[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]



 
             AN INQUIRY INTO THE IMCLONE CANCER-DRUG STORY
=======================================================================




                                HEARINGS

                               before the

                            SUBCOMMITTEE ON
                      OVERSIGHT AND INVESTIGATIONS

                                 of the

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

                               __________

                      JUNE 13 and OCTOBER 10, 2002

                               __________

                           Serial No. 107-142

                               __________

      Printed for the use of the Committee on Energy and Commerce


 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 house

                               __________

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                    COMMITTEE ON ENERGY AND COMMERCE

               W.J. ``BILLY'' TAUZIN, Louisiana, Chairman

MICHAEL BILIRAKIS, Florida           JOHN D. DINGELL, Michigan
JOE BARTON, Texas                    HENRY A. WAXMAN, California
FRED UPTON, Michigan                 EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida               RALPH M. HALL, Texas
PAUL E. GILLMOR, Ohio                RICK BOUCHER, Virginia
JAMES C. GREENWOOD, Pennsylvania     EDOLPHUS TOWNS, New York
CHRISTOPHER COX, California          FRANK PALLONE, Jr., New Jersey
NATHAN DEAL, Georgia                 SHERROD BROWN, Ohio
RICHARD BURR, North Carolina         BART GORDON, Tennessee
ED WHITFIELD, Kentucky               PETER DEUTSCH, Florida
GREG GANSKE, Iowa                    BOBBY L. RUSH, Illinois
CHARLIE NORWOOD, Georgia             ANNA G. ESHOO, California
BARBARA CUBIN, Wyoming               BART STUPAK, Michigan
JOHN SHIMKUS, Illinois               ELIOT L. ENGEL, New York
HEATHER WILSON, New Mexico           TOM SAWYER, Ohio
JOHN B. SHADEGG, Arizona             ALBERT R. WYNN, Maryland
CHARLES ``CHIP'' PICKERING,          GENE GREEN, Texas
Mississippi                          KAREN McCARTHY, Missouri
VITO FOSSELLA, New York              TED STRICKLAND, Ohio
ROY BLUNT, Missouri                  DIANA DeGETTE, Colorado
TOM DAVIS, Virginia                  THOMAS M. BARRETT, Wisconsin
ED BRYANT, Tennessee                 BILL LUTHER, Minnesota
ROBERT L. EHRLICH, Jr., Maryland     LOIS CAPPS, California
STEVE BUYER, Indiana                 MICHAEL F. DOYLE, Pennsylvania
GEORGE RADANOVICH, California        CHRISTOPHER JOHN, Louisiana
CHARLES F. BASS, New Hampshire       JANE HARMAN, California
JOSEPH R. PITTS, Pennsylvania
MARY BONO, California
GREG WALDEN, Oregon
LEE TERRY, Nebraska
ERNIE FLETCHER, Kentucky

                  David V. Marventano, Staff Director
                   James D. Barnette, General Counsel
      Reid P.F. Stuntz, Minority Staff Director and Chief Counsel

                                 ______

              Subcommittee on Oversight and Investigations

               JAMES C. GREENWOOD, Pennsylvania, Chairman

MICHAEL BILIRAKIS, Florida           PETER DEUTSCH, Florida
CLIFF STEARNS, Florida               BART STUPAK, Michigan
PAUL E. GILLMOR, Ohio                TED STRICKLAND, Ohio
RICHARD BURR, North Carolina         DIANA DeGETTE, Colorado
ED WHITFIELD, Kentucky               CHRISTOPHER JOHN, Louisiana
  Vice Chairman                      BOBBY L. RUSH, Illinois
CHARLES F. BASS, New Hampshire       JOHN D. DINGELL, Michigan,
ERNIE FLETCHER, Kentucky               (Ex Officio)
W.J. ``BILLY'' TAUZIN, Louisiana
  (Ex Officio)

                                  (ii)


















                            C O N T E N T S

                               __________
                                                                   Page

Hearings held:
    June 13, 2002................................................     1
    October 10, 2002.............................................   215
Testimony of:
    Crawford, Hon. Lester M., Deputy Commissioner, Food and Drug 
      Administration.............................................   227
    Goldhammer, Robert F., Chairman of the Board, ImClone 
      Systems, Inc...............................................   248
    Keegan, Patricia, Deputy Division Director, Center for 
      Biologics Evaluation and Research, Office of Therapeutics 
      Research and Review, Division of Clinical Trial Design and 
      Analysis, U.S. Food and Drug Administration; accompanied by 
      Richard Pazdur, Director, Division of Oncology Drug 
      Products, Office of Drug Evaluation I, Center for Drug 
      Evaluation and Research, U.S. Food and Drug Administration; 
      Lee H. Pai-Scherf, Medical Officer, Clinical Reviewer, 
      Center for Biologics Evaluation and Research, Office of 
      Therapeutics Research and Review, Division of Clinical 
      Trial Design and Analysis, Oncology Branch, U.S. Food and 
      Drug Administration; George Q. Mills, Acting Chief, Team 
      Leader, Center for Biologics Evaluation and Research, 
      Office of Therapeutics Research and Review, Division of 
      Clinical Trial Design and Analysis, Oncology Branch, U.S. 
      Food and Drug Administration; and Susan M. Jerian, Medical 
      Officer, Team Leader, Center for Biologics Evaluation and 
      Research, Division of Clinical Trials Design and Analysis, 
      Oncology Branch, U.S. Food and Drug Administration.........   189
    Kopperl, Paul B., Member of the Board of Directors, ImClone 
      Systems, Inc...............................................   250
    Landes, John, Senior Vice President, Legal, ImClone Systems, 
      Inc........................................................   257
    Mendelsohn, John, Member of the Board of Directors, ImClone 
      Systems, Inc...............................................   253
    Papineau, Frank, Detailee, Committee on Energy and Commerce; 
      and Raymond Weiss, Consultant in Oncology, Clinical 
      Professor of Medicine, Lombardi Cancer Center..............    18
    Smaldone, Laurie, Senior Vice President, Global Regulatory 
      Sciences, Bristol-Myers Squibb Company.....................    64
    Vaczy, Catherine, Vice President, Legal, ImClone Systems, Inc   258
    Waksal, Samuel, former Chief Executive Officer, ImClone 
      Systems, Inc...............................................    58
    Waksal, Harlan, Chief Executive Officer, ImClone Systems, 
      Inc.:
        June 13, 2002............................................    61
        October 10, 2002.........................................   255

                                 (iii)










             AN INQUIRY INTO THE IMCLONE CANCER-DRUG STORY

                              ----------                              


                        THURSDAY, JUNE 13, 2002

                  House of Representatives,
                  Committee on Energy and Commerce,
              Subcommittee on Oversight and Investigations,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 9 a.m., in 
room 2123, Rayburn House Office Building, James C. Greenwood 
(chairman) presiding.
    Members present: Representatives Greenwood, Bilirakis, 
Stearns, Gillmor, Burr, Whitfield, Bass, Fletcher, Tauzin (ex 
officio), Stupak, DeGette, and Rush.
    Staff present: Alan Slobodin, majority counsel; Mark 
Paoletta, majority counsel; Tom Dilenge, majority counsel; Tony 
Cooke, majority counsel; Will Carty, legislative clerk; David 
Nelson, minority investigator and economist; and Jessica 
McNiece, minority staff assistant.
    Mr. Greenwood. The subcommittee will come to order. It is 
the Chair's intention to recess the subcommittee until 10:30 or 
20 minutes after the conclusion of the full committee markup, 
whichever is later. The Chair reminds witnesses who have 
received a subpoena that they remain subject to the committee's 
compulsory process. The committee stands in recess until 10:30 
a.m. or 20 minutes after the conclusion of the full committee 
markup, whichever is later.
    [Brief recess.]
    Mr. Greenwood. The meeting will come to order. The Chair 
recognizes himself for an opening statement.
    In the past, when Americans of my generation have thought 
about the development of life-saving miracle drugs, the images 
most likely to come to mind have been those of self-effacing 
men of science, like Alexander Fleming and Jonas Salk. In 1952, 
when Salk was convinced that he had developed a vaccine for the 
deadly scourge of polio, he didn't rush out to the marketplace 
with effusive praise either to the drugs efficacy or its money 
making possibilities. Instead he vaccinated volunteers, 
including his wife and three sons. And only when it became 
clear that even though the volunteers had developed antibodies 
to the disease, none had become ill, did he finally publish his 
findings the following year in the Journal of the American 
Medical Association.
    Now flash forward to 2001. Another doctor, this time with a 
Ph.D. in immunology, claims that his company is bringing 
another miracle drug to the market. Like Salk in 1952, the 
disease he is researching strikes down roughly 60,000 thousand 
Americans each year. That disease is colorectal cancer. The 
name of this new drug is Erbitux. And here the similarity comes 
to a glaring halt.
    It appears that, instead of concentrating his focus on the 
need to carefully conduct clinical trials that the introduction 
of a breakthrough medicine demands, ImClone seemed more focused 
on the sales pitch. Dr. Samuel Waksal is quoted as having said 
that Erbitux was, ``going to be the most important new oncology 
launch ever.'' Investors and hopeful patients alike were told 
that the results of ImClone's pivotal clinical trial were, 
``knock-your-socks-off exciting.''
    While others who had invested and hoped and perhaps prayed 
for a cure were busy having their hopes dashed, Dr. Samuel 
Waksal and others close to him appear to have been too busy 
cashing out to pay attention to those for whom the success or 
failure of Erbitux represented the difference between life and 
death.
    Today the subcommittee examines the unraveling of ImClone, 
whose highly publicized race to develop and market what some 
thoughtful researchers still consider to be a promising 
therapy, failed so spectacularly. Presently, only two drugs 
have established efficacy for treatment of metastatic 
colorectal cancer. If these drugs are not effective in a 
particular patient, there is no real therapy available to save 
that patient.
    ImClone sought accelerated approval for Erbitux to meet 
this unmet medical need of colorectal cancer patients who had 
failed standard chemotherapy treatments. For these patients 
with no other options, many believed that Erbitux was their 
best hope at survival, and late last year they had every reason 
to count on a speedy FDA approval. These cancer patients and 
their families were told that Erbitux was a leading monoclonal 
antibody, part of a new class of targeted therapies, drugs such 
as Gleevec and Herceptin, that doctors hoped would 
revolutionize cancer treatment and would not cause the severe 
side effects of toxic chemotherapy.
    They were assured by ImClone that Erbitux was going to be 
approved in early 2002. They believed in a company that had a 
number of leading oncologists on its board of directors. They 
believed in a company that in October 2001 had entered into a 
much publicized and record setting $2 billion strategic 
agreement with a leading pharmaceutical maker, Bristol-Myers 
Squibb, an agreement which included an up-front $1 Billion 
tender offer for ImClone stock from Bristol to ImClone's 
existing shareholders at the premium price of $70 a share.
    On December 17, 2001, ImClone was one of seven 
biotechnology companies included for the first time in the 
NASDAQ 100 index. Excitement and confidence in ImClone were 
reflected in such media reports as a December 26, 2001 Los 
Angeles Times story, which proclaimed, in almost giddy 
language, that ``Erbitux, a colon cancer treatment from ImClone 
Systems Inc., is set to make one of the biggest splashes of 
2002.''
    Yet just days later, the hopes of cancer patients were 
crushed when they learned that the deficiencies in the Erbitux 
clinical trials were so severe that FDA took the rare action of 
issuing a refusal-to-file letter. This meant that, under the 
60-day deadline to determine whether a new product licensing 
application was adequate enough to be evaluated, FDA found such 
serious deficiencies that the agency could not even continue 
its review.
    After announcing FDA's refusal-to-file letter, ImClone 
executives told investors and the public that the problem was 
simply some missing documentation and suggested that it was an 
easily fixable problem of supplying the missing proof in the 
pivotal study. But soon thereafter, excerpts of the non-public 
FDA refusal-to-file letter appeared in a trade publication, 
revealing the real truth behind the FDA's action: The clinical 
study problems were much more than a failure to provide some 
data elements. To bring the drug to market, ImClone would need 
to conduct additional studies to demonstrate the drug's 
efficacy as a combination therapy for cancer, which would take 
substantial amounts of time and could in fact raise more 
questions about Erbitux than they would answer.
    How did a highly touted drug like Erbitux, which attracted 
the interest of Bristol-Myers Squibb to the tune of $2 billion, 
stumble so completely before even arriving at the regulatory 
starting gate? Cancer patients and their families want to know. 
And this subcommittee chairman wants to know too.
    Today, the subcommittee's investigative detailee, 
accompanied by the committee's scientific consultant, will 
present the preliminary staff report on this matter. Here are 
some of the staff's key findings: FDA refused to file ImClone's 
application not just because of missing documentation and data 
discrepancies, but also because the pivotal study was neither 
adequate nor sufficiently well-controlled to meet Federal 
requirements. Yet, in an August 2000 meeting between ImClone 
and FDA to discuss this study, ImClone's proposed study design 
to support accelerated approval was deemed by FDA to be 
probably acceptable.
    FDA's decision to accept the protocol design in effect 
overruled the initial recommendation of the primary FDA medical 
reviewer, who argued it failed to meet Federal requirements. 
Moreover, FDA's decision appears to be based on a significant 
misunderstanding as to the rigor of the study protocol, a 
misunderstanding that should have been quite apparent to 
ImClone from its discussions with FDA, but one ImClone did not 
seek to correct.
    As FDA reviewers examined the study more closely in the 
context of ImClone's formal licensing application, these 
protocol design issues finally received the attention they 
deserved, but by that point it was too late to turn back. 
Either FDA accepted the application for licensing, despite 
these flaws, or refused it and sent ImClone back to the drawing 
board. As we all know, FDA chose the latter option.
    Moreover, the due diligence performed by Bristol and the 
examination by the committee's scientific consultant of 
ImClone's pivotal study raise similar questions about whether 
Erbitux really works better in combination with another drug, 
or whether Erbitux truly has a clinically meaningful effect on 
colorectal cancer. I understand that ImClone and Bristol are 
planning to conduct additional studies on these issues and for 
the sake of cancer patients, I wish them well. But we now know 
that the promising response rates publicized by ImClone based 
on this study do not appear nearly as promising as they once 
did and may in fact be clinically and statistically 
meaningless.
    Before receiving the refusal-to-file letter on December 28, 
2001, ImClone had received signals from FDA as early as 
December 4 that a refusal-to-file letter was a realistic 
possibility given the concerns FDA had about ImClone's 
application. Certainly by December 20, after a phone call in 
which FDA told representatives of ImClone and Bristol to no 
longer contact the agency until it sent a decision letter on 
December 28, both ImClone and Bristol believed that a refusal-
to-file letter was a probable result, according to interviews 
and records. In fact, on December 25, 2001, Brian Markison from 
Bristol called Harlan Waksal at ImClone to inform him that 
Bristol had confirmed from FDA that ImClone would be getting a 
refusal-to-file letter. The next day, ImClone sent a letter to 
FDA in an attempt to forestall the negative decision, and on 
December 27, Sam Waksal, ImClone's CEO at the time, personally 
called FDA in an attempt to stop the refusal-to-file letter. He 
was not successful.
    Adding to the ImClone controversy, on that same day, 
December 27, and perhaps on December 28 as well, several family 
members and friends of Sam Waksal sold significant volumes of 
shares of ImClone stock, all prior to the public announcement 
of the FDA's December 28 refusal-to-file letter. For example, 
Sam's daughter, Aliza, sold $2.5 million of stock while she was 
on vacation. At the same time, Sam gifted to her twice the 
number of shares she had sold. Incidentally, the amount of 
these gifted shares was the same as the amount of shares that 
SEC now alleges that Sam Waksal moved from his own account but 
was unable to trade these shares through Aliza's account 
because broker-dealers refused to execute the trades without 
approval by ImClone's counsel.
    In another example, Martha Stewart, who had been a long-
time investor in ImClone and friend of Sam Waksal, sold all of 
what was left of her ImClone holdings on December 27. Phone 
records indicate a telephone call between Ms. Stewart and Dr. 
Waksal on that same date.
    Yesterday, the SEC charged Sam Waksal with illegal insider 
trading, alleging that he had alerted certain family members 
about the refusal-to-file letter before it became public 
knowledge, who in turn sold large volumes of ImClone stock 
before the market learned of the negative FDA action.
    In addition to the stock trading activity in late December 
of last year, the committee's investigation also reviewed the 
purchase and sale of ImClone stock by ImClone's directors and 
top executives during the months leading up to the Bristol $1 
billion tender offer, which was consummated in October 2001. On 
October 29, 2001, 2 days before ImClone completed its 
application submission for Erbitux to FDA, Sam and Harlan 
Waksal, the founders and top executives of ImClone, sold 
approximately 1.4 million shares of ImClone stock to Bristol 
for about $111 million. However, unlike all the other ImClone 
shareholders who tendered shares to Bristol, the Waksals were 
helped in part by loans of about $35 million that they received 
from ImClone several months before, so that they could exercise 
their options to purchase ImClone stock at highly discounted 
prices.
    These findings, and other information contained in the 
staff report and in our witnesses' testimony, will be of great 
interest to the subcommittee. One of our chief concerns is 
assuring public confidence in our biotechnology/pharmaceutical 
industry and the FDA process. When there is a suspicion that we 
are not getting all the facts about a new drug, investment 
dries up and clinical trial enrollments stall. We must look 
seriously at whether the secrecy of the FDA approval process 
can be, or has been, abused and exploited for personal gain, 
and whether useful drugs are delayed because of flawed 
development strategies and internal FDA confusion.
    The saga of failures like ImClone leads to a loss in 
confidence, not only in the possibilities of the science, but 
in the firms that seek to bring new cures to market and the 
public officials who must approve these cures and regulate 
these markets. My hope is that the lessons we draw from this 
debacle will enable us to provide improved direction to the 
companies, investors and the regulators who need to work 
cooperatively and openly if we hope to continue to bring the 
promise of science to the American people.
    The Chair recognizes the gentleman, Mr. Stupak, for his 
opening statement.
    [The prepared statement of Hon. James C. Greenwood 
follows:]
 Prepared Statement of Hon. James Greenwood, Chairman, Subcommittee on 
                      Oversight and Investigations
    In the past, when Americans of my generation have thought about the 
development of life-saving miracle drugs, the images most likely to 
come to mind have been those of self-effacing men of science like 
Alexander Fleming and Jonas Salk. In 1952, when Salk was convinced that 
he had developed a vaccine for the deadly scourge of polio, he didn't 
rush out to the marketplace with effusive praise either to the drugs 
efficacy or it's money making possibilities. Instead he vaccinated 
volunteers, including his wife and three sons. And only when it became 
clear that, even though the volunteers had developed antibodies to the 
disease, none had become ill, did he finally publish his findings, the 
following year, in the Journal of the American Medical Association. Now 
flash forward to 2001. Another Doctor, this time with a PHD in 
immunology, claims that his company is bringing another miracle drug to 
the market.
    Like Salk in 1952, the disease he is researching strikes down 
roughly 60,000 thousand Americans each year. That disease is colorectal 
cancer. The name of this new drug is Erbitux. Here the similarity comes 
to a glaring halt.
    It appears that, instead of concentrating his focus on the need to 
carefully conduct clinical trials that the introduction of a 
breakthrough medicine demands, ImClone seemed more focused on the sales 
pitch. Dr. Samuel Waksal is quoted as having said that Erbitux was, ``. 
. . going to be the most important new oncology launch ever.'' 
Investors and hopeful patients alike were told that the results of 
ImClone's pivotal clinical trial were, ``. . . knock-your-socks-off 
exciting.''
    While others who had invested and hoped and perhaps prayed for a 
cure were busy having their hopes dashed, Dr. Waksal and others close 
to him appear to have been too busy cashing out to pay attention to 
those for whom the success or failure of Erbitux represented the 
difference between life and death.
    Today the Subcommittee examines the unraveling of ImClone, whose 
highly publicized race to develop, and market what some thoughtful 
researchers still consider to be a promising therapy, failed so 
spectacularly.
    Presently, only two drugs have established efficacy for treatment 
of metastatic colorectal cancer. If these drugs are not effective in a 
particular patient, there is no other real therapy available to save 
that patient.
    ImClone sought accelerated approval for Erbitux to meet this unmet 
medical need of colorectal cancer patients who had failed standard 
chemotherapy treatments. For these patients with no other options, many 
believed that Erbitux was their best hope at survival, and late last 
year they had every reason to count on a speedy FDA approval.
    These cancer patients and their families were told that Erbitux was 
a leading monoclonal antibody, part of a new class of ``targeted 
therapies''--drugs such as Gleevec and Herceptin--that doctors hoped 
would revolutionize cancer treatment and would not cause the severe 
side effects of toxic chemotherapy.
    They were assured by ImClone that Erbitux was going to be approved 
in early 2002. They believed in a company that had a number of leading 
oncologists on its Board of Directors. They believed in a company that, 
in October 2001, had entered into a much-publicized and record-setting 
$2 BILLION strategic agreement with a leading pharmaceutical maker, 
Bristol-Myers Squibb--an agreement which included an up-front $1 
BILLION tender offer for ImClone stock from Bristol to ImClone's 
existing shareholders at the premium price of $70 a share.
    On December 17, 2001, ImClone was one of seven biotechnology 
companies included for the first time in the NASDAQ 100 index.
    Excitement and confidence in ImClone was reflected in such media 
reports as a December 26, 2001 Los Angeles Times story, which 
proclaimed, in almost giddy language, that ``Erbitux, a colon cancer 
treatment from ImClone Systems Inc., is set to make one of the biggest 
splashes of 2002.''
    Yet just days later, the hopes of cancer patients were crushed when 
they learned that the deficiencies in the Erbitux clinical trials were 
so severe that FDA took the rare action of issuing a refusal-to-file 
letter. This meant that, under the 60-day deadline to determine whether 
a new product licensing application was adequate enough to be 
evaluated, FDA found such serious deficiencies that the agency could 
not even continue its review. After announcing FDA's refusal-to-file 
letter, ImClone executives told investors and the public that the 
problem was simply some missing documentation, and suggested that it 
was an easily fixable problem of supplying the missing proof in the 
pivotal study. But soon thereafter, excerpts of the non-public, FDA 
refusal-to-file letter appeared in a trade publication, revealing the 
real truth behind the FDA's action: the clinical study problems were 
much more than a failure to provide some data elements.
    To bring the drug to market, ImClone would need to conduct 
additional studies to demonstrate the drug's efficacy as a combination 
therapy for cancer, which would take substantial amounts of time and 
could in fact raise more questions about Erbitux than they would 
answer.
    How did a highly-touted drug like Erbitux, which attracted the 
interest of Bristol/Myers/Squibb to the tune of $2 billion, stumble so 
completely before even arriving at the regulatory starting gate? Cancer 
patients and their families want to know. And this Subcommittee 
Chairman wants to know.
    Today, the Committee's investigative detailee, accompanied by the 
Committee's scientific consultant, will present the preliminary staff 
report on this matter. Here are some of the staff's key findings:

 FDA refused to file ImClone's application not just because of 
        missing documentation and data discrepancies, but also because 
        the pivotal study was neither adequate nor sufficiently well-
        controlled to meet Federal requirements.
      Yet, in an August 2000 meeting between ImClone and FDA to discuss 
        this study, ImClone's proposed study design to support 
        accelerated approval was deemed by FDA to be ``probably 
        acceptable.''
 FDA's decision to accept the protocol design in effect 
        overruled the initial recommendation of the primary FDA medical 
        reviewer, who argued it failed to meet Federal requirements. 
        Moreover, FDA's decision appears to be based on a significant 
        misunderstanding as to the rigor of the study protocol--a 
        misunderstanding that should have been quite apparent to 
        ImClone from its discussions with FDA, but one ImClone did not 
        seek to correct. As FDA reviewers examined the study more 
        closely in the context of ImClone's formal licensing 
        application, these protocol design issues finally received the 
        attention they deserved, but by that point it was too late to 
        turn back--either FDA accepted the application for licensing, 
        despite these flaws, or refused it and sent ImClone back to the 
        drawing board. As we all know, FDA chose the latter option.
 Moreover, the due diligence performed by Bristol, and the 
        examination by the Committee's scientific consultant, of 
        ImClone's pivotal study raise similar questions about whether 
        Erbitux really works better in combination with another drug, 
        and whether Erbitux truly has a clinically meaningful effect on 
        colorectal cancer. I understand that ImClone and Bristol are 
        planning to conduct additional studies on these issues and, for 
        the sake of cancer patients, I wish them well. But we now know 
        that the promising response rates publicized by ImClone based 
        on this study do not appear nearly as promising as they once 
        did, and may in fact be clinically and statistically 
        meaningless.
 Before receiving the refusal-to-file letter on December 28, 
        2001, ImClone had received signals from FDA as early as 
        December 4th that a refusal-to-file letter was a realistic 
        possibility given the concerns FDA had about ImClone's 
        application.
 Certainly by December 20th, after a phone call in which FDA 
        told representatives of ImClone and Bristol to no longer 
        contact the agency until it sent a decision letter on December 
        28th, both ImClone and Bristol believed that a refusal-to-file 
        letter was a probable result, according to interviews and 
        records.
 In fact, on December 25, 2001, Brian Markison from Bristol 
        called Harlan Waksal at ImClone to inform him that Bristol had 
        confirmed from FDA that ImClone would be getting a refusal-to-
        file letter. The next day, ImClone sent a letter to FDA in an 
        attempt to forestall the negative decision, and on December 
        27th, Sam Waksal, ImClone's CEO at the time, personally called 
        FDA in an attempt to stop the refusal-to-file letter. He was 
        not successful.
 Adding to the ImClone controversy, on that same day, December 
        27th, and perhaps on December 28th as well, several family 
        members and friends of Sam Waksal sold significant volumes of 
        shares of ImClone stock--all prior to the public announcement 
        of the FDA's December 28th refusal-to-file letter. For example, 
        Sam's daughter, Aliza (A-leeza), sold $2.5 million of stock 
        while she was on vacation. At the same time, Sam gifted to her 
        twice the number of shares she had sold. Incidentally, the 
        amount of these gifted shares was the same as the amount of 
        shares that the SEC now alleges that Sam Waksal moved from his 
        own account, but was unable to trade these shares through 
        Aliza's account because broker-dealers refused to execute the 
        trades without approval by ImClone's counsel.
 In another example, Martha Stewart, who had been a long-time 
        investor in ImClone and friend of Sam Waksal, sold all of what 
        was left of her ImClone holdings on December 27th. Phone 
        records indicate a telephone call between Ms. Stewart and Dr. 
        Waksal on that same date.
    Yesterday, the SEC charged Sam Waksal with illegal insider trading, 
alleging that he alerted certain family members about the refusal-to-
file letter before it became public knowledge, who in turn sold large 
volumes of ImClone stock before the market learned of the negative FDA 
action.
    In addition to the stock trading activity in late December of last 
year, the Committee's investigation also reviewed the purchase and sale 
of ImClone stock by ImClone's directors and top executives in the 
months leading up to the Bristol $1 billion tender offer, which was 
consummated in October 2001. On October 29, 2001, two days before 
ImClone completed its application submission for Erbitux to FDA, Sam 
and Harlan Waksal, the founders and top executives of ImClone, sold 
about 1.4 million shares of ImClone stock to Bristol for about $111 
million. However, unlike all the other ImClone shareholders who 
tendered shares to Bristol, the Waksals were helped in part by loans of 
about $35 million that they received from ImClone several months 
before, so that they could exercise their options to purchase ImClone 
stock at highly discounted prices.
    These findings, and other information contained in the staff report 
and in our witnesses' testimony, will be of great interest to the 
Subcommittee. One of our chief concerns is assuring public confidence 
in our biotechnology/pharmaceutical industry and the FDA process. When 
there is a suspicion that we are not getting all the facts about a new 
drug, investment dries up and clinical trial enrollments stall. We must 
look seriously at whether the secrecy of the FDA approval process can 
be--or has been--abused and exploited for personal gain, and whether 
useful drugs are delayed because of flawed development strategies and 
internal FDA confusion.
    The saga of failures like ImClone leads to a loss in confidence, 
not only in the possibilities of the science, but in the firms that 
seek to bring new cures to market and the public officials who must 
approve these cures and regulate these markets.
    My hope is that the lessons we draw from this debacle will enable 
us to provide improved direction to the companies, investors and the 
regulators who need to work cooperatively and openly if we hope to 
continue to bring the promise of science to the American people.

    Mr. Stupak. Thank you, Mr. Chairman--and also I think your 
opening statement certainly reviewed the investigation done by 
our respective staffs in this matter. I believe today's 
hearings raises a number of issues of importance to the Food 
and Drug Administration, the manufacturers of new drugs and 
biologics, investors, large and small, and most importantly the 
victims of cancer and their loved ones.
    The ImClone story is not a happy one. We still do not know 
if Erbitux, a cancer drug developed by ImClone, will be a 
useful tool in the fight against colorectal and other cancers. 
Only good and careful science, not anecdotal reports and 
certainly not inflated and inaccurate hype, will answer this 
question.
    Last spring and summer, patients and their doctors were led 
to believe that a treatment for colorectal cancer, the second 
most prevalent, and one of the most deadly, was at hand, when 
the truth was that the drug had not been studied rigorously 
enough to determine what value Erbitux might have for the 
treatment of colorectal or other cancers. Erbitux does show 
activity and may yet prove to be another useful tool for some 
patients in the battle with a disease that is extremely 
resistant to treatment.
    ImClone was in a position to understand how unlikely FDA 
approval was based on a registration study and another single 
arm study submitted last fall. But patients and oncologists 
were not informed that the proposed registration study was so 
incomplete and that despite six more months of trying, Bristol-
Myers Squibb with all their expertise and resources has still 
not completed the residual work necessary for resubmission to 
the FDA.
    Investors had no idea that ImClone was submitting, at best, 
a marginal application under an expedited procedure that must, 
and demands, rigorous standards and the conduct and reporting 
of the pivotal study and statistical power in the results. The 
ImClone application was so defective and the results were so 
inconclusive that any hope of an accelerated approval may have 
evaporated.
    All this suggests that had the principals of ImClone 
decided that they would do a better design and a much better 
executed study instead of submitting a poorly designed and 
executed Phase II study, then cancer patients, their loved ones 
and the oncologists that treat them might have had Erbitux 
available this year.
    Mr. Chairman, I believe that our respective staffs have 
done an excellent job. I believe that the staff has framed the 
issues accurately. I look forward to this hearing today. I look 
forward to answering questions, and I appreciate the work our 
staffs have done, and I think we owe them a great deal of 
gratitude bringing us up to date. I know they have worked on 
this for a long time. So I am ready to move on with this 
hearing. I will yield back the balance of my time.
    [The prepared statement of Hon. Bart Stupak follows:]
 Prepared Statement of Hon. Bart Stupak, a Representative in Congress 
                       from the State of Michigan
    Today's hearing raises a number of issues of importance to the Food 
and Drug Administration (FDA), the manufacturers of new drugs and 
biologics, investors large and small and, most importantly, to the 
victims of cancer and their loved ones. The ImClone story is not a 
happy one. We still do not know if Erbitux, the cancer drug developed 
by ImClone will be a useful tool in the fight against colorectal and 
other cancers. Only good and careful science, not anecdotal reports and 
certainly not inflated and inaccurate hype will answer that question.
    Last Spring and Summer, patients and their doctors were led to 
believe that a treatment for colorectal cancer, the second most 
prevalent and one of the most deadly forms of that disease, was at hand 
when the truth was that the drug had not been studied rigorously enough 
to determine what value it might have for the treatment of colorectal 
or other cancers.
    Erbitux does show activity and may yet prove to be another useful 
tool for some patients in the battle with a disease that is extremely 
resistant to treatment.
    ImClone was in a position to understand how unlikely FDA approval 
was based on the registration study and another single arm study 
submitted last fall. But patients and oncologists were not informed 
that the proposed registration study was so incomplete that despite six 
more months of trying, Bristol Meyers Squibb, with all their expertise 
and resources has still not completed the residual work necessary for 
re-submission to FDA.
    Investors had no idea that ImClone was submitting, to be generous, 
a marginal application under an expedited procedure that must require 
rigor in the conduct and reporting of the pivotal study and statistical 
power in the results. The ImClone application was so defective and the 
results were so inconclusive that any hope of accelerated approval has 
probably evaporated.
    All of this suggests that had the principals of ImClone decided 
that they would do a better designed and much better executed study 
instead of merely submitting a poorly designed and executed Phase II 
study that they had on the shelf, the cancer patients, their loved 
ones, and the oncologists that treat them, might have had Erbitux 
available this year. Clearly, the sale of the company, not approval of 
the drug, was the Waksal priority.
    Mr. Chairman, I believe that this investigation has been conducted 
properly and the staff has framed the questions accurately. I look 
forward to hearing the testimony and the response to the many questions 
yet to be answered.

    Mr. Greenwood. The Chair thanks the gentleman and 
recognizes the chairman of the full committee, Mr. Tauzin.
    Chairman Tauzin. Thank you, Mr. Chairman. Mr. Chairman, I 
want to commend you again and the staffs of both sides of our 
committee for the excellent work in investigating this 
extraordinary story. The fact is that there are two stories 
here today. One of the stories will be more fully told by the 
SEC and the Justice Department as it examines how the FDA 
process and what appears to be some rather amoristic players 
conspired in a way that allowed insider trading to potentially 
occur and an awful lot of investors to lose a lot of money 
while insiders were trading on information that was available 
only to them in an attempt to cash out on what could be, and 
what was promised to be, a very promising drug for cancer 
patients.
    The other story is about the process at FDA and how the FDA 
process allowed this to happen. And that story has more to do 
with cancer patients around America who lived with the hope, 
the expectation and the promise that Erbitux was everything it 
was hyped up to be and that it would be available by spring, 
right now, for cancer patients who are living only with this 
hope in mind, that finally something had been developed that 
would extend their lives. We were told, and Sam Waksal was one 
of those telling us, that Erbitux, according to him, and I 
quote, ``is going to be huge. It is going to be one of the 
biggest drugs in the history of oncology, a drug that is going 
to alter the way that cancer therapy is done.''
    ImClone reported 400 calls a day from patients desperate to 
get Erbitux outside of clinical trials. And every indication 
was that the drug was not only everything it was promised to be 
but that it would be available by this spring. And the story 
that unfolds in our investigation is that while ImClone 
deserves a lot of credit over the years of research into these 
monoclonal antibodies, which may yet pay off 1 day for these 
patients, that the leadership of this company was apparently 
more intent on immediately cashing in on the promise that 
Erbitux held out for the patients instead of being carefully 
conscious of delivering on those promises sooner rather than 
later.
    Erbitux had some pretty big names behind it and had the 
giants of the clinical oncology world on its board. It had John 
Mendelsohn and Vincent DeVita. And we learned in this 
investigation that the leadership of this company had total 
control over what information would be released to the public, 
about its own studies and about the quality of this new product 
and about its potential since under our rules FDA is prohibited 
and restricted under Federal law from talking about such 
proprietary information. So we have a process whereby FDA is 
being restricted on what it can say about the clinical studies 
and about what is happening with this drug, while the company 
can go out and hype it and take advantage of it financially, 
while at the same time, according to our investigation, 
recognizing all the while that its studies were flawed and 
there were problems with the FDA approval process.
    Now that is the sad story. The saddest story is not about 
investors losing money or about the fact that some of these 
people are facing now SEC and Justice Department investigations 
and, as we have learned just recently, indictments. The sad 
thing is that our investigation is opening the black box of the 
FDA process for public review, and what we see is a drug 
development and FDA review system that is not necessarily 
serving the best interest of America's people and its cancer 
victims in this case.
    Now, our job, Mr. Chairman, is primarily to examine that 
process, to see how this train wreck occurred and to see why 
the promise of a drug that could still hold such great hope for 
cancer patients was denied them because of a process that fell 
apart like this; instead yielded only financial gains to people 
who took advantage of it. If we end up with a process where 
drug approval strategies don't work in the interest of our 
patients in America, but simply allow companies to hype their 
stock and personally enrich their executives and shortchange 
their clinical research in the process, and if we have an FDA 
that sort of hangs back while the company falls on its face 
with such a high risk approval strategy, as was developed in 
this case, then it is not just the company who loses the 
gamble, it is the American public who loses, and most 
importantly the cancer patients who really by this spring, by 
now, were led to believe that there was really something great 
on the horizon that would be available now for them and give 
them life and hope.
    Now, we have got to fix this system, and if your hearings 
point the way for FDA and for us, we in the Congress, who have 
jurisdiction in this area to make some changes to make sure 
this kind of a train wreck doesn't happen again, we will leave 
it to the Justice Department and the SEC to deal with the 
miscreants here, but we ought to give cancer patients who are 
desperate for hope in a drug like Erbitux a chance to have it 
really tested and proven out. And if it is as good as some 
people think it is, that they have the advantage of having it 
in the marketplace and available to them before it is too late. 
And that is the task, that is the task of this committee, and I 
commend you for taking it on. I yield back.
    [The prepared statement of Hon. W.J. ``Billy'' Tauzin 
follows:]
 Prepared Statement of Hon. W.J. ``Billy'' Tauzin, Chairman, Committee 
                         on Energy and Commerce
    Thank you, Chairman Greenwood, and let me commend you for holding 
this hearing on ImClone Systems and its much touted ``miracle'' cancer 
drug, Erbitux. We have much to learn from the story of this drug. And I 
believe the story of this drug provides an opportunity to examine the 
drug development and FDA review systems. We need to make sure these 
systems work for patients.
    Cancer patients and their families had great hopes that Erbitux 
would be on the market by now. They and the media believed all that was 
asserted by ImClone and its prominent backers. ImClone's CEO, Sam 
Waksal, promised that ``Erbitux is going to be huge. It is going to be 
one of the biggest drugs in the history of oncology--a drug that is 
going to alter the way cancer therapy is done.''
    Imagine what cancer patients thought when they heard that 
statement. ImClone reportedly received 400 calls a day from patients 
desperate to get Erbitux outside of clinical trials. By late last 
fall--when ImClone filed its application with the FDA--there were very 
sick colon cancer patients holding onto hope that Erbitux would be on 
the market by this Spring--by now. But when ImClone's clinical research 
package was finally unveiled to the FDA, it had so many problems, the 
FDA could not even review it.
    ImClone certainly deserves credit for its years of research into 
monoclonal antibodies, which still may pay off for patients in the 
future. Unfortunately, when the company should have been paying more 
attention to the quality of its clinical trials, its leadership 
appeared more intent on immediately cashing in on Erbitux's promise--
and delivering for cancer patients later, if ever.
    ImClone had the selling points to boost its stock and raise the 
hopes of dying cancer patients. Erbitux is a targeted therapy, and 
targeted therapy is supposedly the future of cancer treatment. It had 
the names, the giants of clinical oncology on its board--John 
Mendelsohn, Vincent DeVita. It had a growing anti-cancer drug market. 
And, most important, it had virtually total control over what 
information would be released to the public about its studies since the 
FDA is restricted under Federal law from talking about such proprietary 
information.
    Yet it appears, as our Committee investigation has revealed, that 
ImClone was so excited by preliminary response rates in very sick colon 
cancer patients, it tried to take a mediocre clinical trial and gussy 
it up as a study worthy of an accelerated approval by itself. But when 
it became crunch time to get FDA approval, the failure of ImClone's key 
executives to ensure the quality of its clinical trials collided with 
the hype. And, all the while, ImClone's insiders were lining their own 
pockets with millions, as ImClone's publicly-traded stock soared on 
false, public promises.
    Now the SEC has alleged that Sam Waksal knew about the FDA's 
refusal-to-file letter two days before it was issued and that he tipped 
off family members who sold $10 million of ImClone stock. As Vee Kumar, 
a 47-year school psychologist and colon cancer patient from Kirkland, 
Washington, told Vanity Fair magazine: ``There is no excuse for raising 
patients' hopes and then not delivering. There's been a lot of talk 
about ImClone's monetary rewards from Erbitux, but not enough about 
getting it to the patients who need it. They really ought to have done 
their homework better.''
    I understand that the preliminary Committee staff report reveals 
additional problems in the clinical package ImClone submitted to the 
FDA, and lays out the series of actions by ImClone, its strategic 
partner Bristol-Myers Squibb, and FDA that led to this debacle. This 
Committee's investigation opens the black box of the FDA process, and 
reveals a drug-development and FDA review system that is not serving 
the interests of the American people.
    Through this inquiry, I hope we can prevent such train wrecks in 
the future. Drug companies and the FDA should develop drug approval 
strategies that work in the patient's interest--not so that companies 
can hype stock, personally enrich executives, and short-change clinical 
research; not so that the FDA hangs back while a company falls on its 
face with a high-risk approval strategy, as if it's just the company's 
gamble. It may be the company's gamble, but if it fails, cancer 
patients are the ones who really lose.
    Mr. Chairman, I look forward to working with you to improve the 
drug development system and to make that system really deliver for our 
sickest patients.

    Mr. Greenwood. The Chair thanks the chairman and 
recognizes, for 3 minutes for purposes of an opening statement, 
the gentlelady from Colorado, Ms. DeGette.
    Ms. DeGette. Thank you so much, Mr. Chairman. The case of 
ImClone presents what seems to have become a parable for our 
times: an upstart corporation with tremendous financial 
promise, corporate executives reaping fantastic financial, 
soaring stock prices, in this case up to $70 a share, a 
precipitous fall causing the stock to plummet tenfold back down 
to $7, allegations of insider trading by the officers of the 
company and their close friends. But here is the difference 
here, and I agree but I disagree a little with my chairman 
because I don't think it is a second story, I think it is an 
interwoven story that relates directly to all the things I just 
listed, and that is tens of thousands of cancer patients who 
are hanging on to the thread of a hope that Erbitux would be 
added to the two existing therapies for deadly colorectal 
cancer. The foibles of the key players here, corporate 
executives, researchers and FDA reviewers, did not just result 
in tremendous financial losses to investors but also devastated 
cancer patients' hopes.
    Nowhere else in the world is there a greater confluence of 
pharmaceutical/biotech industry growth, shareholder expectation 
of large profit margins, high hopes among patients for new and 
innovative therapies and confidence among the American people 
that the appropriate regulatory agency, the Food and Drug 
Administration, is providing the appropriate oversight.
    To address at least two of these issues, quick approval of 
new and innovative therapies and government oversight of the 
process, Congress established an accelerated approval process 
as part of the 1997 Food and Drug Administration Modernization 
Act, or FDAMA, which was a comprehensive overhaul of the 
Nation's food, drug and medical device laws. The Fast Track 
approval process was created for getting therapies that 
demonstrate the potential to help dying patients to the 
marketplace quickly. While the Fast Track process bypasses the 
rigors of a large-scale Phase III trial, it should not and must 
not allow products to bypass rigorous and sound scientific 
review. Unfortunately, there seems to be evidence that this is 
exactly what happened in the case of Erbitux.
    It appears that too many people dropped the ball throughout 
the approval process in this particular case, from the 
executives and scientists at ImClone who designed the flawed 
clinical trials, to Bristol-Myers Squibb, ImClone's business 
partner, who was aware of the trial's flaws, including the too 
small sample size, and enrollment of patients who did not meet 
the eligibility criteria. From the FDA's mishandling of the 
study's protocol design to the issuance of the refuse-to-file 
letter, sloppy work abounded throughout this process and no one 
is without blame. I can assure you that all of our votes for 
FDAMA were not made with the intent of relaxing the rules.
    However, what dismays us the most is this impact this case 
may have on other therapies that will be seeking Fast Track 
approval in the future, including this therapy, by the way, 
therapies that could have the potential cure for millions of 
people or even just extend their lives for another day, a month 
or a year. Like many of my colleagues, I receive hundreds of 
letters every year from constituents asking to facilitate quick 
FDA approval for therapies, therapies like for multiple myeloma 
and thalidomide, therapies for irritable bowel syndrome or 
lontronix and on and on.
    I am sympathetic to these patients. On the other hand, the 
United States has perhaps the world's most stringent standards 
for approving new drugs. We cannot shirk our duty to take a 
long, hard look at the approval process. Our job, Mr. Chairman, 
as I see it today, is to examine how we can foster speedy 
approval of new drugs, especially in cases where there are few 
alternatives, while at the same time ensuring that they are 
safe and effective. I yield back.
    [The prepared statement of Hon. Diana DeGette follows:]
Prepared Statement of Hon. Diana DeGette, a Representative in Congress 
                       from the State of Colorado
    The case of ImClone presents what seems to have become almost a 
parable for our times:

--An upstart corporation with tremendous financial promise;
--Corporate executives reaping fantastic financial gains;
--Soaring stock prices;
--A precipitous fall--causing the stock to plummet ten-fold;
--Allegations of insider trading by the officers of the company and 
        their close friends.
    But here's the difference: Tens of thousands of cancer patients 
were hanging on to the thread of a hope that Erbitux would be added to 
the two existing therapies for deadly colo-rectal cancer. The foibles 
of the key players here--corporate executives, researchers, and FDA 
reviewers do not just result in tremendous financial loses to 
investors, but devastated cancer patent hopes. Our job as I see it 
today, is to examine how we can foster speedy approval of new drugs, 
especially in cases where there are few alternatives, while ensuring 
their efficacy.
    No where else in the world is there a greater confluence of 
pharmaceutical/biotech industry growth, shareholder expectation of 
large profit margins, high hopes among patients for new and innovative 
therapies and confidence among the American people that the appropriate 
regulatory agency, the Food and Drug Administration is providing the 
appropriate oversight.
    To address at least two of these issues, quick approval of new and 
innovative therapies and governmental oversight of the process, 
Congress established an accelerated approval process as part of the 
1997 Food and Drug Administration Modernization Act (FDAMA), a 
comprehensive overhaul of the nation's food, drug and medical device 
laws.
    The ``fast track'' approval process was created for getting 
therapies that demonstrate the potential to help dying patients to the 
marketplace quickly. While the fast track process bypasses the rigors 
of a large-scale phase III trial, it should not, and must not, allow 
products to bypass rigorous and sound scientific review. Unfortunately, 
there seems to be evidence that this is exactly what happened in the 
case of Erbitux.
    It appears as though too many people dropped the ball throughout 
the approval process in this particular case. From the executives and 
scientists at Imclone who designed the flawed clinical trials, to 
Bristol Myers Squibb, Imclone's business partner who was aware of the 
trial's flaws including the too small sample size, and enrollment of 
patients who did not meet the eligibility criteria. From the Food and 
Drug Administration's mishandling of the study's protocol design to the 
issuance of the refusal to file letter, sloppy work abounded through 
this process.
    I can assure you that my vote for passage of FDAMA was not made 
with the intent of relaxing the rules, and I'm sure my colleagues that 
sit here with me today have the same sentiment. By no means did the '97 
Act include a relaxation of any of the rules. There was nothing in it 
that came close to subverting rigorous reviews of the scientific merits 
of protocols.
    However, what dismays me most is the impact that this case may have 
on other therapies that will be seeking fast track approval in the 
future. Therapies that could have the potential cure for millions of 
people, or even just extend their lives for another day, a month, a 
year.
    Like many of my colleagues, I receive hundreds of letters each year 
from constituents asking me to help facilitate quick FDA approval for 
the one therapy that might be able to ease their pain, or extend their 
own, or a loved one's, life.
    For instance, I have received letters from sufferers of diseases 
such as multiple myeloma, an incurable form of blood cancer, who are 
desperate for Thalidomide, a drug with a long history associated with 
birth defects. Just the other day I got a letter from a constituent who 
suffers from irritable bowel syndrome pleading that I do everything I 
can to facilitate the return of Lotrinex to the market.
    I am very, very sympathetic to these people both as their elected 
representative, and in my capacity as a public servant who votes on 
legislation that effects every single person in this country. They are 
looking to us to facilitate the approval of effective and safe 
medications. And for good reason. The United States has perhaps the 
world's most stringent standards for approving new drugs. We cannot 
shirk our duty to take a long hard look at the approval process.

    Mr. Greenwood. The Chair thanks the gentlelady and 
recognizes for 3 minutes for an opening statement the gentleman 
from Kentucky, Dr. Fletcher.
    Mr. Fletcher. Thank you, Mr. Chairman. I think you have 
reviewed certainly the situation well. I appreciate very much 
you holding this hearing. Your statements, as well as the 
chairman of the full committee, certainly reflect my feelings. 
And in the interest of time and moving on, I would like to 
submit my opening statement to the committee, if that is okay.
    Mr. Greenwood. The gentleman's statement will be made part 
of the record.
    [The prepared statement of Hon. Ernie Fletcher follows:]
Prepared Statement of Hon. Ernie Fletcher, a Representative in Congress 
                       from the State of Oklahoma
    Chairman Greenwood; thank you for having this hearing today.
    As a physician I have seen the devastation that Cancer can cause. I 
have seen the emotion and physical destruction that this disease brings 
to patients and their families.
    In the US where we have one of the best healthcare systems in the 
world, there will be more than 1.2 million new cancer cases diagnosed 
in 2002. This year about 555,000 people will die from cancer.
    It is no surprise that patients and physicians are excited when a 
promising new drug or therapy becomes available. The Energy and 
Commerce Committee has worked hard to see that groundbreaking research 
can provide physicians with the tools to provide treatment for cancer.
    While new drugs, Like Erbitux show great promise, we must also 
balance their development with the public's interest. They must be 
proved safe and effective before they are available for general use. We 
need to make sure that the FDA is doing the best job possible to 
balance these two issues. This hearing needs to look closely at how 
this particular drug was handled and use that information to develop 
policy that allows these new technologies to be available to patients 
as quickly and safely as possible.

    Mr. Greenwood. The Chair recognizes the gentleman from 
Illinois, Mr. Rush, for an opening statement, for 3 minutes.
    Mr. Rush. Thank you, Mr. Chairman. Mr. Chairman, I am very 
glad and happy that you are convening this hearing. I want to 
submit my full statement for the record and beg leave to 
present my full statement for the record. But I also want to 
state to you, Mr. Chairman, and to others who have gathered 
here, to the entire subcommittee, that I am here with an open 
mind. I have not reached any conclusions, I am not faulting any 
participant at this point in time. I believe that this hearing 
will lead me in a direction where I will be able to determine 
for myself exactly what the problem is, what happened in this 
particular case, in the case of Enron. And I will be able to 
determine what I think is the appropriate way to deal with 
this, both at the FDA and also in any other governmental body. 
So I am here with an open mind, and I want to see exactly and 
hear for myself what the issues are and who is at fault, if 
there is anyone at fault in this particular case. Thank you, 
and I yield back the balance of my time.
    Mr. Greenwood. The Chair thanks the gentleman and 
recognizes, for 3 minutes for an opening statement the 
gentleman from Florida, Mr. Stearns.
    Mr. Stearns. Thank you, Mr. Chairman. Of course, thank you 
for holding this hearing today. The United States is the 
foremost in the world today in biotechnological and 
pharmaceutical innovation. It is unfortunate this scandal has 
created in the minds of the public some trepidation. This is 
one more scandal we have seen up here this year with the Enron 
and Tyco and others, and the real question is, I think, how 
could analysts and consumers be sure when they are investing in 
these stocks where you have this executive, Sam Waksal, running 
around, hyping his Erbitux as the blockbuster cancer drug of 
all time, of the future, and meanwhile he is mortgaging his 
shares for an $80 million loan? He is also getting other loans 
that we can't determine completely. But how can the investor 
and the analyst look at this company and decide whether or not 
this man is hyping this for other reasons other than its true 
picture of the drug? At the same time, he is submitting 
applications to the FDA which do not have all the clinical 
evidence.
    So I am approaching this, Mr. Chairman, from the standpoint 
of the consumer and the investor: How can he or she be sure 
when they are investing in this corporation which is talking 
about a blockbuster drug that the money that is being exercised 
by the CEOs and the other investors who control the 
corporations is being properly displayed, made public and 
coincides with their activities?
    So we have a history this year of several scandals. We need 
to follow the money, we need to understand what his previous 
activities were at the same time he is hyping this Erbitux 
drug, and we need to protect the consumers, because in the end 
the consumer is sitting out there thinking that the CEO is 
correct. At the same time, the CEO has another ulterior motive. 
So if somehow this hearing would bring to bear a better 
understanding of what is more transparency on the P&L statement 
and could help consumers to understand whether they should 
continue investing, I think that would help bring more 
confidence to the market. And, you can never be too skeptical. 
I think that is what has happened here. And you can never be 
too diversified in the sense that you are dealing with these 
highly volatile stocks where you have the CEOs and their family 
hyping this thing at the same time they are trying to sell off 
their stock knowing inside information. So I commend you for 
this hearing, and I look forward to the testimony.
    [The prepared statement of Hon. Cliff Stearns follows:]
Prepared Statement of Hon. Cliff Stearns, a Representative in Congress 
                       from the State of Florida
    Mr. Chairman, thank you for holding this hearing today. The United 
States is foremost in the world today in biotechnological and 
pharmaceutical innovation. We boast the leadership role in the world in 
new, lifesaving discoveries. For this, we can thank many parties: 
capital-providing shareholders who fund the research; the brilliant 
scientists and support staff of firms toiling at the bench to develop 
new cures and treatments; the Food and Drug Administration regulators 
and approvers who carefully examine submissions for accuracy and 
worthiness. When a drug is on the FDA fast-track for approval because 
it may be patients' last hope at a cure for a life-threatening 
condition like cancer or AIDS, the proper functioning of the system 
becomes all the more imperative.
    For this system to work, there needs to exist complete honesty and 
integrity in a company's operations. Yesterday (June 12), we learned 
that the CEO of the company visiting us today, Samuel Waksal of 
ImClone, evidently learned of the FDA's negative decision on ImClone's 
flagship drug undergoing approval, Erbitux. According to the Securities 
and Exchange Commission (SEC), Waksal and his relatives sold greater 
than $10 million in Imclone stock in a period of 48 hours: on December 
26 and December 27--a day before the FDA released its ``refuse-to-
file'' letter to ImClone on December 28. Further, Dr. Waksal's brother, 
Harlan, we learn, sold roughly $50 million worth of shares on December 
6, a day after FDA officials first indicated a negative review of the 
application may be forthcoming. Further financial improprieties are the 
fact that ImClone lent money to insiders through the exercise of 
options based on ongoing, but not yet publicly disclosed, discussions 
with collaborating pharmaceutical firm Bristol-Myers Squibb. As many of 
us have know, executive compensation via options lacks clear and 
consistent definitions that potential investors and lenders need to 
make solid decisions. Options are an exercise in creativity, in the 
place of quantifiable, sound accounting.
    In addition to options, SEC lawsuit documents reveal that Dr. Sam 
Waksal was carrying more than $80 million in debt at the time of the 
FDA's Erbitux announcement. Could this have been another motive in 
quickly dumping his stock, leaving the rest of the investors to hold 
the bag?
    Shady executive practices lead to damaging effects rippling through 
the economy: Integrity is the elixir that will attract capital and lead 
to lifesaving innovation, while deceit is the poison that is eroding 
investor confidence.
    This hearing today should open up all these processes and players 
for exploration into whether the drug development and approval, 
including its financing, is occurring as intended. Are the delicate 
balances between patient safety, shareholder reward, and company 
incentive all aligned, or is the scale tipped too heavily in favor one 
way or another, in need of adjusting? Is the exchange between necessary 
confidentiality and public disclosure at an optimum?
    That is why on this Committee are here today, in our investigative 
capacity and responsibility to American citizens.
    We are here to find out: What are the facts? What happened? What is 
supposed to happen? What did the high-level executives and their 
cronies know and when? If something went wrong, how can it be corrected 
to safeguard the balance I just described among patients, the firm, and 
the shareholders? Let us fairly and open-mindedly listen to our 
witnesses today, and thank you.

    Mr. Greenwood. The Chair thanks the gentleman and 
recognizes, for 3 minutes for an opening statement, the 
gentleman from North Carolina, Mr. Burr.
    Mr. Burr. Thank the Chair. And, clearly, the chairman has 
not only tremendous interest in this, he has shown in the past 
tremendous interest in the FDA process. The difficulty that we 
deal with in this particular case is that many of us, years 
ago, saw the potential pitfalls of the emergence of 
biotechnology companies in this country, that without a clear 
road map at the FDA as to how to evaluate that industry, we saw 
the tendency of venture capital that funded these companies 
that hadn't proved anything when they emerged other than that 
they were creative and they thought they might be on the track 
to a breakthrough, that with enough capital and enough time 
that they might unlock that key to something magical and 
eventually make it through an FDA process. We, in 1997, helped 
to make that process a little more predictable and we thought a 
little more transparent. We learn with everything hearing that 
it is not quite as clear as what we intended to be, and we, as 
Members of Congress, have tremendous work left.
    But I think that it is extremely important for us to never 
forget this is about patience, that though we talk about 
publicly or privately held companies, in every case their quest 
is to come up with a new compound that treats something that 
today is untreatable. I am not sure the percentages today of 
efforts of the pharmaceutical or biologic world that actually 
come to fruition, but there are many more paths that they go 
down that don't prove to be successful, that never make it into 
the trial process where money is invested, in good faith, money 
by that company, whether it is public or private, because they 
believe that that might be the avenue to unlocking the key--the 
key to unlocking the disease.
    We are not here to judge the business decisions of any 
companies. Ours is to make sure that there is a process, a 
process that not only the companies but the investors can have 
confidence in works. I am hopeful, Mr. Chairman, that the FDA 
will be very honest to us today as to how the protocols could 
have been flawed, how they could have been designed in a wrong 
way. If the information was bad, then maybe we need to go back, 
Jim, and look at whether we change what we did. We thought we 
got it as close to right as we could.
    The fact is that we are where we were 5 years ago. We are 
sitting in a committee hearing, and we have got people pointing 
fingers at each other, and the person that loses are the 
patients with colorectal cancer. Diana DeGette laid it out 
very, very well. Everybody is blaming somebody but there is one 
real specific group that is left behind. As a Member of 
Congress, I think it is extremely important that we listen very 
closely to BMS, because they apparently saw something that was 
worth a tremendous amount of money on the part of their 
investors in this company but more important in Erbitux, and my 
understanding is that their hopes have not changed. If their 
hopes have not changed, then our hopes have not changed that 
there may be a key that unlocks something here, but more 
importantly that we must make sure that the system works in a 
way that we nurture other biotechnology companies to continue 
to search for those breakthroughs and not quit because of 
another problem. I thank the Chair for his commitment, and I 
yield back.
    Mr. Greenwood. The Chair thanks the gentleman and 
recognizes for 3 minutes for an opening statement the gentleman 
from Ohio, Mr. Gillmor.
    Mr. Gillmor. Thank you, Mr. Chairman. I have a very 
profound and interesting opening statement, but in the interest 
of time I will submit it for the record. Thank you.
    [The prepared statement of Hon. Paul Gillmor follows:]
    Prepared Statement of Hon. Paul E. Gillmor, a Representative in 
                    Congress from the State of Ohio
    Thank you, Mr. Chairman. Prescription drugs are increasingly 
prevalent and influential on our health care system. With an ever-
increasing number of drugs pending approval by the Food and Drug 
Administration, we cannot ignore the important, time-consuming process 
that is involved in making a drug available to market.
    In the case of Imclone Systems, alleged impropriety has taken place 
in its application for approval of the cancer drug Erbitux. Although 
the drug has proven successful in a variety of cases, questions over 
its consistency and a hastily prepared application contributed to the 
FDA's rejection of this drug. That is why we are holding this hearing 
today.
    In the case of ImClone, however, the FDA has been criticized for 
its ruling. By applying a more rigorous standard to Erbitux 
application, it has violated the spirit of ``Fast Track'' approval. 
Furthermore, it has been alleged that ImClone CEO Samuel Waksal had 
prior knowledge of the likely rejection of this drug from FDA 
employees, who are represented today. As a result, significant insider 
trading took place just days before the final FDA ruling, enriching 
several Waksal family members and other well-known shareholders. 
Although it is not in the purview of this Committee to investigate such 
trading deals, it does fall under the jurisdiction of the SEC and the 
Financial Services Committee, on which I do serve.
    I will look forward to witness testimony today that will hopefully 
shed light on the FDA approval process, as well as alleged impropriety 
by Imclone that has left shareholders with substantial losses. Upon 
hearing testimony, I am confident that this Committee will have a 
better idea on how to address and reform the operations of the FDA for 
the 21st century.

    Mr. Greenwood. The Chair will check and if it is profound, 
it will be included in the record.
    And with that, the Chair calls forward the first panel of 
witnesses, and they are Dr. Frank Papineau, who is a detailee--
Papineau, I am sorry, Papineau, Dr. Frank Papineau, who is a 
detailee, working for the Committee on Energy and Commerce, and 
accompanying him, Dr. Raymond Weiss, who is a consultant in 
oncology, a clinical professor of Medicine at the Lombardi 
Cancer Center of Georgetown University Medical Center here in 
Washington.
    Welcome, gentlemen. Thank you for your appearance. You are 
both aware that this committee is holding an investigative 
hearing and when doing so we have had the practice of taking 
testimony under oath. Do either of you have objections to 
giving your testimony under oath? Seeing no such objection, the 
Chair advises you that under the rules of the House and the 
rules of the committee, you are entitled to be advised by 
counsel. Do you desire to be advised by counsel during your 
testimony today? Okay. Then if you will stand and raise your 
right hand, I will swear you in.
    [Witnesses sworn.]
    Okay. You are under oath, and Mr. Papineau, we will begin 
with you. You are recognized for your testimony.

TESTIMONY OF FRANK PAPINEAU, DETAILEE, COMMITTEE ON ENERGY AND 
 COMMERCE; AND RAYMOND WEISS, CONSULTANT IN ONCOLOGY, CLINICAL 
         PROFESSOR OF MEDICINE, LOMBARDI CANCER CENTER

    Mr. Papineau. Chairman Greenwood, ranking member and 
members of the subcommittee, I am Frank Papineau, on detail to 
the Energy and Commerce Committee's staff. I am here today to 
provide background information and key facts and dates 
surrounding the Food and Drug Administration's decision to end 
its consideration of ImClone Systems' highly touted cancer 
drug, Erbitux, and the questionable ImClone stock-selling 
activity during that timeframe.
    My remarks are an oral summary taken from the committee 
staff report provided for today's hearing. I am accompanied 
today by Dr. Raymond Weiss, consultant in Oncology and clinical 
professor of Medicine at Georgetown University Medical Center. 
Dr. Weiss is under contract with the committee to provide 
assistance to the staff. Dr. Weiss wrote a report, and his 
findings are appended to the committee staff report.
    By way of background, ImClone Systems is a small biotech 
company based in New York City, founded in 1984 by two 
brothers, Sam and Harlan Waksal. ImClone has never turned a 
profit in its 18 years of existence and reportedly has spent 
over $200 million on research of Erbitux. Many people involved 
in cancer research believe that Erbitux is a promising drug and 
widely expected it to be on the market this year. Erbitux, 
however, was not approved for the market because the Food and 
Drug Administration found so many problems with Erbitux's 
application for approval that it issued a refusal-to-file 
letter, a rare FDA action that effectively turned the drug back 
to the company for further study. This situation attracted 
national attention because of the pre-market publicity about 
the drug, because of ImClone's record-setting $2 billion 
alliance with Bristol-Myers Squibb to market Erbitux and 
because of the multi-million dollar stock trades by ImClone 
insiders in the weeks before generated a negative decision.
    Before we proceed to the business dealings, let me first 
highlight two of the staff's findings regarding FDA's review of 
Erbitux. One, FDA's initial decision in August 2000 to grant 
Fast Track designation to Erbitux appears to have been based on 
incorrect information regarding the study protocol submitted by 
ImClone in support of the proposed cancer treatment which 
involved Erbitux and another cancer drug, Irinotecan. Two, FDA 
made the initial decision before it had full information about 
Erbitux's activity when administered in the absence of the 
other drug, and it was the other information, requested in a 
letter by FDA in January 2001 and received from ImClone in 
October 2001, that led the agency reviewers to conclude the 
application was incomplete.
    In early 2001, Bristol-Myers Squibb failed in its effort to 
form an alliance with a biotech company called OSI that it 
believed had a promising cancer drug. The company believed it 
was losing its share of the oncology drug market and decided to 
revisit ImClone and its cancer drug, Erbitux. On June 1, 2001, 
after a month of negotiations, Sam Waksal outlined an 
acquisition that would give Bristol Myers a 70 percent majority 
stake in ImClone. Bristol's Board of Directors rejected the 
deal. Dr. Waksal then told Bristol that he was willing to 
consider alternative proposals provided they include a 
significant equity investment in ImClone by Bristol, and he 
also advised Bristol that he believed ImClone's existing 
stockholders would benefit most if Bristol acquiring equity 
interest through a tender offer to the ImClone's existing 
stockholders.
    During July 2001, after ImClone was virtually assured of an 
equity deal and in anticipation of the tender offer from 
Bristol, ImClone's board agreed to lend $35.2 million to the 
Waksal brothers and the chairman of the board. The loans were 
unsecured and at an interest rate of 7.75 percent. The loans 
provided an opportunity for the three individuals to exercise 
options and warrants they held to purchase a total of 4.5 
million shares of ImClone stock. Sam Waksal and Harlan Waksal's 
loans were $18.2 million and $15.7 million respectively. The 
chairman's loan was in the amount of $1.2 million.
    On October 29, 2001, thousands of ImClone's shareholders 
participated in the Bristol tender offer to purchase ImClone 
stock at $70 a share, a $20 premium over the trading price. 
ImClone's Board of Directors tendered 2.1 million shares to 
Bristol by themselves, representing 15 percent of the stock 
tendered by ImClone shareholders. Sam and Harlan Waksal 
tendered 814,674 and 776,450 shares for about $111 million 
themselves. Simply stated, this means that the Waksal brothers 
received more than 10 percent of the entire proceeds paid by 
BMS during the tender offer. Although all ImClone shareholders 
were allowed to tender shares to BMS, only the Waksals and two 
other board members borrowed millions of dollars of company 
funds to purchase the stock and then tender it to Bristol.
    On December 28, 2001, the FDA issued a refusal-to-file 
letter in response to the ImClone submission. The RTF letter is 
sent in rare cases when a submission is deemed insufficient. It 
is a non-public document containing trade secrets and 
confidential commercial information. In a December 31, 2001 
conference call with investors, ImClone executives said that 
FDA sent the RTF letter because the Erbitux application was 
missing certain ``train of documentation'' information needed 
by regulators to accept the filing. ImClone said it would be 
able to answer the FDA questions by the end of the first 
quarter, leading hopefully to Erbitux being approved by the 
fall of 2002.
    On January 4, 2002, the Cancer Letter published excerpts of 
the RTF letter indicating, contrary to ImClone statements to 
investors, FDA had a long list of concerns that went far beyond 
record keeping. The FDA believed ImClone' clinical trial was 
not adequate and well controlled and that additional studies 
would be needed. The letter suggested FDA had warned ImClone 
starting in August 2000 that its data would have to demonstrate 
that Irinotecan, the standard chemotherapy mentioned above, was 
needed along with Erbitux. But the data submitted by ImClone 
was not sufficient to distinguish the effects of the two 
treatments.
    Adding to the controversy over Erbitux has been the trading 
of ImClone stock by ImClone insiders a few weeks before the FDA 
letter, as well as trading of stock by Waksal family relatives 
and friends during the 48 hours before the FDA letter was 
issued. On December 21, 2001, ImClone issued a Company order 
stopping employees from trading in ImClone stock until the FDA 
decision on Erbitux was made public. The committee staff 
believed until yesterday that no member of the board or officer 
of the company traded stock between the 21st and 28th.
    The staff found that, except for Sam and Harlan Waksal, 
members of Sam Waksal's immediate family sold ImClone stock on 
December 27, 2001 or the next day, hours before ImClone 
announced publicly that FDA had refused to accept the filing of 
Erbitux. We found that three officers of ImClone sold stock 
prior to December 18, 2001 on the advice of their broker. In 
addition, Harlan Waksal conducted a forward sale of 700,000 
shares on December 6, 2001.
    The staff learned that on October 31, 2001, Harlan notified 
the ImClone board members that he planned to execute a $700,000 
sales transaction. He told the board that the stock would still 
be under his voting control for the next 3 years. He also 
stated he would finalize the transaction over the next 2 weeks. 
He told the committee staff in early 2001 he attempted to shop 
the sale. He told the staff he was forced to sell the ImClone 
stock to come up with enough cash to pay substantial taxes 
racked up from his prior exercise of stock options and the 
tendering of shares to Bristol. He also stated that because he 
didn't want to sell shares he entered into a forward sales 
contract that gives him a percentage of the cash value of the 
shares up front but still allows him to control the shares and 
defer tax payments for another 2 years. In short, Waksal 
received less than the stock was worth at the time of the sale, 
but he also limited the downside risk when ImClone's stock 
price continued to drop. It should be noted that Harlan Waksal 
sold the 700,000 shares on the same day that ImClone hit its 
52-week high.
    Mr. Chairman, that concludes my prepared statement. I'll be 
happy to answer any questions.
    [The prepared statement of Frank Papineau follows:]
  Prepared Statement of Frank Papineau, Committee Staff, Committee on 
                          Energy and Commerce
    Chairman Greenwood, Ranking Member Deutsch, and Members of the 
Subcommittee, I am Frank Papineau, on detail to the Energy & Commerce 
Committee's staff. I am here today to provide you with background 
information and key facts and dates surrounding the Food and Drug 
Administration's decision to end its consideration of ImClone Systems' 
highly touted cancer drug, Erbitux, and the questionable ImClone stock-
selling activity during this turn of events.
    My remarks are an oral summary taken from the Committee staff 
report prepared for today's hearing. I am accompanied today by Dr. 
Raymond Weiss, Consultant in Oncology and Clinical Professor of 
Medicine at Georgetown University Medical Center. Dr. Weiss is under 
contract with the Committee to provide assistance to the staff. Dr. 
Weiss wrote a report of his findings, which is appended to the 
Committee staff report.
                               background
    By way of background, ImClone Systems is a small biotech company 
based in New York City, founded in 1984 by two brothers--Sam and Harlan 
Waksal. ImClone has never turned a profit in its 18 years of existence 
and reportedly has spent over $200 million on research of Erbitux. Many 
people involved in cancer research believe that Erbitux is a promising 
drug and widely expected it to be on the market this year. Erbitux, 
however, was not approved for the market because the Food and Drug 
Administration found so many problems with ImClone's application for 
approval that it issued a Refusal To File letter, a rare FDA action 
that effectively turned the drug back to the company for further study. 
This situation attracted national attention because of the pre-market 
publicity about the drug, because of ImClone's record-setting $2 
billion alliance with Bristol-Myers Squibb to market Erbitux, and 
because of multi-million dollar stock trades by ImClone insiders in the 
weeks before FDA's negative decision.
    Over the past six months, Committee staff has conducted an 
extensive investigation into matters surrounding ImClone's cancer drug 
and related business dealings. The Committee's investigation focused on 
the FDA drug approval process, Erbitux's clinical trials, Bristol-
Meyer's partnership arrangement to acquire commercial rights to 
Erbitux, and the key events leading up to FDA's Refusal to File letter 
and trading of ImClone stock by its board members and officers, as well 
as, several of Sam Waksal's immediate family and friends.
    Before we proceed to the business dealings, let me first highlight 
two of staff's findings regarding FDA's review of Erbitux: One, FDA's 
initial decision in August 2000 to grant fast-track designation to 
Erbitux appears to have been based on incorrect information regarding 
the study protocol submitted by ImClone in support of the proposed 
cancer treatment, which involved Erbitux and another cancer drug, 
Irinotecan. Two, the FDA made this initial decision before it had full 
information about Erbitux's activity when administered in the absence 
of this other drug; and it was this other information--requested in a 
letter by FDA in January 2001 and received from ImClone in October 
2001--that led agency reviewers to conclude the application was 
inadequate.
       the bristol-meyers squibb deal and imclone's internal loan
    In early 2001, Bristol-Meyers Squibb (BMS) failed in its effort to 
form an alliance with a biotech company, OSI, that it believed had a 
promising cancer drug. The company believed it was losing its share of 
the oncology drug market and decided to re-visit ImClone and its cancer 
drug Erbitux. On June 1, 2001, after a month of negotiations, Sam 
Waksal outlined an acquisition plan that would give BMS a 70% majority 
stake in ImClone. BMS's Board of Directors rejected the deal. Mr. 
Waksal then told BMS that he was willing to consider alternative 
proposals provided they include a significant equity investment in 
ImClone by BMS and he also advised BMS that he believed ImClone's 
existing stockholders would benefit most if BMS acquired an equity 
interest through a tender offer to the ImClone's existing stockholders.
    During July 2001, after ImClone was virtually assured of the equity 
deal and in anticipation of the tender offer from BMS ImClone's Board 
agreed to lend $35.2 million to the Waksal brothers and the Chairman of 
the Board. The loans provided the opportunity for the three individuals 
to exercise stock options and warrants they held to purchase a total of 
approximately 4.5 million shares of ImClone stock. (Sam Waksal and 
Harlan Waksal's loans were $18.2 and $15.7 respectively. The Chairman's 
loan was in the amount of $1.2 million.)
    On October 29, 2001, thousands of ImClone's shareholders 
participated in the BMS tender offer to purchase ImClone stock at $70 a 
share, a $20 premium over the trading price. ImClone's Board of 
Directors tendered 2.1 million shares to BMS by themselves--
representing approximately 15% of the stock tendered by ImClone 
shareholders to BMS. Sam and Harlan Waksal tendered 814,674 and 776,450 
shares for about $111 million. Simply stated this means that the Waksal 
brothers received more than 10% of the entire proceeds paid by BMS 
during the tender offer. Although all ImClone shareholders were allowed 
to tender shares to BMS, only the Waksals and two other board members 
borrowed millions of dollars of company funds to purchase the stock and 
then tender it to BMS.
                             the rtf letter
    On December 28, 2001, the FDA issued its ``refuse-to-file'' (RTF) 
letter in response to the ImClone submission. The RTF letter is sent in 
rare cases when a submission is deemed insufficient. (It is a non-
public document containing trade secret or confidential commercial 
information.) In a December 31, 2001 conference call with investors, 
ImClone executives said that FDA sent the RTF letter because the 
Erbitux application was missing certain ``train of documentation'' 
information needed by regulators to accept the filing. ImClone said it 
would be able to answer the FDA questions by the end of the first 
quarter, leading, hopefully to an approval of Erbitux in the fall.
    On January 4, 2002, the Cancer Letter published excerpts of the RTF 
letter indicating that--contrary to ImClone statements to investors--
the FDA had a long list of concerns that went far beyond record 
keeping. The FDA believed ImClone's clinical trial was not adequate and 
well controlled and that additional studies would be needed. The letter 
suggested that the FDA had warned ImClone starting in August 2000 that 
its data would have to demonstrate that Irinotecan, the standard 
chemotherapy mentioned above, was needed along with Erbitux. But the 
data submitted by ImClone was not sufficient to distinguish the effects 
of the two treatments.
           trading activity by imclone executives and others
    Adding to the controversy over Erbitux has been the trading of 
ImClone stock by ImClone insiders a few weeks before the FDA letter, as 
well as the trading of stock by Waksal family relatives and friends 
during the 48 hours before the FDA letter was issued.
    On December 21, 2001, ImClone issued a Company order stopping its 
employees from trading in ImClone stock until after the FDA decision on 
Erbitux was made public. Committee staff believes that no board member 
or officer of ImClone traded ImClone stock between December 21 and 28, 
2001. However, staff found that, except for Sam and Harlan Waksal, 
members of Sam Waksal's immediate family sold ImClone stock on December 
27, 2001 or the next day hours before ImClone announced publicly that 
FDA had refused to accept the filing of Erbitux.
    We found that three officers of ImClone sold stock prior to 
December 18, 2001 on the advice of their broker. In addition, Harlan 
Waksal conducted a forward sale of 700,000 shares on December 6, 2001.
    The staff learned that on October 31, 2001, Harlan Waksal notified 
the ImClone Board Members that he planned to execute a 700,000 share 
stock transaction. He told the board that the stock would still be 
under his voting control for the next three years. He also stated that 
he'd finalize transaction over the next two weeks. He told Committee 
staff that in early November 2001 he attempted to shop the sale. He 
told staff he was forced to sell the ImClone stock to come up with 
enough cash to pay substantial taxes racked up from his prior exercise 
of stock options and his tendering of shares to BMS. He also stated 
that because he didn't want to sell shares he entered into a forward 
sales contract that gives him a percentage of the cash value of the 
shares up front but still allows him to control the shares and defer 
tax payments for another two years. In short, Waksal received less than 
what the stock was worth at the time of the sale, but he also limited 
the downside risk when ImClone's stock price continued to drop. It 
should be noted that Harlan Waksal sold the 700,000 shares on the same 
day that ImClone hit its 52-week high.
    This ends my prepared testimony, and I will be pleased to answer 
your questions.

    Mr. Greenwood. Thank you, Mr. Papineau. The Chair 
recognizes himself for 5 minutes for questions, and let me 
address my questions to you, Dr. Weiss. You are a clinical 
professor of Medicine, is that right?
    Mr. Weiss. Yes, sir. I am independent consultant in 
oncology.
    Mr. Greenwood. Just pull that right up close to you, sir. 
Pull the microphone forward about 5, 6 inches.
    Mr. Weiss. Does this work now? Yes.
    Mr. Greenwood. Yes.
    Mr. Weiss. Okay. I am a 100 percent self-employed 
independent consultant in oncology. I have a number of 
contracts with agencies of the Federal Government to do various 
tasks, and I am also a clinical professor of Medicine at 
Georgetown. That is an unpaid teaching faculty position.
    Mr. Greenwood. Do you treat patients now?
    Mr. Weiss. Yes, I do. I have an arrangement with an 
oncologist in solo practice who has offices on either side of 
the Maryland and Pennsylvania border in Gettysburg and 
Westminster, and I go to that office about 7 days a month to 
give him some time off and see patients, to maintain my 
clinical skills. I also have a contract with the Walter Reed 
Army Medical Center to go there 1 day a week to see patients in 
the breast disease clinic. So, yes, I do see patients, and I 
see patients with colon cancer too.
    Mr. Greenwood. And for how many years have you audited 
scientific research?
    Mr. Weiss. Yes. Since 1981, the National Cancer Institute 
has required onsite quality assurance auditing of the clinical 
trials that they fund at institutions around this country. 
There are 11 such cooperative groups, collaborating 
institutions, and I work for one of them, the Cancer and 
Leukemia Group B, which has its major grant handled by the 
University of Chicago, so I am a contractor to the University 
of Chicago for that grant. And I make site visits, as I did 
just the past 3 days, to institutions around the country, 
auditing the records, the medical records of patients that are 
in clinical trials.
    Mr. Greenwood. Okay. And you reviewed the clinical trial 
data from Erbitux's 9923 study.
    Mr. Weiss. Yes, I did.
    Mr. Greenwood. Okay. In your report, you described as 
incredible the fact that 37 patients, almost 27 percent, of the 
139 patients who were entered in that study were ineligible. 
Why is that percentage--why do you consider that percentage to 
be, quote, ``incredible?''
    Mr. Weiss. Because eligibility criteria for the clinical 
trial are most important. They determine the patient population 
you are going to study. They have to have the right cancer, 
they have to have the right stage, they have to have certain 
degree of normal liver function, normal kidney function, blood 
counts. All those sorts of things are criteria for being 
eligible to go on the study.
    Mr. Greenwood. So in this study, there were only 139 
patients that were entered, and 27 percent of them didn't meet 
the criteria for the study as it was designed.
    Mr. Weiss. That is correct. That was determined by----
    Mr. Greenwood. Is that an atypical rate?
    Mr. Weiss. Yes, it is.
    Mr. Greenwood. What it is a typical rate?
    Mr. Weiss. To give you an example, just on Monday, one of 
the visits that I did, one of the 13 patients we audited was 
ineligible for the trial. It was due to the mistake of the 
nurse data manager overlooking the fact the patient was still 
on a drug that made him ineligible. That is just pure human 
error. It happens 5, 6, 8 percent of the time. It doesn't 
happen 27 percent of the time.
    Mr. Greenwood. Okay. And so what does you extrapolate from 
that with regard to the quality of the ImClone study?
    Mr. Weiss. There are a lot of patients who were entered on 
the trial that did not meet the eligibility criteria as set up 
in the protocol, and therefore that automatically makes the 
results somewhat subject to question.
    Mr. Greenwood. You also described as incredible the fact 
that 15 patients were exemptions to be enrolled in the study. 
What does that mean and why is that incredible?
    Mr. Weiss. Once you set up these eligibility criteria, you 
do not deviate from them, except that you might make an error, 
as I just described. You don't give exemptions from these 
eligibility criteria, because if you do, then you have changed 
the patient population that you are studying. You have allowed 
on patients who weren't eligible for the study.
    Mr. Greenwood. So is it highly unusual for exemptions to be 
given in such a study?
    Mr. Weiss. Most certainly. In the Cancer and Leukemia Group 
B, with the 300 participating institutions, the only time an 
exemption can be given is by the group Chair at the University 
of Chicago. That means a phone call to the highest level, and 
that is rarely done, No. 1, make a phone call, No. 2, even more 
rare is to give the exemption.
    Mr. Greenwood. Okay. I see in your report that you 
identified another set of major deviations in the study which 
involve the dose and the administration frequency of 
Irinotecan. Pronounce that for me.
    Mr. Weiss. Irinotecan.
    Mr. Greenwood. Irinotecan, the toxic chem. drug used in 
combination with Erbitux. How would the dosing and the 
frequency of dosing affect the results of the study?
    Mr. Weiss. The protocol set up a standard for giving that 
particular drug and said that the dose and the frequency had to 
be the same as the patient received when they progressed; that 
is, their cancer got worse when they were on that drug 
previously. When they were treated on the protocol, I believe 
there were 17 patients did not get the same dose and same 
schedule of frequency of treatment as they were prior to 
entering. That is a major deviation.
    Mr. Greenwood. How would you determine whether the patients 
were actually improving because of these drugs?
    Mr. Weiss. You couldn't separate the effect of increasing 
the dose of the one drug from the effect of the combination of 
the two drugs, either the Erbitux and/or the Irinotecan. When 
you are giving more of one drug than you had before, you are 
changing the results, and, again, you make the results of the 
study subject to question.
    Mr. Greenwood. The Chair's time has expired. The Chair 
recognizes the gentleman, Mr. Stupak, for inquiry for 5 
minutes.
    Mr. Stupak. Thank you, Mr. Chairman.
    Dr. Weiss, the patient eligibility, that was decided by 
who, the patient eligibility for these studies?
    Mr. Weiss. They are set up in the protocol, and I assume 
the investigators entering the patient decided the patient met 
the eligibility criteria or not. But in the case of those 15 
patients, they would have had to call somebody, perhaps at 
ImClone, I don't know, to say it is okay to handle that patient 
even though they are not eligible.
    Mr. Stupak. This study is known as 9923, correct?
    Mr. Weiss. Yes, sir.
    Mr. Stupak. And the study was actually done in 1999, I 
believe.
    Mr. Weiss. It was started in the end of 1999 and ended in 
early 2001.
    Mr. Stupak. And then after that August of 2000, ImClone and 
FDA met to see if they could get an accelerated approval of 
this drug, correct?
    Mr. Weiss. Yes, sir.
    Mr. Stupak. Okay. After that meeting, there was a change in 
the protocol, was there not?
    Mr. Weiss. Actually, the change in the protocol anti-dated 
that meeting by about 10 months. It was October 1999. And it is 
apparent, to me anyway, that the FDA staff did not know about 
the change in the protocol because their understanding was 
Version 1.0 of the study.
    Mr. Stupak. Correct. They thought it was Version 1.0, and 
in fact when the approval was given on Fast Track, which was, 
if I remember correctly, January 12, 2001, they were given the 
Fast Track authority to do protocol No. 1, correct?
    Mr. Weiss. Yes, sir. That is what it appears.
    Mr. Stupak. In fact, even 7 days there later, FDA, on 
January 19, actually sent them a letter and talked about the 
first protocol, and that would be used in this Fast Track 
study.
    Mr. Weiss. That is correct, sir.
    Mr. Stupak. Okay. If you go then to--let me back up just a 
little bit. While they were doing this study and everything, 
there has been a lot of discussion here about the July 30, 2001 
Business Week article, and in the Business Week article, which 
was touting Erbitux, it stated that this drug was the furthest 
along of a handful of new cancer treatments that precisely 
honed in on a growth signal found in up to 50 percent of all 
cancers. In clinical trials, ``the drug demonstrated remarkable 
success in causing colon cancer to regress in patients who had 
failed to respond to other treatments.'' Did you find in your 
review any medical evidence that the drug demonstrated 
remarkable success in causing colon cancer regression?
    Mr. Weiss. No, sir. The patients who got a response, that 
is their cancer shrunk, the measurable lesions that were seen 
on a chest x-ray or a CT scan, the percentage that got that 
sort of response was in the 15 to 20 percent range. When you 
look at all of the people who have reviewed these CT scans and 
decided that they agreed, they agreed only on 20 patients and 
unfortunately there were all these disagreements, whether the 
patients truly were resistant to Irinotecan, No. 1----
    Mr. Stupak. Sure.
    Mr. Weiss. [continuing] and, No. 2, whether they truly got 
a response to the protocol therapy.
    Mr. Stupak. Well, in your investigation, or Mr. Papineau, 
did either one of you find who was responsible for putting out 
the statement saying that you had remarkable success when at 
best the success was only 20 percent?
    Mr. Weiss. It was Mr. Waksal is the one who did most of the 
touting of this drug.
    Mr. Stupak. Sure. Which Mr. Waksal was that?
    Mr. Weiss. Mr. Sam Waksal.
    Mr. Stupak. Okay. Well, did you find in your investigation 
any evidence that, and I am going to quote again in a 
conversation that Mr. Waksal on the phone referenced as single 
agent data, ``Apparently it came out at 13 percent, which he 
feels is half the C22-25, plus CUT 11 data. They have informed 
the FDA who were pleased and confirmed that they would be on 
for the February 28 FDA's Oncologic Drugs Advisory Committee,'' 
I take it the Advisory Committee for approval. Did you find 
anything, Mr. Papineau or Dr. Weiss, in which the FDA was, use 
the word, ``pleased'' and that there would be the expected 
February 28 that they would be on the Advisory Committee? Did 
you find anything like that?
    Mr. Papineau. We did not, sir. The FDA reviewers that we 
talked to were very clear that no statement like that was ever 
made to Sam Waksal.
    Mr. Stupak. Okay. Was it made to anyone else? If not Sam 
Waksal, was it made to anyone else that FDA was pleased with 
this single agent data?
    Mr. Papineau. Not that I am aware of, sir. There was talk 
about the single agent data and FDA wanted to see it. And 
ImClone told them that they had the data and they would present 
it to them at a later date. When it came time to present the 
data----
    Mr. Stupak. And, actually, that data wasn't submitted until 
late December, just before it was rejected.
    Mr. Papineau. It was finally given to them in total on 
December 4.
    Mr. Stupak. December 4. So whether it was the L.A. Times, 
business news, even statements about the remarkable success of 
this drug or FDA's apparently position with this drug, 
excitement about this drug, those are just--there is no basis 
of fact that you could find anywhere in your investigation to 
support those statements?
    Mr. Papineau. Not totally. What we did find from talking to 
the FDA officials is that they were listening to it and they 
couldn't talk because of the secrecy--the trade secrets and 
stuff of drug applications----
    Mr. Stupak. So during that time, even though they saw these 
statements publicly, they could not--FDA could not stand out 
publicly and say, ``This is not true.''
    Mr. Papineau. Exactly.
    Mr. Stupak. Because of the trade secrets and the ongoing 
study, correct?
    Mr. Papineau. That is exactly true. You will hear later 
from FDA witnesses. They will tell you that they watched ``60 
Minutes'' and they read Business Week, and as they sat there 
and watched ``60 Minutes'' on Sunday night, they had a lot of 
problems in the hype and what was being said, but there was 
nothing they could do about it.
    Mr. Greenwood. Time of the gentleman has expired. The Chair 
recognizes the gentleman of the full committee, Mr. Tauzin, for 
5 minutes for inquiry.
    Chairman Tauzin. Thank you, Mr. Chairman. Let me see if I 
can get all this in sort of layman's understanding. Our 
understanding from our investigation, gentlemen, is that this 
whole matter revolves around a mistake made in the early 
protocol that was based upon the notion that the way to test 
this drug, Erbitux, was to test it in combination with another 
toxic chemotherapy; is that correct?
    Mr. Weiss. That is correct.
    Chairman Tauzin. And that mistake was based upon 
information that Erbitux alone didn't show enough effect, 
didn't show a reasonable amount of good results, that it had to 
be used in combination and tested in combination with other 
toxic chemotherapy; is that correct?
    Mr. Weiss. Yes, sir. All drugs that go to clinical trials, 
whether they are cancer drugs or anything else, go through 
testing in animals. And when they tested this new drug, 
Erbitux, in animals, they found that they got the best results 
if they used Irinotecan and Erbitux together in the animal 
cancers.
    Chairman Tauzin. Yes. But, apparently, when the FDA medical 
reviewer handling this matter looked at it, the original 
decision was that the protocol shouldn't be approved. And then 
in August 11, the senior FDA medical official, in effect, 
overruled the primary review and said, ``Yes, go forward with 
it,'' based upon this combination used; is that right?
    Mr. Weiss. That is what it appears to be; yes, sir.
    Chairman Tauzin. And later on a single agent study 
indicated in fact Erbitux did have enough activity to indicate 
that it should have been studied by itself without studying it 
in combination with the toxic chem. you mentioned; is that 
correct.
    Mr. Weiss. Yes, sir. A single agent study was subsequently 
done. Fifty-seven patients were entered and although six 
patients were said to have responded, the Bristol reviewers 
said they clearly agreed that five did respond. So that is 
about an 8 to 9 percent rate of regression of the cancer--
number of patients who got benefit.
    Chairman Tauzin. Now, the 9923 study, which was the study 
that was used to approve the original protocol, apparently it 
had lots of problems. When BMS, Bristol-Myers Squibb, did the 
independent radiological review, they indicated that the 
response rate was only 12.5 percent compared to the claimed 
22.5 percent. They found that the number of patients valuable 
under the system was 89 instead of the original 120. And if 
that data was correct, that would drop it below the 15 percent 
clinical end point set by ImClone, and the study would 
therefore be too small to support the accelerated approval 
process. So BMS, in its radiological review, ends up saying, 
``Hey, this process, 9923, this protocol that the FDA has 
approved, over the objections of the initial reviewer, is 
flawed;'' is that right?
    Mr. Weiss. Yes, sir.
    Chairman Tauzin. But they went ahead and invested anyhow 
and went ahead with that deal. Now, in the end, the end result 
of all this was at some point, December something, FDA finally 
says, ``This is not working. This review process is not doing 
its job, it is flawed, and so we are going to recommend a so-
called refusal-to-file letter.'' Tell us what that is.
    Mr. Weiss. That is basically a rejection----
    Chairman Tauzin. It is a rejection notice.
    Mr. Weiss. It just says, ``We are not going to review your 
study because there are too many problems with it.''
    Chairman Tauzin. Now, you have been asked to independently 
review all this stuff, right?
    Mr. Weiss. Yes, sir.
    Chairman Tauzin. The first question I want to ask you, if 
this drug is as important as it was hyped to be, was this a 
case--if ever there was a case that should have been handled 
absolutely carefully and correctly from Day One, wasn't this 
one?
    Mr. Weiss. Yes, sir. Any time you have a study that is 
going to the FDA to get approval for marketing so that 
thousands of patients into the indefinite future get the drug, 
you want to be sure your scientific results and your study are 
iron clad.
    Chairman Tauzin. Yes, but more importantly, here is a drug 
that is being hyped as a blockbuster chemical treatment drug. 
Here is a drug that is being told it is going to revolutionize 
cancer treatment. Here is a drug that by all accounts is life 
or death for hundreds of patients who call in daily saying, 
``Get it to me.''
    Mr. Weiss. That is correct.
    Chairman Tauzin. Isn't this the kind of drug that should 
have been handled in the most careful, most precise, knowing 
ways so that FDA was assured from Day One that the protocols 
were correct, that everybody working with FDA, including 
Bristol Myers Squibb, everybody, should have been very careful 
that every T was crossed, every I was dotted, everything was 
done precisely right because of the importance of the potential 
of this drug to cancer therapy?
    Mr. Weiss. Most assuredly.
    Chairman Tauzin. Now, you have looked at this process. Was 
there any doubt in your mind that it was flawed when you looked 
at it?
    Mr. Weiss. The protocol had flaws in it.
    Chairman Tauzin. You could see it, couldn't you?
    Mr. Weiss. Yes, sir.
    Chairman Tauzin. Why couldn't FDA? Why couldn't ImClone? 
Why couldn't Bristol-Myers see it? Why couldn't somebody see it 
early enough to say, ``Stop. Let us stop it right now and start 
it up again correctly and do it right so that we don't delay 
this process the way it has now been delayed.''
    Mr. Weiss. I don't believe I can answer that question, sir.
    Chairman Tauzin. That is the question I think we have got 
to answer, Mr. Chairman. Thank you.
    Mr. Greenwood. The Chair thanks the chairman and 
recognizes, for 5 minutes for inquiry, the gentlelady from 
Colorado, Ms. DeGette.
    Ms. DeGette. Thank you, Mr. Chairman, and following up on 
Chairman Tauzin's question, the way the Fast Track process is 
supposed to work is if you have a promising drug, but you want 
to move it more quickly because it is addressing some need that 
has not being addressed by existing drugs or it is being used 
on patients with no hope, Congress and the research community 
sort of said, ``Well, we are not going to have the full-blown 
research Phase III studies that we might have with other 
drugs;'' correct, Dr. Weiss?
    Mr. Weiss. Yes, sir--yes, ma'am.
    Ms. DeGette. I am used to it.
    And so there is some sense with Fast Track approval that 
maybe you won't have the full-blown, years long research 
process, and that is accepted by everyone at the FDA, in the 
research community and by Congress.
    Mr. Weiss. Yes.
    Ms. DeGette. Okay. But nonetheless, the studies are 
supposed to have--are designed to have protocols which are 
acceptable scientifically, correct? I mean we don't abandoned 
scientific protocol simply because we want to get these drugs 
on the market, right?
    Mr. Weiss. You not only have to have a scientifically valid 
protocol, but you have to have scientific valid patients and 
analysis of those patients that were entered on the study.
    Ms. DeGette. And the problem with this--one of the problems 
with this study was that it was--it had a very small sample 
size to begin with. Am I correct in saying that?
    Mr. Weiss. Relatively speaking, in clinical trials in 
cancer, yes.
    Ms. DeGette. And it probably would have been all right as a 
stage two study, correct, Dr. Weiss, do you think?
    Mr. Weiss. I am sorry?
    Ms. DeGette. As a pivotal study, both of these protocols 
were undoubtedly flawed. We are getting all hung here about 
which protocol did the FDA know about, but as a study on which 
you would face Fast Track approval of a drug, both of these 
protocols probably had flaws, wouldn't you say?
    Mr. Weiss. Yes. The major flaw was not requiring a specific 
dose and schedule of the Irinotecan. It was left up to the 
judgment of the physician, to some degree, by saying, ``Give 
them the same dose and schedule that they had before.''
    Ms. DeGette. So if you were doing an FDA approval process, 
that study which didn't give any sense of the dose of the 
Irinotecan might have been all right as a preliminary study, 
but you would want to refine that study before you approved 
Erbitux for use in cancer patients, correct?
    Mr. Weiss. Yes, and you would not ineligible patients on it 
either.
    Ms. DeGette. Especially when you already had such a small 
sample size.
    Mr. Weiss. Yes, most definitely.
    Ms. DeGette. Okay. Now, was there any--do we have any idea 
why there was such a high percentage of ineligible patients in 
the protocol?
    Mr. Weiss. I have no idea.
    Ms. DeGette. So any answers would be speculative unless the 
researchers themselves could tell us, correct?
    Mr. Weiss. They are speculative as far as I am concerned, I 
don't know.
    Ms. DeGette. Okay. And I am a little curious about this 
discussion in August 2000 with the FDA and with ImClone where 
apparently the FDA was relying on an old protocol and ImClone 
had adopted a new protocol. Whose responsibility would it be to 
know that new protocol at that meeting? Would the be the FDA's 
responsibility or ImClone's responsibility?
    Mr. Weiss. I would assume it is ImClone's responsibility to 
present it to the FDA and say, ``Look, we have changed the 
study.''
    Ms. DeGette. Now, do we have--had ImClone, in fact, given 
that updated protocol to the FDA prior to the August 2000 
meeting?
    Mr. Weiss. I saw no evidence that they had.
    Ms. DeGette. So you have no evidence that the FDA had that 
study in hand, whether or not they referred to it at the 
meeting or not.
    Mr. Weiss. I do not.
    Ms. DeGette. Okay. I just have a couple more quick 
questions. I have in my hand the report that you presented to 
this committee, Doctor. I assume you personally have overseen a 
number of protocols, given your background.
    Mr. Weiss. Yes. I have personally participated in a number 
of clinical trials----
    Ms. DeGette. Okay. Now----
    Mr. Weiss. [continuing] written the protocols.
    Ms. DeGette. On page 7 of your study, I don't know if you 
have it in front of you.
    Mr. Weiss. Yes, I do.
    Ms. DeGette. Okay. At the bottom, the very last paragraph, 
it says, ``Flaws in the design of the 9923 protocol were also 
expressed publicly by three prominent medical oncologists after 
the publication of the RTF,'' which is the refusal-to-file 
letter. That was in January 2002 after everything fell apart, 
correct?
    Mr. Weiss. Yes.
    Ms. DeGette. I am wondering if you can tell me very 
briefly, because my time is up, what flaws those three 
prominent oncologists found in the protocols.
    Mr. Weiss. The eligibility criteria regarding the patient 
being clearly resistant to the Irinotecan was one. The way that 
the specifications for giving the Irinotecan on this study, 
which I said were non-existent, those were the two major flaws.
    Ms. DeGette. And are those flaws that should have been 
caught in the FDA Fast Track approval process?
    Mr. Weiss. Yes, I believe they should have been.
    Ms. DeGette. Thank you, Doctor. No further questions.
    Mr. Greenwood. The time of the gentlelady has expired. The 
Chair recognizes the gentleman from Kentucky, Dr. Fletcher, for 
5 minutes, for purposes of inquiry.
    Mr. Fletcher. Thank you, Mr. Chairman. Again, I want to 
thank you for conducting this hearing, and even though I had to 
step out briefly, I tried to listen to much of the testimony 
here.
    Dr. Weiss, let me just ask you, in general terms, and I 
hope this hasn't been asked, but in spite of--if you look at 
the problems with the study, particularly eligibility, those 
that were entered into the study with lack of eligibility, some 
of the other things you pointed out, does this drug, Erbitux, 
represent possibly a major breakthrough in cancer therapy, in 
your opinion?
    Mr. Weiss. I would not describe it as a major breakthrough. 
I would describe it as an interesting drug with some activity 
apparent in colon cancer that makes it worthwhile to study 
further. We have many such drugs in the field of oncology.
    Mr. Fletcher. I certainly understand that and appreciate 
it. Let me----
    Mr. Weiss. In other words, drugs that are interesting but 
not blockbusters.
    Mr. Fletcher. Thank you on that. And, obviously, we have 
heard much of the emphasis on the company management seemed to 
be on the financial dealings rather than making sure that the 
research was conducted adequately, and that does, at least--
that appears from the testimony thus far and what we have heard 
occurred there.
    Let me ask you this. It is very common for oncology agents 
to be used together because of the synergy. Sometimes they do 
not work alone, but they may work in combination with another 
medication. Help me understand why part of the refusal included 
making sure the drug was studied alone in efficacy alone. 
Doesn't the FDA sometimes permit to drug to use and say it is 
approved for use with another specific drug for a particular 
disease?
    Mr. Weiss. Yes. This registration study involved the two 
drugs, and you want to be sure that one drug is really 
producing some additional benefit over the other drug when they 
are used together. And so you had no information that the new 
drug, Erbitux, all by itself provided any benefit. So when they 
are used together, you want to be sure that the new drug also 
has activity by itself along with the old drug, which you know 
has some activity. So if you see a response greater with the 
two, you know it is because, yes, the one drug works a little 
bit but the two work together better and higher percentage of 
patients benefit.
    Mr. Fletcher. Do the flaws in the study prohibit you even 
if statistically you rule out some of the problems due to the 
eligibility that the drug that Erbitux accompanied or was used 
with efficacy was not enhanced with Erbitux?
    Mr. Weiss. It appeared to me that there was, for some 
patients, some benefit of Erbitux, both in the single agent 
study and in the combination study. The problem is with the 
combination study a large percentage of the patients were 
ineligible, many of them got doses higher of Irinotecan than 
they should have been, and there is a great deal of controversy 
over which patients responded and which didn't. So there are 
all sorts of flaws, and I don't think FDA could agree that it 
is a study that clearly makes a case for Erbitux as a drug that 
should be allowed on the market where anybody can prescribe it.
    Mr. Fletcher. Let me ask you then another question. 
Apparently, not only were there problems in following the 
protocol of the design of the study, but there were problems 
that you understand, and you may have already said this, 
problems in the design of the study itself then.
    Mr. Weiss. Yes. The eligibility criteria for determining 
whether the patient was truly resistant to Irinotecan before 
they were entered, that was a problem. And then the looseness--
and I use that term as my own--the looseness of the directions 
on what dose of Irinotecan would be prescribed. It was stated 
that you give the same dose as they received before they went 
on study with no dose increase, but, obviously, the physicians 
involved went ahead and did that anyway. And that makes the 
results very suspect. Did the patient respond because they got 
the two drugs together or did they respond because they got 
more of the Irinotecan now than they did before.
    Mr. Fletcher. And I can certainly understand how that makes 
the results somewhat uninterpretable. Let me ask you, in this 
company you have substantial expertise on the board at ImClone, 
you have obviously substantial expertise in the FDA. How does 
this study, first off, get structured with these flaws, how 
does it get implemented with these flaws in conjunction with 
the FDA, and this allowed to go on? Could you help us with some 
insight on that?
    Mr. Weiss. I can't answer that question, sir. One of the 
board of directors is somebody I used to work under at the 
National Cancer Institute, Dr. DeVita, whom I highly respect, 
and I don't know whether he actually saw the protocol or not.
    Mr. Fletcher. I find it, and the reason I do, certainly, 
many families, and I know our family's been affected personally 
with metastatic colon cancer, and I remember when the studies 
came out with 5-fu and Lamisil, we were very optimistic and it 
was apparently helpful, and we looked forward to this 
medication or others like this in not only metastatic colon 
cancer advance but other diseases. And if there is ever a time 
that you need to make sure for the timeliness of the 
availability of this drug that a study is done well, a study is 
conducted properly, that there is proper FDA oversight, that 
our Fast Track procedures were followed that were established 
by Congress, I mean this is the time you want it, because there 
is nothing more disheartening to raise the expectations of 
thousands of cancer patients that there is a new medication on 
the horizon and then to find out that it may still be, I mean 
it may still be a very good, effective medication, but the 
delay due to the flaws, and it looks like problems on both the 
companies and particularly with the FDA as well in overseeing 
the study, and maybe summon the process where a company can 
release and talk about how good this drug is and where the FDA, 
even if they have concerns, are prohibited, rightfully so, from 
talking about that. I would just like your discussion on what 
do you see can be done to prevent this in the future that we 
are not doing?
    Mr. Weiss. I agree with you entirely that it was extremely 
unfortunate that the hopes of many patients with cancer were 
raised and somewhat dashed now by the fact that the study 
wasn't interpretable sufficiently to approve the drug for 
marketing. I honestly don't have an answer to the second part 
of your question, what can we do to change things. One of them 
is perhaps allow the FDA a little more latitude to make some of 
their analyses public. I think that is for Congress to decide, 
though.
    Mr. Fletcher. I see my time has expired, and thank you, Mr. 
Chairman.
    Mr. Greenwood. The Chair thanks the gentleman. The Chair 
wishes to make one correction with regard to the testimony 
given by Mr. Papineau. I believe you testified that the sale on 
December 6 by Harlan Waksal of stock occurred on the day of the 
highest value of the stock. I believe the record should be 
corrected that it was near--the highest day was December 5 and 
he sold on the 6th. I wish the record to be corrected. The 
Chair recognizes the gentleman from Florida, Mr. Stearns, for 5 
minutes.
    Mr. Stearns. Thank you, Mr. Chairman. Dr. Weiss, did you 
see the ``60 Minutes'' CBS program on Erbitux?
    Mr. Weiss. No, I did not.
    Mr. Stearns. Mr. Papineau, you did, and you----
    Mr. Papineau. No, I did not.
    Mr. Stearns. You did not. I think you indicated--staff told 
me that you thought that the executives Erbitux saw the ``60 
Minutes;'' is that true?
    Mr. Papineau. I indicated that the FDA reviewers that were 
reviewing the drug watched ``60 Minutes,'' and they----
    Mr. Stearns. Okay.
    Mr. Papineau. [continuing] had serious questions.
    Mr. Stearns. Okay. So the FDA people who reviewed the ``60 
Minutes'' had serious questions?
    Mr. Papineau. Yes, sir.
    Mr. Stearns. Did the executives of ImClone, do you know if 
they saw the ``60 Minutes?'' Obviously, they did, but I mean it 
seems to me that if there were exaggerations in that ``60 
Minutes,'' somebody should have corrected the story.
    Mr. Weiss. I would think so.
    Mr. Stearns. Now, that is not the FDA's responsibility.
    Mr. Papineau. No, it isn't. FDA is not allowed to do that.
    Mr. Stearns. Right. Dr. Weiss, who do you think should have 
the responsibility if there is a bad story from CBS, they have 
hyped this, in fact it appears on the July 30, 2001 issue of 
Business Week international cover story they were talking about 
what a great new cancer treatment drug this was. And it seems 
like the point I am getting at is all this hype in the media 
about this. Where did they get this hype from?
    Mr. Weiss. It seems to be from the two executives that ran 
the company, the Waksal brothers.
    Mr. Stearns. Now, the Waksal brothers obviously didn't want 
to contact CBS ``60 Minutes,'' and say, ``No, you 
exaggerated,'' as CBS will say, ``Well, this is what you told 
us.'' So you have these two brothers hyping this and then you 
have the media picking up and hyping it too.
    Mr. Weiss. That seems to be the case; yes, sir.
    Mr. Stearns. So then the public is under the perception 
that it is legitimate because the media is promoting this, two 
legitimate media sources, ``60 Minutes'' and Business Week.
    What does it mean when the FDA puts a drug on a Fast Track 
for an application?
    Mr. Weiss. My understanding is that it is a drug that has a 
lot of interest, looks really hot and is one that should get on 
the market sooner rather than later, because it meets an unmet 
need for certain patients with cancer, and it works.
    Mr. Stearns. Does Erbitux legitimately make the argument 
for a Fast Track with FDA, and who makes that argument? Do the 
executives make it or does the FDA, and how is that determined?
    Mr. Weiss. The executives make it. To some degree, the FDA 
has to accept it too.
    Mr. Stearns. And so the application was made by the 
executives and then the FDA approved it and put it on a Fast 
Track.
    Mr. Weiss. That is my understanding.
    Mr. Stearns. And the evidence, the clinical evidence to put 
on a Fast Track has to be provided by ImClone, I guess, to the 
FDA and say, ``This is what we have from our clinical evidence, 
and we expect it to be on a Fast Track.''
    Mr. Weiss. Yes, sir.
    Mr. Stearns. In your opinion, should drugs go on a Fast 
Track based on any new criteria or the criteria is 
satisfactory?
    Mr. Weiss. Sir, they got a Fast Track by they first in the 
spring of 2000 came to FDA and asked for accelerated approval 
and Fast Track. They had that meeting that we have discussed in 
great detail in August of 2000. Part of that meeting was to 
decide whether or not it should be accelerated, and it was 
information that was made available to FDA at that meeting that 
FDA decided that they would give them accelerated--they would 
accelerate the application. In January of 2001, it was agreed 
it would go Fast Track. Fast Track simply means that as the 
application moves along, you can submit parts of it as you 
complete it. The actual application itself was presented to FDA 
on October 31, 2001. The biggest part of this Fast Track thing 
is that it gives the FDA 60 days to review it, which is what 
put the RTF letter into play.
    Mr. Stearns. Because it was on a Fast Track, it allowed the 
executives to submit documentation partially then; is that 
correct?
    Mr. Weiss. Yes, sir.
    Mr. Stearns. Now, Dr. Weiss, you indicated the assessment 
of Erbitux based upon your available information. You said it 
is not a breakthrough drug, it is not a blockbuster drug, yet 
they got Fast Track. Describe the problems in the 9923 study--
would you describe the problem in the 9923 study as merely 
missing documentation or much more serious?
    Mr. Weiss. Much more serious. There are three major 
problems: One, a high rate of ineligibility; No. 2, that a 
large fraction of the patients were given different doses of 
the Irinotecan, major higher doses of the Irinotecan than they 
received before, which was against the protocol; and then, 
third, that there is a great deal of difference between the 
investigators, the ImClone Review Committee and the BMS 
consultants regarding who responded to the treatment and who 
did not; in other words, the cancer shrunk versus did not 
shrink. So those are the three major problems.
    Mr. Stearns. It seems to me that those are pretty 
transparent problems, that people who have a Ph.D. in 
immunology would know and should have gone ahead. I note that 
you discuss that ImClone attended the inclusion criteria of the 
9923 study. What was this change and was it important?
    Mr. Weiss. Yes. It changed the requirement of the amount of 
therapy the patient had to have with Irinotecan beforehand. In 
other words, the original version the patient had to have a 
significant amount of that drug, 12 weeks of therapy and prove 
that their cancer grew despite that therapy. The protocol was 
changed that the patient could have had only a few doses, like 
on one patient as few as four. And that is 4 weeks of therapy, 
not 12 weeks. And you don't have sufficient information from 
just 4 weeks of therapy that the drug didn't work and the 
patient should now go on the study. That was the major change.
    Mr. Stearns. Thank you, Mr. Chairman.
    Mr. Greenwood. The Chair thanks the gentleman and 
recognizes for 5 minutes the gentleman from North Carolina, Mr. 
Burr.
    Mr. Burr. I thank the Chair. Dr. Weiss, you said that it 
was--the protocol was small and this was unusual. Is it unusual 
for a drug under Fast Track to have a small protocol?
    Mr. Weiss. No, it is not. A hundred and twenty patients 
should be sufficient if you truly have reliable results and you 
really see a benefit of the treatment.
    Mr. Burr. How many Fast Track processes have you testified 
on?
    Mr. Weiss. I have never done this before.
    Mr. Burr. And how many Fast Track processes have you 
reviewed as a medical professional?
    Mr. Weiss. I have not had any experience at the FDA 
reviewing such things.
    Mr. Burr. But you testify a lot because you are good. Is 
your consulting role to review things and potentially file a 
report on it?
    Mr. Weiss. Yes. I both practice medical oncology, take care 
of patients, and I act in this role of quality assurance for 
the clinical trials that the National Cancer Institute 
supports.
    Mr. Burr. How many Fast Track trials to date have used 
combination drugs in a Fast Track application?
    Mr. Weiss. I have not reviewed any Fast Track applications, 
sir. I never worked for the FDA.
    Mr. Burr. Yes, sir. I understand that, I am just trying to 
make sure the familiarity with the Fast Track process. But in 
fact this is the first time there has ever been a Fast Track 
process that used combination drugs. And in every case of the 
participants, they had to have already had a traditional 
chemotherapy approach that they had been non-responsive to; am 
I correct?
    Mr. Weiss. Yes. I think that is true. I can't think of----
    Mr. Burr. My understanding is that is true, and do we know 
in how many cases the particular drug----
    Mr. Weiss. Irinotecan.
    Mr. Burr. [continuing] Irinotecan was used?
    Mr. Weiss. There is the original studies with that drug 
conducted back in the early to middle 1990's that allowed that 
drug to be approved for marketing.
    Mr. Burr. And if I understand correctly from the notes I 
have got, Dr. Leonard Saltz, of the Memorial Sloan-Kettering 
Center, was intricately involved in the 9923 process?
    Mr. Weiss. Yes. I know him and I hold him in high regard.
    Mr. Burr. And what did he say when we interviewed him about 
these?
    Mr. Weiss. I don't believe we did interview him, sir.
    Mr. Burr. Oh, we didn't interview him, okay. And there were 
27 clinical sites that participated in 9923 trial, am I 
correct?
    Mr. Weiss. I am not sure. I would have to provide that for 
the record.
    Mr. Burr. But it was a number of them. Did we talk to any 
of them relative to the discrepancies, the flaws----
    Mr. Weiss. No, we didn't. We did not go out and interview 
any of the original investigators.
    Mr. Burr. I am just trying to better understand--as a 
Member of Congress, and I may be the only one, I don't think I 
am, I get calls all the time from patients who have gone 
through the traditional mode and they have been non-responsive. 
And they pick up the phone and they call and they say, ``Can 
you find a clinical trial? Can you get me in something?'' I can 
sort of understand how people snuck into this. I am not sure 
who approved it, whether it was one of the clinical sites or 
whether it was somebody at the FDA, maybe somebody changed the 
guidance a little bit. Certainly, the numbers that you talk 
about that you found are disturbing, and I think they do, to 
some degree, question the results that were found. I think that 
it is real important that we understand better from those 27 
clinical sites what transpired. How did we have the 
contamination of the pool? But I think to suggest that it was 
flawed because it was small is in fact because it was a Fast 
Track application, and I think that there is some degree of 
history to prove that that is the case usually when we have it.
    Let me ask you, Dr. Weiss, if the pool of individuals who 
participated in this trial was clean, in other words the fit 
within the parameters, as you understand them, that were agreed 
to by the FDA and ImClone, would the results then, if they were 
the same percentages that you see today, increase or decrease 
your belief that there was something here that we ought to 
really pursue, as it relates to the colorectal cancer?
    Mr. Weiss. It would increase it. The problems are, as I 
said, we don't know about the fact that there were so many 
ineligible patients, why that occurred. We know that some of 
the patients got a higher dose of Irinotecan than they should 
have, and we also know that there is a good deal of disparity 
between the various radiologists reviewing the CT scans to 
decide whether or not the patient got a response. But if 
everything were pure, then I can tell you it would be a very 
interesting drug. I don't know that I would call it a 
breakthrough, but it would be very interesting.
    Mr. Burr. I purposely did not refer to it as a breakthrough 
and never try to on this committee to refer to anything as a 
breakthrough, other than when we actually pass a bill, because 
usually that is a breakthrough.
    I think it is extremely important, though, that we 
understand better these 27 sites and why they made the 
decisions to either lower or raise the level of the 
chemotherapy drug that they were using in combination, because 
in fact by itself Erbitux showed some response but not 
tremendous response. It showed a much better response when used 
in combination with--what was the name of that chem. drug 
again?
    Mr. Weiss. Irinotecan.
    Mr. Burr. Irinotecan. But in the case of every person in 
the trial, they had gone through a traditional chemotherapy 
approach and had been non-responsive; in other words, their 
problem had not gotten better. In most cases, it had gotten 
worse; at best, it had stayed the same, am I correct?
    Mr. Weiss. Yes.
    Mr. Burr. So there was some promise that was there. Mr. 
Chairman, I know my time has run out, and I hope that either in 
other information that we have from our staff report or from 
other witnesses we can better understand these discrepancies 
that deal with the makeup of the protocols, why there were 
deviations in the size of the chemotherapy that was given, and 
hopefully we can follow up with Dr. Saltz and the 27 sites.
    Mr. Greenwood. The Chair thanks the gentleman. Just to 
clear the record, Dr. Weiss, you did review some of the audit 
reports from some of the 27 sites; is that correct?
    Mr. Weiss. Yes, sir.
    Mr. Greenwood. Okay. The Chair thanks--Dr. Fletcher asks 
unanimous consent for an additional 2 minutes for purpose of 
inquiry.
    Mr. Fletcher. Thank you, Mr. Chairman. I just had one more 
question, especially the gentleman from North Carolina 
certainly spurred my interest in the fact that looking at 
Bristol-Myers Squibb, which purchased this company and I think 
still, obviously, has a belief that this medication will help 
in colorectal cancer, metastatic colorectal cancer, especially 
in patients who have had failed conventional therapy. I mean 
this is a company that invested a substantial amount of money. 
They have a tremendous amount of expertise in this area. They 
looked at this study. Now why do you think in looking at this 
study that they still believe that this medication certainly 
has a great deal of viability and yet you seem to dismiss the 
study substantially?
    Mr. Weiss. I do not dismiss the study substantially. I say 
there are so many problems it is hard to know whether the drug 
really works. And I do not know why the BMS people went ahead 
with it, but I guess that I could use the analogy they thought 
they were getting a diamond and they turned out to have gotten 
a zircon.
    Mr. Fletcher. Let me ask you just one follow-up with that, 
and that is that what are the side effects of this medication?
    Mr. Weiss. It has two side effects. One is any time you 
give a protein, which it is, to anybody there is always the 
chance of allergy.
    Mr. Fletcher. Percentage of that, do you have it?
    Mr. Weiss. Three or 4 percent. And the patient can't get 
any more of that drug because they are allergic to it. The 
other major side effect----
    Mr. Fletcher. Does that include any anaphylactic reaction 
or life-threatening----
    Mr. Weiss. Yes. That is exactly what I mean. And the other 
major side effect, where 85, 90 percent of the patients get it, 
is they get cases of acne, skin reaction, and sometimes it is 
bad enough so the patient wants to stop the therapy.
    Mr. Fletcher. Thank you very much. Thank you, Mr. Chairman.
    Mr. Greenwood. The Chair thanks the gentleman. The Chair 
wishes, without objection, to enter two documents into the 
record. One is the staff report entitled, ``An Inquiry into the 
ImClone Cancer-drug Matter, Preliminary Committee Staff 
Report,'' and the second is a report to the House Committee on 
Energy and Commerce by Dr. Weiss. Without objection, those 
documents will be entered into the record.
    [The reports follow:]
             An Inquiry Into the ImClone Cancer-Drug Matter
                   preliminary committee staff report
    At the direction of Chairman W.J. ``Billy'' Tauzin and Subcommittee 
Chairman James C. Greenwood (later joined by Ranking Minority Member 
John D. Dingell and Subcommittee Ranking Minority Member Peter 
Deutsch), Committee staff conducted an investigation into matters 
surrounding the development by ImClone Systems, Inc., (ImClone) of its 
colorectal cancer drug Erbitux (also known as C225 or Cetuximab).
    ImClone, a small biotechnology company based in New York, was 
founded by two brothers, Drs. Sam and Harlan Waksal, in 1984. ImClone 
developed a cancer therapy drug called Erbitux, reportedly spending 
more than $200 million on research on this drug. ImClone has never 
turned a profit in its 18 years of existence.
    In the spring of 2000, ImClone sought accelerated approval from the 
Food and Drug Administration (FDA) to market Erbitux to meet the 
medical need of colorectal cancer patients who have failed to respond 
to standard chemotherapies. ImClone and Erbitux are internationally 
known, having been featured on the CBS news program ``60 Minutes,'' and 
the international cover of the July 30, 2001 issue of Business Week. 
One reason Erbitux received such attention is that, according to 
Business Week, this drug was ``the furthest along of a handful of new 
cancer treatments that precisely home in on a growth signal found in up 
to 50% of all cancer types.'' In clinical trials, ``the drug 
demonstrated remarkable success in causing colon cancer to regress in 
patients who had failed to respond to all other treatments.'' Erbitux 
also is promising because it is an antibody that targets and blocks off 
cancer cells, without the high degree of side effects from standard 
cancer treatment. Such promise apparently prompted thousands of cancer 
patients to try to obtain Erbitux either through clinical trial 
enrollment or ``compassionate use'' access. For example, USA Today 
reported that ImClone had received 400 calls a day from patients 
desperate to get Erbitux outside of clinical trials
    In September 2001, Bristol-Myers Squibb (BMS) bought 19.9 percent 
of ImClone for $1 billion, and agreed to pay as much as $1 billion more 
to obtain the marketing rights to Erbitux. On October 30, 2001, ImClone 
submitted its Biologics License Application (BLA) for Erbitux to FDA. 
On December 17, 2001, ImClone was one of seven biotechnology companies 
included for the first time in the NASDAQ 100 index. Excitement and 
confidence in ImClone was reflected in such media reports as an article 
in the December 26, 2001 Los Angeles Times, which proclaimed, 
``Erbitux, a colon cancer treatment from ImClone Systems Inc., is set 
to make one of the biggest splashes of 2002.''
    Many observers and investors were thus stunned to learn that, on 
December 28, 2001, FDA issued a ``refuse-to-file'' (RTF) letter in 
response to the ImClone license submission. The RTF letter is sent in 
rare cases when a submission is deemed insufficient, and is a non-
public document, since it contains trade secret or confidential 
commercial information. ImClone publicly announced the FDA decision the 
evening of December 28th, which prompted a sharp sell off in ImClone 
shares starting on December 31, 2001.
    The Committee's investigation focused on the validity of the claims 
that were asserted about ImClone's effectiveness, the FDA filing and 
review process, and evidence uncovered by the Committee that friends 
and family members of ImClone's founders sold large amounts of ImClone 
stock just prior to ImClone's receipt of the negative determination 
from FDA.
                              methodology
    To review the above issues, Committee staff conducted hundreds of 
hours of interviews with officials from ImClone, BMS, and other 
pharmaceutical companies, FDA, Wall Street firms, patient advocacy 
groups, oncologists, and representatives of family and friends of Sam 
and Harlan Waksal. Staff also obtained and reviewed thousands of 
documents from the above officials, corporations, and FDA. These 
documents and discussions with officials included, but were not limited 
to, the FDA drug approval process, clinical trials, the BMS tender 
offer and milestone payments with ImClone, events leading up to the FDA 
refusal-to-file letter, stock trading by ImClone officials and Waksal 
family and friends, and ImClone's filings with the Securities and 
Exchange Commission (SEC). Staff also reviewed the due diligence 
activities conducted by seven other major pharmaceutical firms during 
1999 and 2000, to determine what they learned about ImClone and its 
products, and what their rationale was for not entering into an 
alliance with ImClone, as BMS did in 2001.
    the fda process: accelerated approval and fast-track designation
    The ImClone case highlights the policy question of how to test 
cancer drugs in a way that balances rapid access to life-saving drugs 
with the need to ensure that the drugs work, particularly when a 
publicly traded company is involved. In the standard approval process 
for a drug, FDA normally requires one or more large clinical trials 
(usually called Phase III trials) showing that a drug prolongs life 
compared with a placebo or with an already-approved drug. Such trials 
can take years, involve thousands of patients, and cost hundreds of 
millions of dollars to perform.
    When a company develops a drug for patients with life-threatening 
diseases and there are comparatively few treatment options available, 
FDA sometimes approves the new drug based on smaller trials, without a 
control group for comparison. The trials normally look at whether 
tumors are shrinking, which can be determined much faster than whether 
patients are living longer. Often, these trials are limited to patients 
who have not responded to existing therapies (known in medical terms as 
``refractory'' patients). If FDA approves a drug based on such small 
trials, it typically requires companies to conduct additional studies 
to show more widespread benefit, such as additional survival time.
    In ImClone's case, the company was trying to get approval for 
Erbitux based on a study where the drug was used in combination with an 
approved chemotherapy, in a universe of approximately 120 patients--a 
very small patient pool. ImClone's strategy appears to have been 
unprecedented. According to the BMS Due Diligence Findings, dated June 
12, 2001: ``No accelerated approval has ever been granted for an 
oncology drug for use in a combination therapy.'' It also should be 
noted that ImClone was seeking FDA's agreement for accelerated approval 
with a protocol design of a study that already had been 
conducted.1
---------------------------------------------------------------------------
    \1\ Some companies meet with FDA before they conduct the clinical 
trial to seek the agency's input and guidance on the clinical protocol 
design. Agreements between the company and FDA can be made binding 
through Special Protocol Assessments. Although FDA's Center for Drugs 
has used dozens of these assessments for cancer drugs, the FDA's Center 
for Biologics (the division handling ImClone) had never used one for a 
biologic product, other than in one instance involving a vaccine.
---------------------------------------------------------------------------
    The Committee's investigation focused on two areas of the FDA 
process prior to the submission of ImClone's BLA for Erbitux in October 
2001: (1) the clinical protocol design and conduct of the pivotal 9923 
study, and (2) the single-agent study of Erbitux.
    In the spring of 2000, ImClone had two Phase II clinical trials 
that looked promising for accelerated approval: a study in head-and-
neck patients, and a study in colorectal cancer patients. ImClone 
originally anticipated that it would be the head-and-neck trial that 
would be the vehicle for possible FDA approval. However, because of 
faster accrual of patients and promising results, it was the colorectal 
cancer patient study, known as the 9923 study, that ultimately formed 
the clinical core of ImClone's BLA. According to ImClone, the results 
of the 9923 study showed a 22.5% positive response rate in colorectal 
cancer patients who already failed the standard chemotherapies.
    In August 2000, ImClone was scheduled to meet with FDA to discuss, 
among other things, whether the results of the 9923 study were 
clinically meaningful and whether 9923 could meet accelerated approval 
criteria and receive fast-track designation. Prior to the ImClone 
meeting, FDA officials held an internal ``pre-meeting'' to prepare. At 
this pre-meeting, the primary FDA medical review officer indicated her 
reservations concerning the 9923 study. Her notes from this meeting 
state: ``1) Is ORR [overall response rate] = 15% clinically meaningful 
for colorectal CPT-11 failure? Only if as a single agent. 2) CP02-9923 
meet accel. approval criteria and fast track? No.'' According to 
Committee staff interviews, nobody on the FDA staff expressed 
disagreement with the assessment of the medical review officer at this 
internal ``pre-meeting.''
    On August 11, 2000, FDA met with ImClone officials and consultants 
to discuss ImClone's accelerated approval strategy using the 9923 
study. According to the minutes of this meeting prepared by FDA, FDA 
participants described the 9923 study during this meeting as follows:
          ``This is a Phase 2 open label study of Cetuximab [Erbitux] 
        plus irinotecan in metastatic or recurrent colorectal cancer 
        refractory to irinotecan. Following two courses of irinotecan, 
        patients' tumors are measured and based on the results, divided 
        into the Stable Disease Treatment Group (tumor volume change < 
        25%) or the Progressive Disease Treatment Group (tumor > 
        increased in volume 25%). Patients then receive irinotecan plus 
        cetuximab until treatment failure.''
    This description accurately tracks the first version of ImClone's 
protocol for 9923. According to that August 2, 1999 Version 1.0 of 
Protocol IMCL CP02-9923, Section 3.1.2, the patient ``must have 
demonstrated progression of disease after completing a minimum of two 
courses of a regimen containing irinotecan.'' However, a few months 
later, when patients were being enrolled into the study, ImClone 
relaxed the inclusion criteria in an amended protocol. According to the 
October 18, 1999 Version 2.0 of Protocol IMCL CP02-9923 amended Section 
3.1.2 (Inclusion Criteria), the patient ``has documented stable disease 
(must have received a minimum of 12 weeks of irinotecan therapy) or 
progressive disease at any time after receiving an irinotecan-
containing regimen. Copies of scans must be provided to confirm the 
lack of an objective response to prior therapy.'' (Emphasis added).
    Therefore, FDA was relying on an outdated version of the protocol 
at the August 2000 meeting with ImClone. Yet nobody from ImClone 
informed FDA about the amended protocol at this meeting or any time 
thereafter. Moreover, the minutes of the meeting taken by the company 
and FDA were exchanged, yet, again, the company did not correct the 
FDA's misunderstanding on this point.
    At the August 11, 2000 meeting with ImClone, the most senior FDA 
medical officer agreed that ``the basic trial design is probably 
acceptable,''--albeit, relying on the incorrect version of the study 
protocol--and, in effect, overruled the view of the primary medical 
reviewer that had been expressed at the pre-meeting among FDA 
personnel. The senior FDA officer told Committee staff that her 
decision to accept the protocol was based on her belief that she should 
be flexible for a promising drug meeting an unmet medical need, but was 
also based on representations that ImClone made about the special 
synergistic effect of Erbitux when used in combination with irinotecan. 
The senior FDA officer said that ImClone asserted that Erbitux showed 
no activity when used alone, which would support the claim of 
synergistic effect. This assertion was based on animal data and one 
small human trial. In the context that ImClone discussed this point, 
she assumed the human trial involved human colorectal cancer patients. 
The senior FDA officer later learned that the human trial involved 
renal cancer patients, which cannot be used as a basis for determining 
single-agent activity in colorectal cancer patients. ImClone disputes 
that the issue of single-agent activity came up at the August 11, 2000 
meeting, but the company agrees that the issue was discussed in 
subsequent phone calls and meetings with FDA.
    On January 12, 2001, FDA granted fast-track designation for 
Erbitux. The FDA fast-track designation appears to be based on the 
inclusion criteria of the outdated version of the 9923 protocol. 
According to the January 12, 2001 letter to Nikhil Mehta of ImClone 
from Glen Jones of FDA: ``[W]e are designating as a Fast Track 
development program the investigation of cetuximab in combination with 
irinotecan for its effect on durable tumor responses (complete and 
partial responses) in patients with metastatic colon cancer who are 
refractory to standard chemotherapy (5 fluorouracil and irinotecan), 
where refractory is defined as progressive disease during at least two 
cycles of standard doses of 5-fluorouracil and irinotecan.'' (Emphasis 
added).
    On January 19, 2001, FDA sent a letter to ImClone requiring them to 
conduct a small study of 25-50 patients to test the response rate when 
using Erbitux alone as opposed to being used in combination with the 
toxic Irinotecan. As FDA explained:
          ``You are expected to study and submit the following in order 
        to have a biologics license application which meets filling 
        criteria and in order for your development program to continue 
        to meet the criteria for Fast Track designation:
    1. Preclinical and clinical data (including at least 25-50 
            patients) which excludes the possibility (e.g., through 
            establishment of the upper limit of the 95% confidence 
            interval around the observed response rate and the lower 
            limit of the 95% confidence interval around the observed 
            response rate with combination therapy) that the response 
            rate observed with the combination of irinotecan and 
            Cetuximab [Erbitux] would not be observed with single agent 
            Cetuximab at the dose and schedule proposed. You must 
            provide evidence that continuation of a toxic agent 
            (irinotecan) is necessary to achieve the desired clinical 
            effect. If you do not have such data, you should generate 
            this information in a randomized controlled trial directly 
            comparing the efficacy of single agent Cetuximab (the 
            generic name for Erbitux) to the combination of Cetuximab 
            plus irinotecan to establish the contribution of irinotecan 
            in this setting.''
    During the winter and spring of 2001, while conducting the single-
agent study, ImClone was actively pursuing a joint venture or a sale of 
the company, or of a majority interest in the company, to several 
pharmaceutical companies. It appears that, in pursuing such an 
arrangement, the ImClone leadership attempted to downplay the 
significance of the single-agent study required by FDA. For example, 
according to one drug company official's e-mail, dated April 6, 2001:
          ``They [Imclone] have to complete the pilot trial of C225 
        [Erbitux] alone in refractory colon cancer patients, 25-40 
        patients. The FDA has required a final study report from this 
        trial prior to an ODAC [Oncologic Drug Advisory Committee] 
        meeting. Per [ImClone] estimately [sic], they believe a final 
        study report will be sent Oct/Nov, meaning a likely Spring ODAC 
        meeting. According to Harlen [reference to Harlan Waksal], the 
        FDA has agreed that while this study is necessary for filing, 
        it will not impact the approval of the combination in 
        refractory. They need to have the single agent activity per 
        their regulations. They won't use the small trial to compare RR 
        [response rate] of the single agent to the combo, but will use 
        it to help plan further development of C225 as a single agent 
        if appropriate.''
    On October 12, 2001, ImClone finished its single-agent study. The 
results of this study showed six responses out of 57 patients, for a 
response rate of 10.5%. As FDA noted in its December 28, 2001 refusal-
to-file letter: ``Based on the summary information provided, and 
assuming that the results can be confirmed, the data do not show that 
the response rate observed with the combination of Cetuximab and 
irinotecan could not also be observed with single agent Cetuximab at 
the dose and schedule proposed.''
    Even though there was a difference in the response rates (10.5% 
single agent; 22.5% combination), because both studies had such small 
populations, the confidence intervals overlapped and, thus, there was 
still a possibility that a very sick colorectal cancer patient could 
respond just as well with Erbitux alone as with Erbitux combined with a 
toxic chemotherapy. As a result, additional studies would be needed to 
isolate and establish the contributions of each drug. These additional 
studies would, at a minimum, significantly delay the launch of Erbitux.
    However, it appears that ImClone attempted to portray the results 
of the single-agent study and the prospects for its application in an 
inaccurate light to BMS, its likely new business partner. According to 
an October 12, 2001 e-mail from BMS Chief Scientific Officer Peter 
Ringrose to other BMS executives: ``I just had Sam Waksal on the phone 
re the single-agent data. Apparently it came out at 13% which he feels 
is half the C225 plus CPT-11 data. They have informed the FDA who were 
``pleased'' and confirmed that they would be on for the Feb 28 ODAC 
(FDA's Oncologic Drugs Advisory Committee). He reckons they will be on 
the market by March. I am planning to meet with Sam in NY week after 
next.''
    But, according to Committee staff interviews with FDA personnel, no 
one at FDA spoke to ImClone about the single-agent data on or around 
October 12, 2001, and FDA had never placed Erbitux on the agenda for 
the February 2002 ODAC meeting. The submission of the single-agent 
study to FDA was not completed until December 4, 2001.
    To more closely evaluate these two studies relied upon by ImClone, 
the Committee hired an expert consultant to review the studies' 
designs, protocols, and results. The key findings from this review are 
contained in a Report to the House Committee on Energy and Commerce by 
Raymond Weiss, MD, FACP (attached as an appendix to this report).
         the filing of the erbitux application and fda's review
    On October 31, 2001, ImClone completed its BLA application for 
Erbitux by submitting the clinical portion of the BLA to FDA. This 
clinical portion included the records for the 9923 study and the 
single-agent study 0141 (except for data on 17 patients, which was 
submitted on December 4, 2001). Under the fast-track designation of the 
FDA Modernization Act of 1997, the agency was required to complete its 
review of Erbitux and determine filability within 60 days of the 
submission date. Until this submission, FDA had relied on assurances 
from ImClone and the records in ImClone's Investigative New Drug file. 
FDA did not actually see the details of the clinical trials for Erbitux 
until ImClone submitted this portion of its BLA at the end of October 
2001. Upon reviewing the clinical portion, FDA reviewers immediately 
identified significant problems, and the number of problems continued 
to mount as their review continued in November 2001. According to the 
FDA reviewers, the Erbitux application, as filed, raised serious 
questions and lacked needed information that ImClone had been advised 
on several occasions would be required as part of the application. The 
FDA reviewers told Committee staff that it was readily apparent that 
the clinical research was severely deficient and could not meet the 
legal requirement of an adequate and well-controlled clinical trial.
    On November 30, 2001, key FDA reviewers reached the conclusion that 
problems in the clinical portion were so severe that there was no 
option but to issue a refusal-to-file (RTF) letter, a rare event. On 
December 4, 2001, after raising the prospect of an RTF in a 
conversation with one of the FDA reviewers, ImClone's Regulatory 
Affairs Vice President formed an impression for the first time that an 
RTF letter was a realistic possibility, according to her interview with 
Committee staff. That same day, she reported this conversation and 
FDA's concerns to Dr. Harlan Waksal. On December 5, 2001, FDA 
management decided ImClone would receive an RTF letter. On December 7, 
2001, a BMS Regulatory Affairs executive reported that she was not sure 
ImClone fully understood the implications of the comments of a FDA 
medical reviewer regarding the individual contributions of the drugs in 
the combination trial. In the e-mail opinion of the BMS executive, 
based on the FDA reviewer comments, ``a refusal to file decision 
doesn't appear altogether unlikely at this point.''
    Both FDA and officials from the two companies told Committee staff 
that the tone of conversations between the agency and ImClone 
dramatically changed following the early December discussions with FDA. 
By mid-December 2001, it was clear to both ImClone and BMS that FDA had 
serious concerns about the Erbitux drug application. After a 
teleconference with FDA on December 12, 2001, key ImClone executives 
perceived an increased probability of an RTF letter, according to their 
interviews with Committee staff. On December 20, 2001, FDA told ImClone 
and BMS to no longer contact the agency until after they received FDA's 
letter on filability on December 28, 2001. Some personnel from ImClone 
and BMS thought from the tone of this conversation that an RTF letter 
was likely, but some in ImClone still held out hope for a positive FDA 
response. On December 24, 2001, an outside consultant for BMS was able 
to get an incidental confirmation from a source at FDA that FDA would 
be sending an RTF letter to ImClone. The next day, December 25, BMS 
Senior Vice President for Marketing Brian Markison called Dr. Harlan 
Waksal, who was vacationing in Colorado, to inform him of this 
confirmation BMS' consultant had received from an FDA source. Dr. Sam 
Waksal was vacationing at a Caribbean island and returned to New York 
on December 26, 2001.
    It appears that Sam and Harlan Waksal and other key ImClone and BMS 
executives knew about the RTF letter by the morning of December 26, 
2001. That day, ImClone sent a letter to FDA in an attempt to prevent 
the RTF by offering to waive its rights to the 60-day deadline that FDA 
had to meet by December 28, 2001. FDA declined the offer on the grounds 
that ImClone could not legally waive the deadline. On December 27, 
2001, Sam Waksal for the first time personally interacted with FDA with 
respect to Erbitux, calling a senior official at FDA's Center for 
Biologics he knew when Waksal worked at the National Institutes of 
Health. The purpose of this call appears clear. Based on internal notes 
produced to the Committee by ImClone, dated 12:00 noon on December 27, 
2001, ``Sam and Harlan [Waksal] are calling FDA to try to stop RTF.'' 
The senior FDA official declined to intercede, and on December 28, 
2001, at approximately 2:55 p.m., FDA faxed the RTF letter to ImClone. 
The company in turn publicly revealed the receipt of the letter later 
that day, at approximately 7:14 p.m.
                  the rtf letter and subsequent events
    As discussed above, on December 28, 2001, FDA issued a refusal-to-
file letter in response to the ImClone submission. The RTF letter, sent 
in rare cases when a submission is deemed insufficient, is a non-public 
document containing trade secret or confidential commercial 
information. In its December 31, 2001 investors' conference call, 
ImClone executives said that FDA regulators sent the RTF letter because 
the Erbitux application was missing certain ``train of documentation'' 
information needed by regulators to accept the filing. ImClone said it 
would be able to answer FDA's questions by the end of the first 
quarter, leading, hopefully to an approval of Erbitux in the fall of 
2002. On the first trading day after the issuance of the RTF letter, 
ImClone's shares fell $11.15, or 20 percent, to $44.10 per share.
    On January 4, 2002, the Cancer Letter published excerpts of the RTF 
letter, which indicated that FDA had greater concerns about ImClone's 
data than company executives stated in the December 31 conference call 
with analysts and investors. The Cancer Letter article reported that 
the RTF letter detailed a long list of FDA concerns that went far 
beyond record keeping. The FDA was quoted as saying that ImClone's 
clinical trial was ``not adequate and well controlled,'' and that 
additional studies would be needed. Moreover, the letter suggested that 
FDA had warned ImClone starting in August 2000 that its data would have 
to demonstrate that irinotecan, a standard chemotherapy, was needed 
along with Erbitux. But the data submitted by ImClone was not 
sufficient to distinguish the effects of irinotecan and Erbitux. After 
the Cancer Letter report appeared, ImClone shares fell sharply further, 
to open on January 7, 2002, at $34.96 per share.
    On January 9, 2002, after ImClone had lost nearly $1.5 billion in 
market value since December 28, 2001, and after the filing of at least 
11 federal class action lawsuits, Sam Waksal, ImClone's president and 
chief executive officer, attempted to explain the company's situation 
at the J.P. Morgan H&Q Healthcare conference. ``What happened was that 
we put together a faulty package and we screwed up,'' Waksal reportedly 
said. The principal problem, he said, was the company's failure to 
provide documentation demonstrating that the patients enrolled in 
ImClone's pivotal trial had met the eligibility criteria.
    the bms-imclone partnership and imclone's loans to key officials
    During 1999 and 2000, ImClone invited BMS, as well as several other 
major pharmaceutical firms, to meet with representatives of ImClone to 
conduct due diligence with a view toward acquiring a majority ownership 
in ImClone. Over this time period, several pharmaceutical firms, 
including BMS, met with Sam Waksal and conducted preliminary due 
diligence activities. Each pharmaceutical firm, including BMS, 
concluded that the price being asked by ImClone was too high to 
continue discussions at that time.
    In early 2001, BMS conducted an extensive internal review of its 
own biologics business, and evaluated a number of opportunities to 
expand its biologics capabilities. BMS concluded in April 2001 that 
ImClone's IMC-C225 compound, Erbitux, could sustain its leadership 
position in oncology, significantly contribute to its corporate growth 
strategy, and provide a significant step towards BMS becoming a leader 
in biologics.
    In mid-April 2001, Mr. Brian Markison, BMS Senior Vice President of 
Marketing, contacted Dr. Sam Waksal to determine whether ImClone would 
be interested in pursuing a deal involving a significant equity 
investment in ImClone by BMS. On May 3, 2001, Dr. Waksal, Mr. Markison 
and Dr. Peter Ringrose, Chief Scientific Officer of BMS, met in New 
York City to discuss BMS' interest in ImClone. During that meeting, Dr. 
Waksal outlined the type of deal that would be acceptable to ImClone. 
Dr. Waksal's preference was that ImClone remain a publicly traded 
entity after the deal. As a result, Mr. Markison agreed to explore a 
possible transaction whereby BMS would acquire a majority interest of 
ImClone in return for BMS common stock, together with a separate 
agreement providing for the commercial rights to IMC-C225 by BMS.
    After further discussions, on May 19, 2001, the two companies 
entered into a confidentiality agreement, and BMS conducted further due 
diligence of ImClone. On June 1, 2001, Mr. Richard Lane, President of 
BMS' Worldwide Pharmaceutical Division, and Dr. Waksal met to discuss 
an outline of a deal prepared by ImClone's legal advisors that called 
for an acquisition by BMS of a 70% stake in ImClone.
    On June 5, 2001, BMS' Board of Directors entertained the majority 
ownership deal with ImClone. However, some BMS board members raised 
concerns about acquiring majority ownership of ImClone, and suggested 
that BMS seek an arrangement of less equity in ImClone while still 
securing the rights to C-225. On June 7, 2001, representatives of the 
two companies met to discuss BMS' proposed due diligence activities. 
Shortly thereafter, employees of BMS and representatives of its legal 
and financial advisors conducted an extensive due diligence review of 
ImClone in the areas of clinical development, legal matters, 
information technology, marketing and sales, tax, finance, 
manufacturing, intellectual property and regulatory affairs.
    In late June 2001, BMS concluded that the acquisition of a minority 
interest in ImClone, together with a separate commercial agreement 
relating to the co-development, co-promotion, and distribution of 
ImClone's IMC-C225 compound, would be a preferable structure for a deal 
with ImClone. Thereafter, Dr. Waksal was contacted by Mr. Peter Dolan, 
Chief Executive Officer of BMS, and Mr. Lane, who confirmed to Dr. 
Waksal that BMS no longer had interest in a deal to acquire a majority 
interest in ImClone where ImClone remained a publicly-traded entity. 
Mr. Dolan and Mr. Lane reaffirmed BMS' interest in ImClone and BMS' 
intent to consider other deals that met the economic and business 
objectives of both companies. Dr. Waksal stated that he was willing to 
consider alternative proposals, but emphasized that he was not 
interested in a commercial transaction that did not also include a 
significant equity investment in ImClone by BMS. Dr. Waksal also 
advised BMS that he felt ImClone's existing stockholders would benefit 
most if BMS acquired an equity interest through a tender offer to 
ImClone's existing stockholders.
    On June 26, 2001, BMS provided ImClone with an outline of a 
proposed commercial transaction for the co-development, co-promotion, 
and distribution of IMC-C225, and an equity structure that proposed an 
acquisition of a 19.9% interest in ImClone by BMS. During the end of 
June and the first two weeks of July 2001, BMS and ImClone, and their 
respective legal and financial advisors, met several times to discuss 
terms and conditions of a 19.9% equity investment and a commercial 
transaction relating to rights to IMC-C225. Also during this time, the 
two companies and their respective financial advisors discussed the 
price at which BMS would offer to purchase the ImClone shares, which 
would be at a significant premium to the publicly-traded stock price.
    In mid-July 2001--after ImClone was virtually assured of the 19.9% 
equity deal and in anticipation of the lucrative tender offer from 
BMS--ImClone's Board of Directors agreed to lend $35 million to Sam and 
Harlan Waksal and Robert Goldhammer, the Chairman of the Board, to 
provide them with an opportunity to exercise stock options and warrants 
they held to purchase a total of approximately 4.5 million shares of 
ImClone stock. Sam Waksal and Harlan Waksal's loans were $18.2 million 
and $15.7 million respectively. Mr. Goldhammer's loan was in the amount 
of $1.2 million. These unsecured loans were at an interest rate equal 
to the prime lending rate plus 1 percent (7.75 percent on the date of 
the note).
    On July 20, 2001, BMS and ImClone agreed, on a preliminary basis, 
to a tender offer price of $70.00 per share. On September 17, 2001, the 
Board of Directors of BMS unanimously approved the ImClone deal. On 
September 19, 2001, ImClone's Board of Directors approved the deal, and 
both companies issued separate press releases announcing that BMS would 
acquire 14.4 million shares, or about a 20 percent stake, of ImClone's 
common stock for $1 billion through a tender offer of $70 a share, 
exclusively set aside for ImClone shareholders. At the time of the 
announcement, ImClone shares were selling at roughly $40 per share. BMS 
also agreed to pay as much as another $1 billion in milestone payments 
in return for the marketing rights to Erbitux in the United States.
    On October 29, 2001, thousands of ImClone's shareholders 
participated in the BMS tender offer to purchase ImClone stock at $70 a 
share, a $20 premium over the increased trading price. Sam Waksal sold 
814,674 shares, and Harlan Waksal sold 776,450 shares, or just more 
than 20% of each of their holdings. Although all ImClone shareholders 
were allowed to tender their shares of ImClone stock to BMS, only the 
Waksals, the Chairman of the Board, and one other board member were 
given loans by ImClone to purchase ImClone stock, at highly discounted 
prices, and then tender it to BMS at $70 per share.
    A number of experts in the financial and biotech areas told 
Committee staff that there is no precedent in pharmaceutical-biotech 
alliances for the BMS and ImClone deal, which resulted in the immediate 
personal enrichment of top executives through a tender offer to 
existing shareholders. The more typical alliance formed between a major 
pharmaceutical company and a smaller biotech firm is centered on 
milestone payments that provide much needed cash to the biotech firm.
             bristol-myers squibb due diligence of imclone
    The Committee's investigation also focused on BMS' due diligence 
into the clinical research behind Erbitux prior to its decision to 
strike a commercial deal with ImClone. In May 2001, BMS scientists were 
mobilized to examine the clinical research package. On June 14, 2001, 
BMS Senior Vice President Laurie Smaldone sent an e-mail to her 
colleagues Peter Ringrose and Beth Seidenberg concerning ImClone, 
stating: ``On the whole this remains a very high risk opportunity.'' 
Among the critical outstanding issues she cited:
          ``Pivotal CRC [colorectal cancer] program issues--Single 
        agent activity. The trial which is ongoing will need to be 
        shared with us. We should attend the FDA meeting with ICE 
        [ImClone] when the data is final. There is no agreement that we 
        could find that is reassuring regarding activity level needed 
        for approval.
          ``Weak dose selection rationale--They have developed a PK 
        [pharmacokinetic] rationale for dose selection, however the 
        dose is questionable for refractory patients and the safety 
        margin for early stage patients has not been determined. In 
        their phase 3 first line study they are evaluating the same 
        dose used in refractory disease. This is already seen as a 
        problem by the FDA and by us . . .
          ``Safety--The safety of the product, specifically related to 
        skin toxicity, bleeding, allergy has not been well 
        characterized. This reemphasizes the weakness of the dose 
        selection argument . . .''
    Ultimately, concerns about the single-agent study and the 9923 
study were not completely resolved before BMS entered into the 
agreement with ImClone. In a June 12, 2001 ``Summary of Key Findings,'' 
BMS executives pointed out the risks of the results of the single-agent 
study:
          ``FDA has requested that data be provided on the antitumor 
        activity of C225 as a single agent. Preclinical data has thus 
        far been provided to FDA to address this issue, but they have 
        persisted in their interest that clinical data be provided. No 
        accelerated approval has ever been granted for an oncology drug 
        for use in a combination therapy. (emphasis added). In the 
        event that tumor responses are observed in the ongoing single-
        arm single agent refractory colorectal study then it is 
        possible that this could throw into question the approvability 
        of the combination claim based on nonrandomized antitumor data 
        (given that the value of CPT-11 after CPT-11 might be 
        questioned).''
    On September 4, 2001, a BMS Vice President sent an e-mail to other 
senior BMS executives, stating:
          ``Based on today's discussions with Susan and Steve our 
        preliminary recommendation is a `go' decision. We are still 
        trying to obtain data from the mono therapy study from ICE 
        [ImClone]. As of 6:30 PM today we did not have any more 
        information. I will be discussing this with Susan again in the 
        AM.''
    Despite requests to BMS, Committee staff has not been provided any 
evidence at this time that shows that BMS obtained the data on the 
single-agent study prior to making its historic deal with ImClone.
    In addition, the BMS independent radiology review of ImClone 9923 
study lowered the ImClone reported response rate and the size of the 
patient pool, both significantly. In an August 30, 2001 e-mail, the BMS 
independent radiologist noted:
          ``Attached to this message you will find the latest update of 
        the spread sheet we are using to keep track of our review of 
        the CT's and MRI's of patients enrolled in CP02-9923.
          ``We are in the process of reviewing a total of 34 cases, 27 
        of which were initially assigned by the investigator to the PD 
        [progressive disease] cohort and 7 of which were assigned to 
        the SD [stable disease] cohort. To date we have reviewed 23/27 
        cases from the PD cohort and 6/7 cases from the SD cohort.
          ``In the PD cohort we can now confirm 14 partial responses. 
        We may have 15, but one case will require adjudication. With 4 
        more cases to review, and the one case for adjudication, the RR 
        in the PD cohort could be as high as 15 + 4/120 = 15.8%.
          ``I should mention, however, that in 4 of these confirmed 
        partial responses our radiologists have judged the disease to 
        be only stable at the time of patient's enrollment into the 
        study. If these 4 cases were thrown out, then the highest 
        possible response rate would 11 + 4/120 = 12.5%. However, we 
        have not conducted a strict review of all of the 120 cases, and 
        it is likely that if we carefully reviewed all of the cases we 
        would throw many out on the same basis [emphasis added]. 
        Indeed, it is my understanding that the study sponsor has 
        conducted such an analysis on the basis of its own 
        radiologists' review, and has thereby reduced the denominator 
        of the patient population with radiographically confirmed 
        progressive disease.
          ``I will review the study sponsor's data and see if I can get 
        at the same denominator [patient pool size] as it did (? N = 
        89), and calculate the response rate accordingly. More cases 
        and analysis to follow tomorrow... ``
    It should be noted that, if indeed the denominator in 9923 was 
below 100 (particularly if it were as low as 89, which the BMS 
independent radiologist appears to have indicated in the above e-mail), 
the entire study probably could no longer serve to support an 
accelerated approval application. As ImClone consultant, Roger Cohen 
MD, e-mailed to Dr. Harlan Waksal on January 4, 2002:
          ``9923 is a small study to begin with. It cannot get much 
        smaller and have any hope of serving as a registration study. I 
        think it is clear that it has to have at least 100 fully 
        eligible and evaluable subjects (closer to 100).''
    Therefore, although BMS received tentative support from its 
scientific leadership and outside consultants, it appears that the 
status of crucial issues were as follows at the time BMS entered into 
the alliance with ImClone in September 2001:

1. Single agent activity--BMS lacked the data from the single agent 
        study.
2. Response rate--BMS outside radiology review indicated that a strict 
        review could lower the response rate below the clinically 
        meaningful standard of 15 percent.
3. The denominator, or patient pool size, of the pivotal trial appeared 
        to be under 100, and therefore could not serve as a basis for 
        accelerated approval according to ImClone's own consultant.
     bms reaction to imclone comments on the refusal-to-file letter
    On the evening of December 28, 2001, ImClone revealed to the public 
that it had received a refusal-to-file letter from FDA. On December 29, 
2001, a Reuters news article reported: ``Sam Waksal, ImClone's chief 
executive officer, told Reuters that the agency first wants more 
`annotation' information, about how the company verified that patients 
enrolled in its trials had indeed failed previous drug regimens and 
that subsequent tumor reductions attributed to Erbitux were indeed 
real. Concerns raised by the FDA mainly involve how the data were 
presented and do not raise outright concerns about safety or efficacy 
of the drug, the CEO added.'' An internal BMS e-mail dated December 30, 
2001, responding to earlier BMS e-mails on the Reuters article, states: 
``I agree that some alot [sic] of Sam's comments are misleading and at 
this point we should continue to be silent. As you heard from 
yesterday's discussion, there's a lot we don't know.''
    On that same date, December 30, 2001, another BMS official 
commented on the draft documents being prepared for the ImClone 
investor relations conference call: ``These draft documents leave me 
most uncomfortable. They gloss over the seriousness of the RTF letter 
and make it appear that the integrity of the study results is not in 
question, when in fact it is . . . We will also need to rewrite major 
portions of the clinical and pharmacology part of the BLA including a 
new 9923 study report, new 141 (monotherapy) study report, new ISS and 
ISE based on these revised reports. I know that this is not what 
ImClone wants to tell their investors, but I think it represents the 
reality of this situation.''
  trading activity of sam and harlan waksal, their family members and 
                  close friends, and imclone directors
    Adding to the controversy over Erbitux has been the trading of 
ImClone stock by ImClone insiders a few weeks before the FDA refusal-
to-file letter, and by Waksal family relatives and friends during the 
48 hours before the FDA letter was issued. Committee staff examined 
public records and conducted interviews with Sam and Harlan Waksal, and 
with representatives of several of their family members and friends, to 
determine the degree of trading in ImClone stock by these individuals 
over the last year. Of particular interest were board members who 
tendered stock to BMS on October 29, 2001, and whether any board 
members or officers of ImClone sold stock during the critical month of 
December 2001. Committee staff also attempted to gather information on 
those trades of Sam Waksal's immediate family members and close friends 
that were identified during discussions with Dr. Waksal.
    Committee staff found that ImClone board members exercised stock 
options to acquire 8.1 million shares of ImClone common stock between 
the period of June 1, 2001 and October 29, 2001. Committee staff 
examined this time period because it represents the period of 
negotiations between BMS and ImClone officials regarding an equity 
purchase of ImClone by BMS. Of these 8.1 million ImClone shares, Sam 
and Harlan Waksal acquired approximately 4.1 million. Each board member 
who exercised stock options during this time period is shown in the 
table below.

ImClone Incorporated Stock Options Exercised by ImClone Board Members During the Period of Negotiations with BMS
                                         June 1 Through October 29, 2001
----------------------------------------------------------------------------------------------------------------
                                                                                                     Options
                    ImClone Board Members                       Date Exercised       Shares       excercised at
----------------------------------------------------------------------------------------------------------------
Barth, Richard...............................................       6/13/2001            2,500            $3.00
Barth, Richard...............................................       9/17/2001            2,500            $3.00
Barth, Richard...............................................      10/29/2001           27,328            $4.50
Devita, Vincent..............................................             N/A   ...............  ...............
Goldhammer, Robert...........................................       7/16/2001          316,684       $.28-$6.63
Kies, David..................................................        8/2/2001           30,000            $6.63
Kies, David..................................................       7/25/2001           55,000      $3.00-$5.44
Kopperl, Paul................................................       7/24/2001          120,000      $3.00-$6.63
Kopperl, Paul................................................      10/29/2001            6,430           $39.91
Levine, Arnold...............................................        8/3/2001           16,000            $5.43
Mendelsohn, John.............................................      10/29/2001           90,226       $.53-$2.75
Miller, William..............................................             N/A   ...............  ...............
Waksal, Harlan...............................................       7/12/2001        2,080,000      $3.03-$9.13
Waksal, Sam..................................................       7/12/2001        2,060,000      $5.69-$9.13
                                                               ...............       4,806,668   ...............
----------------------------------------------------------------------------------------------------------------

    It should be noted that ImClone awarded many of these options to 
the Waksal brothers in 1999 and 2000, and accelerated the vesting of 
these options with the rise in the stock price. According to ImClone's 
SEC filings, on May 24, 1999, the stockholders approved the grant of an 
option to Sam Waksal to purchase 1,000,000 shares and Harlan Waksal to 
purchase 650,00 shares of Common Stock at a per share exercise price 
equal to $18.25, the last reported sale price of the Common Stock on 
the date shareholder--approval was obtained at the annual shareholders 
meeting. The option was to vest no later than six years from the grant 
date and specified amounts were subject to earlier vesting if specified 
Company Common Stock price thresholds were met. On May 31, 2000, the 
stockholders approved amendments to a total of 1,600,000 options that 
were granted to Sam and Harlan Waksal the year before. The shareholders 
also approved amendments to a total of 3,300,000 additional options 
held by Sam and Harlan Waksal. All these options were amended to 
provide that each tranche vested immediately upon achievement of the 
relevant stock target price associated with such tranche, without 
regard to the passage of time that was a requirement in the original 
options. The options became fully vested and exercisable upon the 
approval of the amendments. As reported in a previous section, the 
ImClone board granted the Waksal brothers and two other directors 
company loans to finance the exercise of their options as part of the 
tender offer.
    In total, Committee staff found that members of ImClone's Board of 
Directors tendered 2.1 million shares of ImClone common stock at $70 a 
share to BMS on October 29, 2001. This represents approximately 15% of 
the stock tendered by ImClone shareholders to BMS. Sam and Harlan 
Waksal tendered a total of 1.6 million shares of ImClone stock to BMS 
for about $111 million. Simply stated, this means that the Waksal 
brothers received over 10 percent of the entire proceeds paid by BMS 
during the $1 billion tender offer, and the ImClone Board combined 
received nearly 15 percent of the proceeds from the BMS tender offer. 
The table below shows the number of shares tendered and the proceeds 
for each of ImClone's Board members.

                      ImClone Incorporated Shares Tendered to BMS by ImClone Board Members
                                                October 29, 2001
----------------------------------------------------------------------------------------------------------------
                    ImClone Board Members                      Shares Tendered   Cost Per Share      Proceeds
----------------------------------------------------------------------------------------------------------------
Barth, Richard...............................................          27,328              $70       $1,912,960
Devita, Vincent..............................................             129              $70           $9,030
Goldhammer, Robert...........................................         364,781              $70      $25,534,670
Kies, David..................................................          30,007              $70       $2,100,490
Kopperl, Paul................................................          27,864              $70       $1,950,480
Levine. Arnold...............................................           1,329              $70          $93,030
Mendelsohn, John.............................................          90,226              $70       $6,315,820
Miller, William..............................................           8,573              $70         $600,110
Waksal, Harlan...............................................         776,450              $70      $54,351,500
Waksal, Sam..................................................         814,674              $70      $57,027,180
                                                                    2,141,361              $70     $149,895,270
----------------------------------------------------------------------------------------------------------------

    Committee staff also examined trading by ImClone board members and 
officers during the critical month of December 2001 to determine if any 
ImClone officials who sold stock had knowledge of discussions with FDA 
regarding whether the agency would accept the Erbitux filing. We found 
that, with the exception of Harlan Waksal's disposition of 700,000 
shares on December 6, 2001 (discussed below), three officers of ImClone 
sold stock prior to December 18, 2001. In each case, Committee staff 
were told that the officials involved were unaware of the details of 
the FDA review of Erbitux, sold less than 20 percent of their holdings 
in ImClone, and did so based on their brokers' advice. Even though 
ImClone has internal rules that require officers of the company to 
receive pre-clearance before trading in company stock, two of the three 
trades were not pre-cleared. In one case, the individual was not an 
officer at the time of the trade, but was since promoted. In the other 
case, the officer claimed to have simply forgot to pre-clear the trade.
    On December 21, 2001, ImClone issued an order prohibiting its 
employees from trading in ImClone stock until after the FDA decision on 
Erbitux was made public. ImClone has told Committee staff that no board 
member or officer of ImClone traded ImClone stock between December 21 
and 28, 2001. However, Committee staff discovered that several of Sam 
Waksal's immediate family members or friends sold ImClone stock on 
December 27, 2001--the day before ImClone announced publicly that FDA 
had refused to accept the filing of Erbitux. This list of traders 
included his father, sister, two daughters, and son-in-law. In 
addition, Committee staff learned from discussions with Sam Waksal that 
the SEC has questioned him about trades made by three other friends on 
December 27 or 28, 2001.
    With the exception of Sam Waksal's father (who has not yet provided 
information to the Committee), attorneys for each of the family members 
admitted that their client sold stock on or around December 27, 2001, 
but asserted that they received no non-public information about ImClone 
and each had a reason why they sold the stock on that particular day. 
Although phone records and logs obtained from Sam and Harlan Waksal, 
covering the time period December 26-28, 2001, suggest that both men 
had conversations with each other and may have had conversations with 
members of their family and friends, both Sam and Harlan Waksal denied 
that they had tipped off anyone as to their knowledge that ImClone was 
about to receive a RTF letter from FDA.
    On December 6, 2001, Harlan Waksal sold 700,000 shares of ImClone 
stock. On October 31, 2001, Harlan Waksal notified the ImClone board 
members that he planned to execute a forward transaction involving 
700,000 shares of ImClone common stock:
          Dear Members of the Board:
          As a result of my recent option exercise and the sale of 
        stock to Bristol-Myers Squibb I am left with an additional tax 
        burden that I need to meet. As I am averse to having such a 
        great personal liability I plan to meet this obligation (and 
        provide some liquidity), by the sale of additional shares of 
        ImClone stock. I am moving to do this through a prepaid forward 
        contract for the sale of stock. This will be a 700,000 share 
        transaction, the stock will still be under my voting control 
        for the next three years and I will retain some continued 
        upside if the stock continues to perform as we anticipate. I 
        plan on finalizing this transaction over the next two weeks.
          I look forward to seeing you at the Board dinner on the 14th.
          Sincerely,
          Harlan W. Waksal, M.D.
    Dr. Harlan Waksal told Committee staff that, in November 2001, he 
attempted to shop the sale of his ImClone stock. Dr. Waksal filed a 
Form 144 with the SEC, announcing his intention to sell 700,000 shares 
of ImClone. Dr. Waksal told Committee staff he was forced to sell the 
ImClone stock to come up with enough cash to pay substantial taxes 
generated from his prior exercise of stock options and his tendering of 
shares to BMS. He also stated that, because he did not want to sell 
shares, he entered into a forward sales contract that gave him a 
percentage of the cash value of the shares up front but still allowed 
him to control the shares and defer tax payments for another two years. 
Simply put, Dr. Waksal received less than what the stock was worth at 
the time of the sale, but he also limited his downside risk when 
ImClone's stock price dropped considerably in the month thereafter. It 
should be noted that Dr. Waksal sold the 700,000 shares on the same day 
that ImClone's share price hit its 52-week high.
    Moreover, in February 2002, Dr. Sam Waksal revealed about 50 
unreported stock trades that should have been reported to the SEC and 
returned to ImClone about $486,000 in profit he made on some sales of 
company stock because he may have violated an insider-trading 
regulation.
                               conclusion
    The key findings from the Committee staff's investigation at this 
point are as follows:

 In August 2000, the primary FDA medical reviewer handling the 
        ImClone/Erbitux matter did not believe that ImClone's 9923 
        study met the criteria for accelerated approval and fast-track 
        designation. Her view is substantiated by the opinions of 
        leading oncology experts who reviewed the 9923 protocol for the 
        Cancer Letter in 2002 and found serious protocol design flaws.
 At the August 11, 2000 meeting between ImClone and FDA to 
        discuss a possible accelerated approval strategy, FDA relied on 
        the wrong version of the 9923 protocol, which had a tighter 
        inclusion criteria than the one actually used in the amended 
        protocol. ImClone did not correct FDA's mistake.
 At the same August 11, 2000 meeting, the senior FDA medical 
        official in effect overruled the primary medical reviewer and 
        said the protocol design was probably acceptable.
 The senior FDA official now believes she was misled by ImClone 
        about its claim that a human clinical trial showed no single 
        agent activity. This official said that this claim was a key 
        factor in her decision to allow ImClone's application to 
        proceed.
 FDA's decision to grant fast-track designation to ImClone's 
        Erbitux appears to have been based on the wrong version of the 
        9923 protocol, and was made before it had the single-agent data 
        on Erbitux.
 The 9923 study was afflicted with many problems. The BMS 
        independent radiology review showed that strict scrutiny of the 
        study data resulted in a response rate of only 12.5% (as 
        opposed to the claimed 22.5% response rate) and that the number 
        of evaluable patients was only approximately 89 (as opposed to 
        the original 120). If these data were in fact correct, the 9923 
        study failed to meet the 15 percent clinical endpoint set by 
        ImClone and the study would be too small to support an 
        accelerated approval by itself.
 BMS scientists were aware of the issues involving the response 
        rate and the size of the patient pool, and BMS apparently did 
        not have the single-agent data prior to entering into its 
        agreement with ImClone in September 2001. Nevertheless, BMS 
        went ahead with the ImClone agreement.
 The results of the single-agent study showed enough activity 
        in Erbitux alone to throw into doubt the assumption used for 
        the pivotal 9923 study--that the toxic chemotherapy, 
        irinotecan, needed to be used in combination with Erbitux to 
        produce stronger and more meaningful response rates. Because of 
        this doubt, FDA needed additional studies to resolve this 
        issue, which would mean a substantial delay in launching 
        Erbitux.
 ImClone knew the results of the single-agent study on October 
        12, 2001, but its then-CEO appeared to portray these results in 
        a positive light to the BMS Chief Scientific Officer.
 On October 29, 2001, BMS consummated the tender offer with 
        ImClone. As a result, Sam and Harlan Waksal made about $111 
        million from the sale of stock. In acquiring their shares, the 
        Waksal brothers had received loans from ImClone to finance the 
        exercising of options.
 On November 30, 2001, key FDA reviewers recommended a refusal-
        to-file letter for the Erbitux application.
 On December 4, 2001, ImClone's Regulatory Affairs Vice 
        President confirmed in a conversation with one of the FDA 
        reviewers that an RTF letter is a realistic possibility.
 On December 5, 2001, senior FDA management at the Center for 
        Biologics determined that an RTF letter would be sent to 
        ImClone. It took several days for all members of the FDA review 
        team to learn of this decision and it did not become official 
        until a team meeting held on December 17, 2001.
 On December 20, 2001, FDA informed ImClone and BMS that a 
        decision had been reached and that the decision letter would be 
        sent on December 28, 2001. ImClone and BMS officials suspect an 
        RTF.
 On December 24, 2001, an outside consultant to BMS obtained 
        confirmation from an FDA official that an RTF letter will be 
        issued.
 On December 25, 2001, a BMS executive informed Dr. Harlan 
        Waksal that ImClone would be getting an RTF letter.
 On December 26, 2001, key ImClone and BMS officials were aware 
        of the RTF. ImClone sent a letter to FDA to try to prevent the 
        RTF letter.
 On December 27 and 28, 2001, Waksal family relatives and some 
        friends sold ImClone shares.
 On December 28, 2001, ImClone received the RTF letter.



[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]


    Mr. Greenwood. The Chair thanks our witnesses for your 
testimony and for your help of this subcommittee with its work 
and excuses you.

    The Chair now calls forward Dr. Samuel Waksal, Ph.D., who 
is the former chief executive officer of ImClone Systems. Would 
you please pull the microphone forward very close to you and 
push the button on it so that it is on.

    Mr. Samuel Waksal. It should be on.

    Mr. Greenwood. Thank you. Thank you. It is on. Dr. Samuel 
Waksal is a former ImClone chief executive officer and is here 
with us today under subpoena. On April 19, 2001, Dr. Waksal did 
submit to an interview--2002, excuse me--Dr. Waksal did submit 
to an interview with committee investigators that lasted for 
about 4 hours. Dr. Waksal was scheduled for another staff 
interview on May 30 but withdrew from this scheduled interview 
on advice of counsel. My understanding is that Dr. Waksal 
authorized his counsel to advise the committee that he will 
rely on his constitutional right not to testify at today's 
hearing. I believe that this privilege should be personally 
exercised before the members of this subcommittee, as we have 
done in the past, and that is why we have requested Dr. 
Waksal's appearance today, and I thank you for joining us, sir.

    I would urge you, given the importance of your testimony, 
to reconsider your decision to invoke your Fifth Amendment 
rights, especially since you may need to amend statements you 
made earlier to the committee investigators during your 
interview which, if the Government criminal and civil 
complaints filed against you yesterday are true, may not be 
wholly accurate.
    Dr. Waksal, you are aware that the committee is holding an 
investigative hearing, and in doing so we have the practice of 
taking testimony under oath. Do you have any objection to 
testifying under oath?
    Mr. Samuel Waksal. No.
    Mr. Greenwood. The Chair also advises you that under the 
rules of the House and the rules of the committee, you are 
entitled to be advised by counsel. Do you desire to be advised 
by counsel during your testimony today, sir?
    Mr. Samuel Waksal. I have counsel here with me.
    Mr. Greenwood. Okay. Would you please identify your counsel 
for the record or your counsel may identify himself.
    Mr. Liman. Yes. It is Lewis Liman from the law firm Wilmer, 
Cuttler and Pickering.
    Mr. Greenwood. Thank you. At this time, Mr. Waksal, if you 
would stand and raise your right and I will swear you in.
    [Witness sworn.]
    Mr. Greenwood. Okay. Thank you, Dr. Waksal. You are now 
under oath, and you may give a 5-minute statement for the 
record if you choose. Do you care to, sir?

  TESTIMONY OF SAMUEL WAKSAL, FORMER CHIEF EXECUTIVE OFFICER, 
                     IMCLONE SYSTEMS, INC.

    Mr. Liman. Dr. Waksal will not be giving a statement for 
the record at this time.
    Mr. Greenwood. Very well. Then the chairman will recognize 
himself for questioning of the witness.
    Mr. Liman. We have submitted a letter to the subcommittee.
    Mr. Greenwood. Without objection, your letter will be 
entered into the official record of these proceedings, sir.
    Mr. Samuel Waksal. Thank you.
    [The letter follows:]


[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

    
    Mr. Greenwood. Dr. Waksal, on October 29, 2001, you and 
your brother sold $1.6 million of shares of ImClone to Bristol-
Myers Squibb for about $111 million, a sale helped, in part, by 
all of the hype ImClone generated about its purported wonder 
drug, Erbitux and made possible, in part, by unsecured loans of 
about $35 million that you and your brother received from 
ImClone so you could exercise options to purchase ImClone stock 
at highly discounted prices. During the same time period, 
ImClone was running the pivotal clinical trial aimed at 
supporting an accelerated FDA approval for ImClone's cancer 
drug, Erbitux. The study turned out to be riddled with severe 
problems with no apparent quality control by ImClone. As a 
result, FDA refused to even accept the Erbitux application for 
filing.
    Given the contrast and outcomes, the financial gain of $111 
million for you and your brother before the FDA application was 
even filed and the failure to deliver on your promise to 
thousands of very sick cancer patients to have Erbitux on the 
market in spring of 2002, would it be fair to say that your 
strategy at ImClone was to put personal profiteering ahead of 
patients, sir?
    Mr. Samuel Waksal. Unfortunately, upon the advice of 
counsel, I wish to assert my constitutional rights and 
respectfully decline to answer.
    Mr. Greenwood. We thank you, sir, and we respect your right 
to do so. But let me be clear, Dr. Waksal. Are you refusing to 
answer the question on the basis of the protections afforded to 
you under the Fifth Amendment to the United States 
Constitution?
    Mr. Samuel Waksal. Yes.
    Mr. Greenwood. Dr. Waksal, do you intend to invoke your 
Fifth Amendment rights in response to any and all questions 
posed to you here today?
    Mr. Samuel Waksal. Yes.
    Mr. Greenwood. Okay. Then you are excused from the witness 
table at this time, but I advise you that you remain subject to 
the processes of this committee, and that if this committee 
needs such, then we may recall you, sir.
    Mr. Samuel Waksal. Thank you.
    Mr. Greenwood. Okay. You are excused, sir.
    The Chair then calls forward Dr. Harlan Waksal, M.D., who 
is now the chief executive officer of ImClone Systems, Inc.; 
Dr. Laurie Smaldone, M.D., senior vice president, Global 
Regulatory Sciences for Bristol-Myers Squibb Company. And 
accompanying Dr. Smaldone is Mr. Brian Markison, vice 
president, the Division of Oncology at Bristol-Myers Squibb 
Company.
    The Chair welcomes our witnesses. You are both aware, all 
three of you are aware that this committee is holding an 
investigative hearing, and it is the practice of this 
subcommittee to take testimony in such hearings under oath. Do 
any of you object to giving your testimony under oath this 
morning?
    Mr. Harlan Waksal. No.
    Ms. Smaldone. No.
    Mr. Greenwood. Okay. It is also the responsibility of the 
Chair to advise the witnesses that you are entitled to be 
represented by counsel. Do either of the witnesses choose to be 
represented by counsel? Dr. Waksal, do you?
    Mr. Harlan Waksal. I do have counsel here, sir.
    Mr. Greenwood. Okay. Your counsel may join you at the 
table, if he chooses. Would you identify your counsel by name, 
sir?
    Mr. Harlan Waksal. Chip Lowenson.
    Mr. Greenwood. Would you pull the microphone much closer to 
yourself, sir, and make sure that it is turned on.
    Mr. Harlan Waksal. Is that okay now?
    Mr. Greenwood. That is perfect, sir. Would you identify 
your counsel, please?
    Mr. Harlan Waksal. Chip Lowenson.
    Mr. Greenwood. Okay. Dr. Smaldone, do you choose to be 
represented by counsel?
    Ms. Smaldone. I have my counsel here with me.
    Mr. Greenwood. You are going to have to do the same thing 
with your microphone.
    Ms. Smaldone. Sorry. I do have my counsel here with me 
today.
    Mr. Greenwood. And would you identify your counsel, ma'am?
    Ms. Smaldone. Evan Chesler.
    Mr. Greenwood. Pardon me?
    Ms. Smaldone. Evan Chesler.
    Mr. Greenwood. Okay. If you would then both rise and raise 
your right hand. Mr. Markison, if you would rise as well and 
raise your right hand.
    [Witnesses sworn.]
    Okay. The Chair advises you that you are under oath. And, 
Dr. Waksal, you are recognized for 5 minutes to provide an 
opening statement. Do you choose to?
    Mr. Harlan Waksal. I do indeed. Thank you.
    Mr. Greenwood. Please proceed.

 TESTIMONY OF HARLAN WAKSAL, CHIEF EXECUTIVE OFFICER, IMCLONE 
 SYSTEMS, INC.; LAURIE SMALDONE, SENIOR VICE PRESIDENT, GLOBAL 
 REGULATORY SCIENCES, BRISTOL-MYERS SQUIBB COMPANY; AND BRIAN 
 MARKISON, VICE PRESIDENT, DIVISION OF ONCOLOGY, BRISTOL-MYERS 
                         SQUIBB COMPANY

    Mr. Harlan Waksal. Chairman Greenwood, Congressman Deutsch 
and members of the subcommittee, my name is Harlan Waksal, and 
I am the President and CEO of ImClone Systems. I have held that 
position for only 3 weeks, but I have been with the company 
since it was founded 17 years ago.
    Thank you for this opportunity to tell you about Erbitux. 
Since we licensed this compound 9 years ago, ImClone has 
invested hundreds of millions of dollars in research and 
testing Erbitux. Our effort reached a critical point 2 years 
ago. Doctors at preeminent research centers like Memorial 
Sloan-Kettering Cancer Center started to report success in 
using Erbitux in combination with chemotherapy to treat 
terminally ill patients. These doctors and their patients were 
telling us that the Erbitux combination therapy was shrinking 
solid tumors in patients with no other treatment options. So we 
set out to make this drug available to cancer patients as 
quickly as possible.
    Congress created the Fast Track process to encourage 
expedited review of drugs that have the potential to address an 
unmet medical need related to a life-threatening illness. If 
ever a drug was a good candidate for Fast Track, Erbitux was 
it. And in fact, the FDA granted Erbitux Fast Track status in 
January 2001. During this same period, we had many meetings 
with the FDA to determine whether the clinical trial we had 
underway for colorectal cancer patients could serve as the 
basis for regulatory approval. After the FDA reviewed our study 
protocol, we reached an understanding with the agency that this 
trial could be the pivotal study for our application.
    Over the next few months, we worked closely with the FDA to 
develop an application for approval. When the FDA asked 
questions, we answered them. When the FDA asked for more data, 
we got it for them. Such give and take is a common part of the 
application process. We were very pleased with the results of 
the clinical trial. It found that roughly 20 percent of 
patients responded to that treatment. These results were 
reported by independent physicians at preeminent cancer 
centers--doctors with no stake in the outcome, who saw the drug 
at work, first hand, in their patients. These conclusions were 
then confirmed by an independent committee, known as an IRAC. 
Twenty percent was an impressive result, since the FDA had 
approved Irinotecan, a chemotherapy drug, with a 13 percent 
response rate.
    But we were not the only ones excited by the potential of 
Erbitux. In May 2001, doctors at the leading oncology 
conference reacted enthusiastic to the data presented by Dr. 
Leonard Saltz on the Erbitux trial. And in September of last 
year, after months of due diligence by their top scientists, 
Bristol-Myers Squibb committed to invest $2 billion in ImClone, 
a huge vote of confidence for Erbitux from the world's leading 
cancer drug company.
    Despite these encouraging signs, the FDA refused to file 
ImClone's application. Today, this hearing will be filled with 
questions as to why the FDA refused to file our application, 
and I am happy to answer those questions. But in brief, let me 
say that with the benefit of 20/20 hindsight, we could and 
should have done a better job in documenting the clinical 
evidence. Many of our critics have suggested that the pilot 
trial was too small and that our results were not proven by the 
most rigorous testing standards. But I would remind those 
critics that Congress explicitly created Fast Track to bring 
drugs to market that had not been through the rigors of a Phase 
III test, wisely deciding that when patients are dying and 
drugs demonstrate potential for treating them, the balance 
should be struck in favor of getting those drugs to patients 
quickly.
    Today, ImClone and its partners continue to work closely 
with the FDA to move forward in the approval process. Erbitux 
remains on the FDA's Fast Track. We will be submitting new data 
as it comes in and still hope to win accelerated approval. We 
also have other clinical tests underway, including large Phase 
III trials.
    Mr. Chairman, in conclusion, I would like to make two 
points. First, while we had the right intentions in trying to 
get Erbitux through the filing process in 2001, we failed. Yes, 
setbacks in regulatory strategies occur, in fact they are 
common, and ImClone is hardly among the only biopharmaceutical 
or pharmaceutical companies that have failed in gaining swift 
approval for a drug. But that does not change the fact that we 
let patients down, and for that, I am truly sorry.
    Second, as the company's new CEO, I am committed, 
absolutely committed, to getting this drug approved. I will 
work closely with the FDA and try to continue the cooperative 
relationship we have had with the agency. We want to get them 
the information they need as quickly as we can so that 
hopefully Erbitux can be available to cancer patients in 
desperate need of more treatments.
    I appreciate the opportunity to be here today to answer 
your questions.
    [The prepared statement of Harlan Waksal follows:]
  Prepared Statement of Harlan Waksal, President and Chief Executive 
                        Officer, ImClone Systems
    Chairman Greenwood, Congressman Deutsch and Members of the 
Subcommittee, my name is Harlan Waksal, and I am the President and 
Chief Executive Officer of ImClone Systems. I have held that position 
for only three weeks, but I have been with the company since it was 
founded, 17 years ago.
    Thank you for this opportunity to tell you about Erbitux--a 
potential new treatment for cancer that attaches itself to growth 
factor receptors on cancer cells, depriving tumors of the ability to 
grow. Since we acquired the license for this compound nine years ago, 
ImClone has invested hundreds of millions of dollars to support its 
clinical program of research and testing.
    Our efforts reached a critical point two years ago. Over the course 
of the year 2000, doctors at preeminent research institutes such as the 
Memorial Sloan-Kettering Cancer Center reported success in using 
Erbitux in combination with chemotherapy to treat terminally ill 
patients. These doctors--and their patients--were telling us that the 
Erbitux combination therapy was shrinking solid tumors in patients who 
did not have other treatment options. As a result, we set out to make 
this drug available to cancer patients as quickly as possible.
    As this Subcommittee knows, Congress created the ``Fast Track'' 
process to encourage the expedited review of drug applications where 
the drug in question has the potential to address an unmet medical need 
related to a life-threatening illness. If ever a drug was a good 
candidate for ``Fast Track,'' Erbitux was it. And in fact, the FDA 
granted Erbitux ``Fast Track'' status in January 2001.
    During this same period, we had multiple meetings and conversations 
with the FDA, to determine whether the clinical trial we had underway 
for colorectal cancer patients--giving Erbitux and chemotherapy in 
combination to patients who had failed chemotherapy alone--could serve 
as the basis for regulatory approval. After the FDA reviewed our test 
protocol, we reached an understanding with the agency that this 
clinical study could be the pivotal study for our application to win 
approval for Erbitux.
    Over the next few months, we worked closely with the FDA to develop 
an application for approval. When the FDA asked questions, we answered 
them. When the FDA asked for more data, we got it for them. Such give 
and take is a common part of the application process.
    We were very pleased with the results of the clinical trial. It 
found that roughly 20 percent of patients responded to the treatment. 
These results were reported by independent physicians at preeminent 
cancer centers--doctors without any stake in the outcome, who saw this 
drug at work, first hand, in their patients. These conclusions were 
then confirmed by an independent review committee, commonly known as an 
``IRAC.'' The approximately 20% response rate was an impressive result, 
since the FDA had approved irinotecan--a chemotherapy drug--with a 13% 
response rate in a similar patient population.
    But we were not the only people excited by the potential of 
Erbitux. In May of 2001, doctors at the leading oncology conference--
after hearing a presentation from Dr. Leonard Saltz regarding the 
clinical trial--reacted enthusiastically to the data. And in September 
of last year, after months of extensive due diligence by their top 
scientists, Bristol-Myers Squibb committed to investing $2 billion in 
ImClone and Erbitux--a huge vote of confidence from the world's leading 
oncology pharmaceutical company, which clearly believed that Erbitux 
showed great potential.
    As the Subcommittee knows, despite these encouraging signs, the FDA 
refused to file ImClone's application for Erbitux. Today's hearing will 
be filled with questions as to why the FDA refused to file our 
application, which I am happy to answer. But in brief, let me say that 
with the benefit of 20/20 hindsight, we now know that we could and 
should have done a better job in putting together our application 
package.
    Many of our critics have suggested that our pivotal trial was too 
small, and that our results were not proven by the most rigorous 
testing standards. But, I would remind those critics that Congress 
explicitly created Fast Track to bring drugs to market that had not 
been through the rigors of a Phase III test--wisely deciding that when 
patients are dying, and there is a drug that demonstrates ``potential'' 
for treating those patients, the balance should be struck toward 
getting new drugs to those patients quickly.
    Notwithstanding our setbacks, ImClone and its partners continue to 
work closely with the FDA to move forward in the approval process. 
Today, Erbitux remains on the FDA's ``Fast Track.'' We will be 
submitting new data as it comes in, and still hope to win accelerated 
approval. We also have underway a variety of other clinical tests, 
including large, Phase III trials.
    Mr. Chairman, in conclusion, I would like to make two points.
    First, while we had the right intentions in trying to get Erbitux 
through the filing process in 2001, we failed. Yes, setbacks in the 
regulatory process are common, and ImClone is hardly alone among drug 
companies in failing to win swift approval for a drug. But that does 
not change the fact that we let patients down, and for that, I am truly 
sorry.
    Second, as ImClone's new CEO, I am committed--absolutely 
committed--to getting this drug approved. I will work closely with 
patients and the advocacy community to see this through. And I will 
also work closely with the FDA, to continue the open and cooperative 
relationship we have had with the agency. We want to get them the 
information they need, as quickly as we can, so that hopefully Erbitux 
can be available to cancer patients in desperate need of more treatment 
options.
    I appreciate the opportunity to be here today, and will be glad to 
answer your questions now.

    Mr. Greenwood. The Chair thanks you, Dr. Waksal, for your 
statement. The Chair also thanks you for your presence and your 
willingness to come here without subpoena. And let me 
personally say that I certainly hope that you succeed in having 
this drug approved if it will in fact help patients.
    Dr. Smaldone, you are recognized to give your opening 
statement for 5 minutes, please.

                  TESTIMONY OF LAURIE SMALDONE

    Ms. Smaldone. Yes, thank you. Thank you, Mr. Chairman and 
thanks to the committee. My name is Laurie Smaldone, and I am 
senior vice president of Worldwide Regulatory Science at the 
Bristol-Myers Squibb Pharmaceutical Research Institute, and a 
physician specializing in oncology. I have been with Bristol-
Myers Squibb for 17 years, and before that I was an oncologist 
in academic practice. While the scope of my responsibilities at 
Bristol-Myers Squibb today crosses therapeutic lines, a great 
deal of my professional experience has been in the area of 
cancer and, more specifically, cancer treatments.
    I am pleased to have the opportunity to address the 
subcommittee, as well as respond to its questions, about 
Bristol-Myers Squibb's commitment to the anti-cancer drug, 
Erbitux. First, I would like to say that from a scientific and 
clinical perspective, we believe that Erbitux is an active 
anti-cancer agent. Evidence suggests that Erbitux shows anti-
tumor activity in several tumor types but in particular in 
patients with late-stage colorectal cancer that is refractory, 
or, in other words, unresponsive to available treatments. These 
are patients who otherwise have few if any treatment options 
available to them. We believe this about Erbitux now, just as 
we believed it when we invested in ImClone Systems and entered 
into a commercialization agreement with ImClone relating to 
Erbitux back in September 2001.
    It is important for the subcommittee to understand that one 
of the diseases for which Erbitux is being investigated as a 
possible treatment, advanced refractory colorectal cancer, is 
particularly insidious. For individuals diagnosed with it, the 
prognosis is uniformly grim; this is an incurable disease. 
Still, many patients are desperate for any treatment that will 
give them additional time with family and loved ones, and in 
some cases, Erbitux has helped provide this additional time.
    While the difficulties in finding adequate treatments for 
cancer are well known, it is useful to point out that great 
progress has been made in understanding the course and 
complexities of cancer over the last many years. Nonetheless, 
beyond early detection and surgical intervention, major impact 
with chemotherapy and biologic therapies is limited, and still 
most tumors go undetected until quite an advanced stage, which 
makes any treatment effect at that time far more difficult to 
achieve.
    As the world's leading provider of cancer therapies, 
Bristol-Myers Squibb has focused much of its research and 
development on finding better treatments, more targeted and 
less toxic therapies than those currently available. And our 
strategy also has been to look outside our company for 
promising compounds such as Erbitux, which itself represents a 
new and potentially revolutionary way of fighting cancer 
through a more targeted approach. Still, we realize that these 
advances, while significant, are not the ``magic bullet'' 
against cancer, but they do represent real progress.
    My second point is that it is important, in the midst of 
all the issues identified, that we together find a way to 
address these issues and make Erbitux available to patients as 
quickly as possible. That is why we continue to work closely 
with ImClone to further the development of Erbitux and to 
resubmit the application to the U.S. Food and Drug 
Administration as soon as possible. While some patients have 
been able to benefit from Erbitux in clinical trials and 
compassionate use programs, we know that only after approval 
and commercialization will all those who truly need the drug 
actually get it and will physicians be able to further evaluate 
its role in different settings.
    Finally, I wish to stress that this is about everyday 
people, more than 100,000 each year, who 1 day go to their 
doctor and have their entire life turned upside down by a 
diagnosis of colon cancer. For these people, Erbitux is not an 
exciting scientific advance or a compelling idea or a promising 
investment. It is a treatment option and a way to have more 
time and hope. I can say this with some conviction because I 
had the honor recently of meeting an Erbitux patient who told 
me quite candidly what the drug has meant to her. And she has 
permitted me to share her story with the committee, which I 
will do very briefly.
    A little over a year ago, when she was 38 years old, 
Michael Ann Mullinix of Belvidere, Illinois, was told by her 
doctor that she had stage 4 metastatic colon cancer that had 
spread to her ovaries. Even with surgery, she was given a short 
time to live. A wife and a mother of teenage children, Michael 
Ann decided she wanted to go on an Erbitux regimen. Following 
surgery, she began treatment with Erbitux and other 
chemotherapeutic agents last August as part of a clinical 
study. And as of today, she is essentially cancer free and 
continues to respond.
    In the course of our conversation, Michael Ann told me that 
she was worried not that her cancer would return, or how she 
was coping with this serious illness. She was worried about the 
future of Erbitux, about its continued availability as a 
therapy alternative, not just for her benefit but for many 
others who could potentially benefit as well. When she heard 
that I was coming to testify before this subcommittee, she 
asked me to convey this message that I have stressed in this 
statement: We need to work together to do all that we can to 
get Erbitux to all the patients who need it as quickly as 
possible.
    I should point out that there are risks involved in this 
project, just as there are risks involved in all of biomedical 
research. We have no guarantee that Erbitux ultimately will be 
the important therapeutic advance we expect it to be. But 
knowing what we know about it today, there is every reason to 
be hopeful about its promise and to move forward with the 
clinical development and registration process.
    Once again, I am grateful for the opportunity to address 
the committee on this important subject. I will be happy now to 
answer any questions you have.
    [The prepared statement of Laurie Smaldone follows:]
Prepared Statement of Laurie Smaldone, Senior Vice President, Worldwide 
   Regulatory Science, Bristol-Myers Squibb Pharmaceutical Research 
                               Institute
    Thank you, Mr. Chairman. My name is Laurie Smaldone, and I am 
senior vice president of Worldwide Regulatory Science at the Bristol-
Myers Squibb Pharmaceutical Research Institute, and a physician 
specializing in oncology. I have been with Bristol-Myers Squibb for 17 
years, and before that I was an oncologist in academic practice. While 
the scope of my responsibilities at Bristol-Myers Squibb crosses 
therapeutic lines, a great deal of my professional experience has been 
in the area of cancer and, more specifically, cancer treatments.
    I am pleased to have this opportunity to address the subcommittee, 
as well as respond to its questions, about Bristol-Myers Squibb's 
commitment to the anti-cancer agent Erbitux. First, I would like to say 
that--from a scientific and clinical perspective--we believe that 
Erbitux is an active anti-cancer agent. Evidence suggests that Erbitux 
shows anti-tumor activity in patients with late-stage colorectal cancer 
that is refractory--or, in other words, unresponsive--to available 
treatments. These are patients who otherwise have few if any treatment 
options available to them. We believe this about Erbitux now, just as 
we believed it when we invested in ImClone Systems and entered into a 
commercialization arrangement with ImClone relating to Erbitux back in 
September 2001.
    It is important for the subcommittee to understand that the disease 
for which Erbitux is being investigated as a possible treatment--
advanced refractory colorectal cancer--is particularly insidious. For 
individuals diagnosed with it, the prognosis is generally grim. Still, 
many patients are desperate for any treatment that will give them 
additional time with family and other loved ones. And in some cases, 
Erbitux has helped provide this additional time.
    While the difficulties in finding adequate treatments for cancer 
are well known, it is useful to point out that great progress has been 
made in understanding the course and complexities of cancer. 
Nonetheless, beyond early detection and surgical intervention, major 
impact with chemotherapy and biologic therapies is limited, and still 
most tumors go undetected until quite an advanced stage.
    As the world's leading provider of cancer therapies, Bristol-Myers 
Squibb has focused much of its research and development on finding 
better treatments--more targeted and less toxic therapies than those 
currently available. And our strategy also has been to look outside our 
company for promising compounds such as Erbitux, which itself 
represents a new and potentially revolutionary way of fighting cancer 
through a more targeted approach. Still, we realize that these 
advances--while significant--are not the ``magic bullet'' against 
cancer, but they represent real progress.
    My second point is that it is important--in the midst of all the 
issues identified--that we together find a way to address these issues 
and make Erbitux available to patients as quickly as possible. That is 
why we are working closely with ImClone to resubmit the application for 
Erbitux to the U.S. Food and Drug Administration as soon as possible. 
While some patients have been able to benefit from Erbitux in clinical 
trials and compassionate use programs, we know that only after approval 
and commercialization will all those who truly need the drug actually 
get it, and will physicians be able to further evaluate its role in 
different clinical settings.
    Finally, I wish to stress that this is about everyday people from 
all walks of life--thousands of them each year--who one day go to their 
doctor or to the hospital and have their entire life turned upside down 
by a diagnosis of colon cancer or other solid tumors. For these people, 
Erbitux is not an exciting scientific advance or a compelling idea or a 
promising investment. It's a way to have more time.
    I can say this with some conviction because I had the honor 
recently of meeting an Erbitux patient who told me quite candidly what 
the drug has meant to her. And she has permitted me to share her story 
with the committee, which I will do now, briefly.
    A little over a year ago, when she was 38 years old, Michael Ann 
Mullinix of Belvidere, Illinois, was told by her doctor that she had 
stage 4 colon cancer that had spread to her ovaries. Even with surgery, 
she was given just 9 months to live. A wife and a mother of teenage 
children, Michael Ann decided she was going to fight the odds by going 
on an Erbitux regimen, which she had heard about on television. 
Following surgery, she began treatment with Erbitux and other 
chemotherapeutic agents last August as part of a clinical study. And as 
of today, she is essentially cancer free.
    In the course of our conversation, Michael Ann told me that she was 
worried. Not that her cancer would return, or how she was coping with 
this serious illness. She was worried about the future of Erbitux--
about its continued availability as a therapy alternative, not just for 
her benefit but for many others who would potentially benefit from it 
as well. And when she heard that I was coming to testify before this 
subcommittee, she asked me to convey the message I have stressed 
several times in this statement: we need to work together to do all we 
can to get Erbitux to all the patients who need it as quickly as 
possible.
    I should point out that there are risks involved in this project, 
just as there are risks in all biomedical research. We have no 
guarantee that Erbitux ultimately will be the important therapeutic 
advance we expect it to be. But knowing what we know about it today, 
there is every reason to be hopeful about its promise and to move 
forward with the clinical development and registration process.
    Once again, I am grateful for this opportunity to address the 
committee on this important subject. I'll be happy now to answer any 
questions you may have.

    Mr. Greenwood. Thank you, Dr. Smaldone. We appreciate your 
presence and your testimony.
    Ms. Smaldone. Thank you.
    Mr. Greenwood. The Chair recognizes himself for 5 minutes 
for purposes of inquiry. Let me address my questions initially 
to Dr. Waksal. When ImClone filed the Erbitux biologics 
licensing application, otherwise known as a BLA, on October 31, 
2001, did you expect that ImClone was in fact on a glide path 
toward approval?
    Mr. Harlan Waksal. Absolutely. We did file it at that time. 
In fact, it was a rolling BLA. That was the last piece of it. 
We thought we were well on the track to moving this drug 
through approval.
    Mr. Greenwood. And did you expect that Erbitux BLA to go 
before the February 2002 FDA Advisory Committee called ODAC?
    Mr. Harlan Waksal. Well, we were hopeful that based on 
timing of the review clock that the February ODAC would be the 
appropriate time for this drug to be in front of the Oncologic 
Drug Advisory Committee.
    Mr. Greenwood. Okay. Does Lilly Lee, ImClone's Regulatory 
Affairs vice president report directly to you?
    Mr. Harlan Waksal. Yes, she does.
    Mr. Greenwood. And was she reporting to you her contacts 
and communications with FDA during the approval process?
    Mr. Harlan Waksal. Yes, she was.
    Mr. Greenwood. Okay. Dr. Lee, could you please come forward 
to be sworn in and answer a few questions? Welcome, Dr. Lee. 
You may be seated for a moment and then we will ask you to 
stand again. You have heard me say, Dr. Lee, that this is an 
investigative hearing, and it is our practice to take testimony 
under oath. Do you have any objections to giving your testimony 
to us under oath?
    Ms. Lee. No.
    Mr. Greenwood. Okay. You also should be advised that you 
are entitled to counsel. Do you wish to be advised by counsel?
    Ms. Lee. Yes, please.
    Mr. Greenwood. Okay. And could you identify your counsel 
for us, please?
    Ms. Lee. Mr. Richard Emory.
    Mr. Greenwood. Mr. Richard Emory?
    Ms. Lee. Yes.
    Mr. Greenwood. Okay. Thank you. In that case, would you now 
rise and raise your right hand?
    Ms. Lee. Sure.
    [Witness sworn.]
    Mr. Greenwood. Thank you, Dr. Lee. Did you have a face-to-
face meeting with the FDA reviewers on December 4, 2001?
    Ms. Lee. Yes, I did.
    Mr. Greenwood. Okay. Did the FDA reviewers raise serious 
questions about the documentation of the study at that time?
    Ms. Lee. They had raised questions about the documentation.
    Mr. Greenwood. Okay. Did you ask the FDA reviewers whether 
the FDA was going to send ImClone a refusal-to-file letter?
    Ms. Lee. No, I did not ask that.
    Mr. Greenwood. Okay. Did it come up in the conversation? 
Was there any discussion of the possibility of a refusal-to-
file letter?
    Ms. Lee. The only mention of a refusal-to-file was in the 
context of the FDA reviewer laying out the next steps, and it 
was one of the three possible outcomes after the would have the 
internal filing meeting. The three outcomes that he had laid 
out is, one, the FDA could accept and review; two, since this 
was a rolling submission, ImClone may decide that the last 
piece was actually not the last piece that complete the BLA; 
and three, is the FDA may issue a refusal-to-file, RTF. So 
these three options are really any drug that filed an 
application, any BLA would face those three same scenarios.
    Mr. Greenwood. Did you not tell our committee staff in your 
interview that after your conversation an RTF letter for the 
first time became a possibility in your mind?
    Ms. Lee. For me it was on December 13 that the possibility 
that the review--issues that we were working on with the FDA 
may lead to an RTF.
    Mr. Greenwood. Okay. Let me turn back to you, Dr. Waksal.
    Mr. Harlan Waksal. Yes, sir.
    Mr. Greenwood. Do you recall Dr. Lee telling you about this 
meeting?
    Mr. Harlan Waksal. Yes, she did.
    Mr. Greenwood. And were you aware of the FDA issues at this 
point in time, what their concerns were?
    Mr. Harlan Waksal. Yes. Dr. Lee articulated very clearly 
the issues, the documentation questions that were being raised 
by the FDA.
    Mr. Greenwood. Weren't the nature of these issues--when did 
that happen?
    Mr. Harlan Waksal. We spoke many times, but December 4 
was--you are referring to the December 4 meeting, so it was in 
the afternoon on December 4.
    Mr. Greenwood. Okay. Weren't the nature of these issues 
such that it was obvious that whether FDA refused to file or 
not, ImClone wasn't going to the February 2002 Advisory Panel?
    Mr. Harlan Waksal. No, not at all. At the time, we felt 
very confident about our ability to go ahead and address those 
issues. In fact, we were putting into place a plan to go ahead 
and make sure that we could address the FDA's concerns and 
issues that were being raised and felt that indeed we could go 
ahead and continue to move this drug forward.
    Mr. Greenwood. And be ready for the February Advisory 
Panel.
    Mr. Harlan Waksal. Well, the preparation for any advisory 
committee is not dependent on the company, it is dependent on 
the FDA and their feeling that they are ready in fact to go 
ahead and present it and move it forward. We don't really have 
control over that. Obviously, it is always our hope to get it 
to an advisory committee as quickly as possible.
    Mr. Greenwood. December 4 was also an important date for 
another reason. Wasn't that the date that ImClone filed the 
rest of the single agent study?
    Mr. Harlan Waksal. That is right. In fact, the real purpose 
of the meeting, why the meeting took place, was we were 
delivering the last portion of the package to the FDA, and that 
was the final results, the final study report on the single 
agent trial on 57 patients.
    Mr. Greenwood. And were the results of the single agent 
study a factor cited in the FDA refusal-to-file letter?
    Mr. Harlan Waksal. Yes, it was.
    Mr. Greenwood. According to public records, you gained 
almost $50 million from a carry-forward stock transaction on 
December 6, 2001; is that correct?
    Mr. Harlan Waksal. That is correct.
    Mr. Greenwood. This is the transaction you said in an 
October 31, 2001 letter to the ImClone Board that you would 
execute in 2 weeks, and on December 6, ImClone was trading near 
its 52-week peak price. Dr. Waksal, did you not have important 
non-public information about the status of the Erbitux 
application when you executed the December 6 sale of ImClone 
stock for almost $50 million?
    Mr. Harlan Waksal. That is correct. There was no material 
information, in my opinion, at the time. In fact, my 
transaction was quite independent of everything else taking 
place. That transaction was one that I defined and identified 
months earlier, identified the board of directors on October 
31, and these are complicated transactions, and it took until 
the beginning of December for it to be finalized. Before the 
December 4 meeting, I, in fact, had already transferred the 
stock and had engaged in that effort, but the event on December 
4 was not a material event. We didn't believe it would be----
    Mr. Greenwood. But it was non-public.
    Mr. Harlan Waksal. Pardon me?
    Mr. Greenwood. It was not public, though.
    Mr. Harlan Waksal. No, it was not public, but there was no 
material information----
    Mr. Greenwood. Your argument is that while it was non-
public, it was not material.
    Mr. Harlan Waksal. That is correct, sir.
    Mr. Greenwood. Okay. My time has expired. The Chair 
recognizes the gentleman, Mr. Stupak, for 5 minutes.
    Mr. Stupak. Thank you. Dr. Waksal, in August 2000, when you 
met with the FDA, were you present at that meeting?
    Mr. Harlan Waksal. I was.
    Mr. Stupak. Okay. And who set up the protocol that you 
would use to get this Fast Tracked?
    Mr. Harlan Waksal. The protocol was set up by a variety of 
people. We generally work with a group of oncology consultants, 
the people who are going ahead and doing the trial, in 
conjunction with our in-house people who are responsible for 
writing it. It goes through review committees and we get 
feedback till we get to the final form.
    Mr. Stupak. But, basically, ImClone sets forth the 
protocol.
    Mr. Harlan Waksal. That is correct, ImClone is responsible 
for the protocol.
    Mr. Stupak. And that is what you were presenting to the FDA 
in August of 2000 and hoped to get to Fast Track.
    Mr. Harlan Waksal. That is right.
    Mr. Stupak. And, actually, on January 12, 2001, you did 
receive the Fast Track authority from FDA to proceed.
    Mr. Harlan Waksal. That is correct.
    Mr. Stupak. And there is some question as to what protocol 
was being used, protocol No. 1 or protocol No. 2; is that 
correct?
    Mr. Harlan Waksal. That is not correct.
    Mr. Stupak. Well, in the letter of January 19, from FDA, 
where they laid it out for you what you were supposed to be 
doing with the--and also that there would have to be a small 
study of the single data, was that news to you or----
    Mr. Harlan Waksal. Well, that was the first time that was 
mentioned. But just to get back to the first question, the FDA 
had both protocols, and it wasn't as if there were two 
protocols.
    Mr. Stupak. You presented two protocols in August 2000?
    Mr. Harlan Waksal. We presented two protocols well before 
August 2000.
    Mr. Stupak. Okay.
    Mr. Harlan Waksal. The protocol was amended, so it was 
slightly modified, and the FDA had both protocols in their 
hands while this study was underway, without any question, sir.
    Mr. Stupak. But when you met with them in August 2000----
    Mr. Harlan Waksal. Yes. We were talking about the 
protocols----
    Mr. Stupak. You had both protocols.
    Mr. Harlan Waksal. Yes, the FDA had both protocols.
    Mr. Stupak. And it was clear to everyone that there were 
two protocols here and it is clear to everybody?
    Mr. Harlan Waksal. There was never an issue or suggestion 
that that was a problem in any way. The protocol modifications 
were minor.
    Mr. Stupak. They were minor?
    Mr. Harlan Waksal. Yes, sir.
    Mr. Stupak. Who sets the modifications of the protocol?
    Mr. Harlan Waksal. It is usually done in conjunction--
again, ImClone sets them in conjunction with the oncologists 
when they believe there is a change that is necessary in a 
protocol.
    Mr. Stupak. But Dr. Weiss had just testified that the 
dosage and the amount of--and the time of receiving some of the 
drugs, the----
    Mr. Harlan Waksal. Irinotecan.
    Mr. Stupak. [continuing] Irinotecan----
    Mr. Harlan Waksal. Yes.
    Mr. Stupak. [continuing] that was determined by the doctors 
doing the testing on the patients, correct?
    Mr. Harlan Waksal. Well, actually, the protocol set out 
very clearly what should take place with Irinotecan treatment. 
There were protocol deviations that took place where doctors 
had gone ahead and made changes in that dose of Irinotecan, 
primarily decreasing the amount of Irinotecan that was being 
used in those patients. In a very few number of patients, very 
few, it was increased. And in fact only one of those patients 
has responded.
    Mr. Stupak. But those modifications were fatal to your 
application, were they not, one of the three reasons why your 
application failed.
    Mr. Harlan Waksal. I think the application failed for a 
number of reasons, primarily documentation. But I think that 
certainly the review----
    Mr. Stupak. Wait a minute. Documentation? You had to have 
had at least 100 people go through this thing. In the final 
analysis, there is maybe 89 at best. That is not a 
documentation issue, that is a fact issue that you didn't have 
enough people in your small study. And when you have a small 
study, as been testified earlier, it is critical that everyone 
makes it through and you do not fall below that 100 number; 
isn't that correct?
    Mr. Harlan Waksal. That is not correct, and if I could----
    Mr. Stupak. That is not correct? Dr. Weiss was wrong in his 
testimony earlier today?
    Mr. Harlan Waksal. I didn't hear Dr. Weiss' testimony, but 
if I could just go ahead and comment on this.
    Mr. Stupak. Sure. Well, I don't want you to filibuster an 
answer, I just want an answer.
    Mr. Harlan Waksal. I have no intention of filibustering.
    Mr. Stupak. Okay.
    Mr. Harlan Waksal. The study was 138 patients. One hundred 
and twenty of those patients were considered refractory.
    Mr. Stupak. Correct.
    Mr. Harlan Waksal. The documentation is not on patients on 
study, it has to do with patients before they came on to trial, 
and in fact----
    Mr. Stupak. Doctor, if it is just a matter of 
documentation, just a matter of documentation and not the size 
of study and not when dosage is, as you say, it is just 
documentation, why haven't you provided the proper 
documentation into the FDA and get this drug approved?
    Mr. Harlan Waksal. We, at the time, didn't recognize that 
there was a shortcoming in the documentation, and that was a 
quality problem within our company, and it is something that I 
have agreed was a problem. We have since gone out and have 
collected with our partners as many scans as we can, collected 
133 of the 138 patient scans. They haven't been reviewed yet. 
We are waiting and talking to the agency, and it will be a 
component, hopefully, of a resubmission in conjunction with 
additional data.
    Mr. Stupak. So you are still under the impression it is 
just a documentation issue and that is all it is. And once that 
documentation is provided, you expect to get your approval?
    Mr. Harlan Waksal. In no way am I trivializing the 
importance of this documentation. It is critical to the study 
and its integrity. And not only is that important but the other 
issues that you have raised are important as well. But the real 
issue is the question of whether or not these are major or 
minor deviations or protocol problems. And for the most part, 
our review continues to establish that the vast majority are 
not major protocol problems and in fact the study hopefully 
will continue to be in tact once we reevaluate it. That has not 
taken place yet. But it is more than documentation, without a 
question.
    Mr. Stupak. You know, some of the documents we have here 
indicating that three prominent oncologists say, and let me 
quote, ``Overall, this is a protocol,'' NCR protocol, right?
    Mr. Harlan Waksal. Yes, sir.
    Mr. Stupak. ``That asks the wrong questions and then is not 
tightly written and efficient. The protocol generates far more 
questions than it could ever answer. It is a blueprint for 
production of vague answers.''
    Mr. Harlan Waksal. I believe you are reading from the 
Cancer Letter, three clinicians who reviewed the protocol, who 
were not involved with the study or the study design. I think 
what is very critical in this study was----
    Mr. Stupak. So your answer is only those doctors who were 
involved in the study can answer or review your BLA?
    Mr. Harlan Waksal. No, not at all. No. I believe the 
importance of how we got to this place is very critical, and 
unfortunately those physicians weren't involved in that 
process. What is critical is that this study was not designed 
as a registration trial. It was a Phase II study early on in 
the development of this drug. It was only because of the 
unexpected results that we were able to go ahead and move it 
forward, sir.
    Mr. Stupak. It is no longer a Phase II study. You are 
asking for accelerated Fast Track to put it out to the general 
population. You are past Phase II. We call it Phase III, and 
Phase IV is when you put it out in the real world. Therefore, 
if it is only Phase II, you still had two more phases to go 
through if you went through the regular process.
    Mr. Harlan Waksal. Actually, it was Congress who stipulated 
in Fast Track designation----
    Mr. Stupak. That is true.
    Mr. Harlan Waksal. [continuing] that studies exactly like 
this could be designated to be moved forward toward approval.
    Mr. Stupak. Exactly.
    Mr. Harlan Waksal. Phase II studies, sir.
    Mr. Stupak. And Congress also said that if you are going to 
do a Fast Track legislation, it has to be tightly controlled, 
tightly regulated, and you must follow the regimen to a tee; 
otherwise, we are not going to allow it.
    Mr. Harlan Waksal. And we have agreed that there were 
problems in the protocol.
    Mr. Greenwood. Time of the gentleman has expired. The Chair 
recognizes the chairman of the full committee, Mr. Tauzin, for 
inquiry.
    Chairman Tauzin. Thank you, Mr. Chairman. Gentlemen, let me 
take you back to December 20. Are you aware of the fact that 
the FDA called both ImClone and I think Bristol-Myers Squibb on 
that date to say, ``The decision has been made. Don't call us, 
don't bother us anymore. We will announce the decision on 
December 28.'' Is that correct?
    Mr. Harlan Waksal. Well, Congressman, what took place is we 
actually had called the FDA to find out what the status was, 
and we were informed at the time that a decision had been made 
and that it would be coming sometime the next week, right.
    Chairman Tauzin. Is that correct, Mr. Markison?
    Mr. Markison. That is correct.
    Chairman Tauzin. Turn your mike on please, sir. Is that 
correct?
    Mr. Markison. Yes, that is correct.
    Chairman Tauzin. Did you get a call from FDA saying, 
``Don't call, don't bother us anymore. We are going to have the 
decision--it is already made, we will announce it next week on 
the 28th.''
    Mr. Markison. Was that question directed to me or Dr. 
Waksal?
    Chairman Tauzin. Yes, sir. Directed to you, sir.
    Mr. Markison. I never received a call from the FDA.
    Chairman Tauzin. Did you know that FDA had called ImClone?
    Mr. Markison. I was aware of the teleconference that Dr. 
Waksal referred to. And I was aware subsequently of a dialog 
around that within both companies, and we acknowledged the 
fact----
    Chairman Tauzin. All right.
    Mr. Markison. [continuing] that that was a very difficult 
call.
    Chairman Tauzin. Now, on December 21, Christmas day, you 
tracked Dr. Waksal down to talk to him. Where did you find him?
    Mr. Markison. Well, sir, first I must apologize to the 
chairman as well, I am also represented by counsel. I wasn't 
asked to point that out. I feel that I should point that out.
    Mr. Greenwood. Please identify your counsel.
    Mr. Markison. Mr. Hamilton, behind me.
    Mr. Greenwood. All right. Say his name clearly in the 
microphone, please. State his name.
    Mr. Markison. Mr. James Hamilton.
    Mr. Greenwood. Okay.
    Mr. Markison. The only reason I didn't offer his name, I 
wasn't asked previously, sir.
    Mr. Greenwood. Fair enough.
    Chairman Tauzin. All right. We got your counsel on the 
record. Now, let us see if we can get the question answered. 
The question is on December 25 you apparently tracked down Dr. 
Waksal by phone to have a conversation with him, Christmas Day, 
December 25. Where did you find him?
    Mr. Markison. I was able to reach Dr. Waksal at his house 
in Telluride.
    Chairman Tauzin. That is in Colorado?
    Mr. Markison. I believe so, yes.
    Chairman Tauzin. So what was the purpose, why were you 
calling him on Christmas Day at his house in Colorado?
    Mr. Markison. The reason I called Dr. Waksal was because on 
Christmas Eve I had heard from outside counsel to BMS, Mr. 
Allan Bennett, that through a contact at the FDA we had heard 
that a refusal-to-file letter was a distinct possibility. And 
then I tried to reach Dr. Waksal that evening, called his home, 
but did not leave a message on his machine and then called him 
on Christmas Day to relay that information.
    Chairman Tauzin. All right. Now, Dr. Waksal, you tried to 
reach your brother the next morning, you called him three 
times, I think, starting at 6:30 a.m.; is that correct?
    Mr. Harlan Waksal. In fact, I called many members of 
ImClone senior management, including Sam. I was unable to reach 
him.
    Chairman Tauzin. Where was he?
    Mr. Harlan Waksal. I believe he was somewhere--he was on 
vacation down in the Caribbean. I don't know----
    Chairman Tauzin. St. Barts, you think.
    Mr. Harlan Waksal. That may be correct.
    Chairman Tauzin. And why were you trying to call him?
    Mr. Harlan Waksal. I had just heard from our colleagues at 
Bristol-Myers that we had a refusal--a high potential, a high 
likelihood of receiving a refusal-to-file, and I was calling 
all the senior members of management to participate in a 
conference call that was scheduled for 10 a.m. eastern time 
where we could discuss our options.
    Chairman Tauzin. Now, for the record, both of you are 
testifying that the most you got from this contact with a 
consultant who had a contact with somebody at FDA that a 
refusal-to-file letter was probable, likely? What did you hear 
exactly, Mr. Markison?
    Mr. Markison. I had a dialog with Mr. Bennett where he 
described that a refusal-to-file letter was probabilistic, 
highly probable. And then, subsequently, in an e-mail to me, he 
did point out, in no uncertain terms, that a refusal-to-file 
letter would be coming.
    Chairman Tauzin. No, no, wait a minute. So when did you get 
that e-mail?
    Mr. Markison. On Christmas Eve.
    Chairman Tauzin. So before you called Dr. Waksal, you 
already had an e-mail saying that a refusal-to-file is coming 
definitely.
    Mr. Markison. Yes, sir.
    Chairman Tauzin. Did you convey that information to Dr. 
Waksal on Christmas Day?
    Mr. Markison. I conveyed the information that was in the e-
mail and also my subsequent dialog with Mr. Bennett that it 
appeared a refusal-to-letter was coming.
    Chairman Tauzin. Now, Dr. Waksal, you just said you were 
conveying the message to everyone that that was a problem. Are 
you telling us that you did not convey to your officers and 
directors and try to convey to your brother the fact that an e-
mail had been received saying one was definitely coming?
    Mr. Harlan Waksal. No, I didn't say that at all. I was----
    Chairman Tauzin. Tell me what you did convey.
    Mr. Harlan Waksal. I was very clear. I relayed the 
conversation I had with Mr. Markison to the team. I asked them 
all to participate so that we could hear directly from the 
people involved what was going to take place, and in fact we 
had that telephone conference call with all parties at 10 a.m. 
on the 26th.
    Chairman Tauzin. On the 26th.
    Mr. Harlan Waksal. That is correct.
    Chairman Tauzin. So that by the 25th you all knew that in 
fact a letter, the refusal-to-file decision had been made and 
it was going to be announced; is that right?
    Mr. Harlan Waksal. Actually, I don't know who knew on 
Bristol's side. I was the only person who knew on the 25th, and 
I did not contact anyone on the 25th of December. I didn't feel 
it was appropriate to wreck Christmas for the people at the 
company.
    Chairman Tauzin. Now, I have got in my hands a document 
marked, ``Confidential treatment requested by ImClone Systems, 
Inc.'' We are going to make a copy available to you, Dr. 
Waksal.
    Mr. Harlan Waksal. Thank you.
    Chairman Tauzin. It is a series of memos, handwritten 
memos. We don't know who wrote it, but the date on top, if you 
will follow it, is December 27, 2001; is that correct?
    Mr. Harlan Waksal. That is correct, sir.
    Chairman Tauzin. Would you read the second item for us?
    Mr. Harlan Waksal. ``A rejection letter will include 
points: study size small, truly refractory, data base flawed.''
    Chairman Tauzin. So that at least by the 27th you all knew 
not only that a rejection letter was coming, but you knew 
exactly what the points of rejection would be; is that correct?
    Mr. Harlan Waksal. What we knew is what is written here. 
What was relayed to us was that there are both--there are 
review issues, and these were the possible review issues that 
we were going to see in that letter; yes, sir.
    Chairman Tauzin. Where did you get that information?
    Mr. Harlan Waksal. I believe that was part of our 
conference call dialog on the 26th and possibly on the 27th.
    Mr. Markison. Mr. Markison, was that information relayed to 
you in that e-mail as well, not only that the rejection letter 
was coming, but it was coming for the following reasons?
    Mr. Markison. No, sir, it was not.
    Chairman Tauzin. Do we have a copy of that e-mail that you 
received?
    Mr. Markison. You should have it, yes.
    Chairman Tauzin. All right. I would like to turn to the 
second page, Dr. Waksal. The first item says, ``No press 
release by BMS.'' The second item interests me, ``Brian 
understands that Sam and Harlan are calling FDA to try to stop 
RTF. Our press release should be as vague as possible. A 
question, do we need to do anything at all?'' Is that correct? 
Did you and your brother begin calling FDA to try to stop the 
RTF at that point?
    Mr. Harlan Waksal. Not entirely. We were having discussions 
to try to decide how to move forward and what to do. I think I 
mentioned earlier one of the things we decided to do was to put 
a letter together to the FDA to try to go ahead and stop the 
RTF from coming. I did not call the FDA. As you mentioned, we 
were not able--we were asked not to contact them. I do know 
that Sam Waksal did try to contact the FDA.
    Chairman Tauzin. What is confusing about these documents is 
that in press releases you and your brother, either one of you, 
both of you have said that you were shocked on the 28th to find 
out that the RTF came down. You were shocked, utterly, to find 
out that the agency would reject filing. And yet these 
documents indicate that you knew at least on the 27th and your 
testimony is that Mr. Markison advised you on the 25th that the 
rejection letter was coming. Why would you say publicly on the 
28th that you were shocked?
    Mr. Harlan Waksal. Well, I was shocked, sir. When I 
received the RTF letter, the tone, the content was a big 
surprise. We were surprised at the number of issues that were 
raised and the deficits that were noted in the RTF letter.
    Chairman Tauzin. But you had to know it was coming. You 
just testified you knew it was coming.
    Mr. Harlan Waksal. I knew that it----
    Chairman Tauzin. And you knew why it was coming.
    Mr. Harlan Waksal. I felt very certain that an RTF--no, 
these were issues--these were some of the issues, but we didn't 
have the extent of which were reviewed and which were going to 
be refusal to file issues.
    Chairman Tauzin. I want to go back if I have just a minute, 
Mr. Chairman, to that date when--in August of 2000.
    Mr. Harlan Waksal. Yes, sir.
    Chairman Tauzin. When ImClone and FDA met to discuss a 
possible accelerated approval strategy. Our investigators tell 
us that very clearly FDA relied upon the wrong version of the 
9923 protocol. And then they tell us that ImClone did not 
correct the FDA's mistake. We further learned from the senior 
FDA official who overruled the medical reviewer handling the 
case that she believes she was misled by ImClone about its 
claim that a human clinical trial showed no single agent 
activity. We have two instances here where, one, the FDA relied 
upon a wrong version and our investigators tell us that no one 
at ImClone corrected the FDA's mistake. Did you know in August 
of 11, 2000 when FDA made the decision to rely upon the wrong 
version of the protocol that they were making a mistake?
    Mr. Harlan Waksal. First of all, the FDA had both versions 
of the protocol prior to our meeting on August 2000, and indeed 
we assumed, and I still believe, that the FDA was fully aware 
of what those protocols are. It is a surprise to me that it is 
suggested that we were somehow trying to fool them into 
thinking we were working under Version 1.0 versus Version 2.0. 
There would be no reason for us to----
    Chairman Tauzin. Well, clearly, they made a mistake, but 
our investigators said it was within your power to correct the 
FDA mistake in August 11, 2000. Why wouldn't you, for the sake 
of getting this drug approved more quickly and correctly, have 
corrected the FDA's mistake on that date?
    Mr. Harlan Waksal. We would have absolutely corrected the 
mistake had we known about it. The first I have heard about 
this issue of Version 1.0/Version 2.0, sir, is here.
    Chairman Tauzin. We were also told, however, by the FDA 
official who overruled the local review, that they believe they 
were misled by ImClone about the claim that a human clinical 
trial showed no single agent activity. Do you deny that?
    Mr. Harlan Waksal. Yes, absolutely deny that. We were very 
clear with the FDA that the best way to use this drug, based on 
the information we had in animal studies and even in the single 
human study that we had engaged in, did not show major single 
agent activity, that it is primarily a cytostatic drug. The 
only study that was performed in humans was the study we did in 
renal cell cancer, and we articulated those results, albeit in 
a different tumor type.
    Chairman Tauzin. I am looking at the protocols----
    Mr. Harlan Waksal. Yes, sir.
    Chairman Tauzin. [continuing] that are in dispute here. And 
staff is pointing out to me, and I am trying--I am getting this 
correctly, that the protocol, the original version, says that 
following two courses of Irinotecan, patients' tumors were 
measured and based on the results. Was there a change in that 
protocol?
    Mr. Harlan Waksal. Yes. Medical practice doesn't allow 
doctors to continue patients on a drug if they have new lesions 
or progression. So the doctors, in conjunction with the 
company, made a modification to the protocol to allow patients 
who were failing the drug to be on the protocol in combination 
with 225, or Erbitux.
    Chairman Tauzin. Well, I am looking at the minutes of the 
meetings with the FDA.
    Mr. Harlan Waksal. Yes.
    Chairman Tauzin. A meeting on August 11. And they are 
saying that in fact this is the original version and that it 
was changed later and that that is what they relied upon in 
literally making the decision to overrule the medical reviewer 
and to approve this protocol. Do you deny that?
    Mr. Harlan Waksal. I am not aware of any of that. I am 
aware of the fact that both protocols have been submitted to 
the FDA, and I felt that both protocols----
    Chairman Tauzin. We were told that you saw these minutes, 
did you not?
    Mr. Harlan Waksal. The minutes to----
    Chairman Tauzin. To the meeting.
    Mr. Harlan Waksal. Yes, I have seen the minutes to the 
meeting. I would like to see them again. I am not quite sure 
which part you are referring to.
    Chairman Tauzin. Well, we will come back to it. We will get 
you copies and I will ask the chairman to give me a unanimous 
consent to come back to it in a minute. I want you to see it as 
we discuss it.
    Mr. Harlan Waksal. I would appreciate it, Congressman 
Tauzin.
    Mr. Greenwood. The Chair thanks the gentleman. The Chair 
recognizes the gentlelady from Colorado for 5 minutes.
    Ms. DeGette. Thank you, Mr. Chairman. Dr. Waksal, it is 
your view that the problem with this Erbitux application is 
irregular paperwork, right, in essence?
    Mr. Harlan Waksal. Well, that is one of the major problems, 
and I think----
    Ms. DeGette. Well, what are the other major problems?
    Mr. Harlan Waksal. I think it was pointed out very 
carefully, when you have a problem in documentation, it affects 
the entire study.
    Ms. DeGette. So, in essence, it is documentation, right? 
Yes or no.
    Mr. Harlan Waksal. Yes.
    Ms. DeGette. Okay.
    Mr. Harlan Waksal. But there are other issues as well.
    Ms. DeGette. Okay. What are the other issues----
    Mr. Harlan Waksal. Well, the----
    Ms. DeGette. [continuing] unrelated to documentation?
    Mr. Harlan Waksal. The other issues that need to be 
resolved are the protocol violations that took place as well.
    Ms. DeGette. And those are serious problems too, right?
    Mr. Harlan Waksal. Every clinical study has protocol 
violations--every study.
    Ms. DeGette. Right.
    Mr. Harlan Waksal. The real question is whether the 
protocol violations affect the integrity of the trial.
    Ms. DeGette. Okay. Sir, I apologize, they only give me 5 
minutes.
    Mr. Harlan Waksal. I understand.
    Ms. DeGette. And so with respect to the documentation, now 
have you--you have had 6 months since you heard about this, 
roughly.
    Mr. Harlan Waksal. That is correct.
    Ms. DeGette. Have you fixed the documentation problems?
    Mr. Harlan Waksal. What we have done--we can't just fix the 
problems, we have to fix the problems the right way.
    Ms. DeGette. Okay. So the answer would be no.
    Mr. Harlan Waksal. No, that is not----
    Ms. DeGette. In 6 months you have not.
    Mr. Harlan Waksal. [continuing] really the answer. The 
answer is what we have done is we have gone down the process 
and started discussions with the FDA to make sure----
    Ms. DeGette. The answer is--Okay. I am sorry, I only have 5 
minutes. The answer is you have not fixed the documentation 
problems. Your view is you are working on it, right?
    Mr. Harlan Waksal. That is right.
    Ms. DeGette. When do you think they will be fixed?
    Mr. Harlan Waksal. I can't give you that answer.
    Ms. DeGette. Okay. Now, the other problem, that is a harder 
problem just to fix than documentation; is that right?
    Mr. Harlan Waksal. Which one is that?
    Ms. DeGette. The problem of the irregularities, the 
protocol violations.
    Mr. Harlan Waksal. No. We believe that the vast majority of 
these, the vast majority don't affect the ability to evaluate 
this study and program.
    Ms. DeGette. So how are you working to fix that problem?
    Mr. Harlan Waksal. The same way. We are going through, 
making sure we can identify which of these violations have any 
impact on the ability to interpret the data and we are doing it 
patient-by-patient, making sure that can indeed, at the end of 
the day, have an intact trial.
    Ms. DeGette. When do you expect to have all of that data to 
the FDA?
    Mr. Harlan Waksal. Well, what we are doing is that is an 
analysis plan.
    Ms. DeGette. So you don't have a firm time when you expect 
to have that.
    Mr. Harlan Waksal. Until we have guidance from the FDA, we 
cannot give you a time on that.
    Ms. DeGette. So it is their fault?
    Mr. Harlan Waksal. No, it is not.
    Ms. DeGette. Okay.
    Mr. Harlan Waksal. It is something that is being done in 
conjunction with them.
    Ms. DeGette. All right.
    Mr. Harlan Waksal. It is not something we can do alone.
    Ms. DeGette. Okay. I mean I hope--I frankly hope Erbitux 
works too. There are not very many drugs for colorectal cancer.
    Mr. Harlan Waksal. I completely agree with you.
    Ms. DeGette. And I understand that. But here is the thing: 
The reason Congress approved this Fast Track procedure is so 
that we could get drugs that we think that would work in very 
serious patients.
    Mr. Harlan Waksal. That is right.
    Ms. DeGette. And if we don't have any protocols at all or 
if we have very bad protocols, for all we know people may be 
applying for laying out a hand, and I don't think that is any 
of our goals here.
    Let me talk to you, Dr. Smaldone, for a minute. Now, you 
say that the reason to have Erbitux approved is to get these 
patients who know they are dying more time, more time with 
their families, more time to get their affairs in order, right?
    Ms. Smaldone. That is correct.
    Ms. DeGette. But are you aware that neither the 9923 or the 
0141, the smaller trial, have measured life extension but 
rather they have measured tumor shrinkage?
    Ms. Smaldone. I am very well aware of that.
    Ms. DeGette. So in fact we don't know whether or not life 
extension is one of the benefits of this drug at this point, do 
we?
    Ms. Smaldone. That is absolutely correct. That is----
    Ms. DeGette. Thank you. Now, I was really touched by the 
patient that you talked about, and this is all about the 
patients, Michael Ann Mullinix. I am glad that her cancer seems 
to be gone. But I think we should be clear, as far as we know, 
she is the only patient who has had this result from this drug. 
Wouldn't that be fair to say?
    Ms. Smaldone. That is not the way I would put it.
    Ms. DeGette. You know other patients who have had this same 
result?
    Ms. Smaldone. I would like to go back to our own analysis 
of--a reanalysis of 9923 that we conducted during the due 
diligence, which was done with yet another independent review 
group outside radiologists evaluating the scans. And----
    Ms. DeGette. And they say that other patients have been 
cured aside from this one patient?
    Ms. Smaldone. There are other patients who have responded. 
And at the worst case of that particular----
    Ms. DeGette. But none of them have had the cancer go away. 
They have had the tumor shrink, right?
    Ms. Smaldone. We cannot comment on cure at this point in 
time; it is way too early. These are response rates, which----
    Ms. DeGette. And that is even true with Michael Ann 
Mullinix, isn't it?
    Ms. Smaldone. At this point in time, that is true, it is a 
response.
    Ms. DeGette. Thank you. Okay. I have a couple of other 
questions. Now----
    Mr. Greenwood. The Chair will be lenient with the time.
    Ms. DeGette. Oh, I am sorry.
    Mr. Greenwood. The Chair also would note that we are going 
to two rounds with this panel.
    Ms. DeGette. Thank you. Thank you, Mr. Chairman.
    Mr. Greenwood. The Chair recognizes the gentleman from 
Kentucky, Mr. Fletcher, for 5 minutes.
    Mr. Fletcher. Thank you, Mr. Chairman. Let me first ask Dr. 
Waksal some questions. You started when the initial protocol or 
the initial treatment protocols were enacted at some of the 
cancer centers, you mentioned Sloan-Kettering as one, a very 
well-respected cancer center, started reporting back that the 
results seemed very positive. Is that--how is that documented? 
Is that just kind of what we used to call hallway discussions, 
when you are on rounds and things are going very well?
    Mr. Harlan Waksal. Very much so. We were getting case 
reports--we were getting information back that was written, 
data was starting to come in, a lot of it was discussions with 
the doctors at these various institutions around the country. 
There were about 20-some different centers who were using the 
drug in this trial. A lot of it I think you could characterize 
it as hallway type of, anecdotal type of discussions, sir.
    Mr. Fletcher. Do you have documentation of that from 
reputable oncologists that participate in these protocols that 
from their experience say that, yes, in fact this drug seems to 
be effective, people who have had experience in a number of 
protocols and wouldn't say that without adequate experience?
    Mr. Harlan Waksal. I think every one of the physicians who 
were involved in our trial, every one of them, are very 
reputable, and----
    Mr. Fletcher. Do you have documentation, written 
documentation, memos, et cetera, coming from those in the early 
parts of these trials?
    Mr. Harlan Waksal. We have better than that. We have their 
case report forms. We actually have the documentation of the 
effects it was having in their patients, the fact that they 
were seeing shrinkage. And that is documentation that forms the 
basis for what we did.
    Mr. Fletcher. So these are early reports that are made 
throughout the protocol of the effectiveness.
    Mr. Harlan Waksal. Exactly. That is right.
    Mr. Fletcher. Let me go on. There appears substantial 
failures, or Dr. Weiss mentioned 20-some percent of those that 
were enrolled should have been ineligible, at least that was 
the number that I recall him giving. Now, apparently, you 
acknowledged there was some failure in following the 
eligibility criteria. Is that correct or not?
    Mr. Harlan Waksal. Yes, I do, sir.
    Mr. Fletcher. And you have said that that happens or at 
least problems happen in all or most protocols.
    Mr. Harlan Waksal. Yes. And if I could elaborate, I will 
give an example. The major protocol deviation that took place 
was for patients who had an abnormal liver test that was done, 
and doctors will also use their judgment to decide if an 
abnormal liver test put the patient at any increased risk. The 
doctors would go ahead and put patients on this trial in spite 
of that, and in fact it was their decision that it wasn't a 
risk to these individuals.
    Mr. Fletcher. So these very well-respected clinicians would 
enter someone in the trial that was not eligible because of 
elevated liver function test which was part of the protocol. I 
mean they had to have normal liver function tests, I assume.
    Mr. Harlan Waksal. Yes.
    Mr. Fletcher. Do you think that was because of the optimism 
that they saw in the response in patients that were looking for 
some sort of treatment? Why would that occur if they knew that 
it may possibly prevent this from being approved through the 
FDA?
    Mr. Harlan Waksal. I don't think that was part of their 
consideration. It was their clinical judgment that these 
patients were not being put at any type of risk by enrolling 
them in the study, and----
    Mr. Fletcher. But aren't they under sort of obligation to 
follow the protocol? Isn't it not approved for those patients 
to be on this under the FDA guidelines of this protocol if they 
do not meet the criteria?
    Mr. Harlan Waksal. There is no question. These doctors 
don't have the protocol in their hands as they go ahead and 
make the decisions at times.
    Mr. Fletcher. Is that normal that physicians are not fully 
familiar with the protocol when they are using it?
    Mr. Harlan Waksal. They are familiar with the protocol, 
but, as I said, mistakes happen in every study regardless of 
what that study is.
    Mr. Fletcher. I am just trying to get to the basis of why 
there seemed to be an excessive amount of failure in meeting 
the protocol in this study compared to other studies. Any 
answer to that?
    Mr. Harlan Waksal. I can. I think that the most important 
issue with this trial is that it was never initiated as a 
registration study, it was a Phase II study.
    Mr. Fletcher. Well, the Phase II, but also the Fast Track 
aspect, do you think that influenced it?
    Mr. Harlan Waksal. No. It actually--it wasn't planned for 
Fast Track until after we had the data. It was really the fact 
that we had such robust responses in patients that led us to go 
ahead and move this drug forward. So it was the positive data 
that indeed stimulated our desire to move this forward.
    Mr. Fletcher. Thank you, Dr. Waksal. Let me ask Dr. 
Smaldone a question. Given the fact that your company obviously 
being one of the leading providers for oncology therapies has 
been through the FDA process multiple times, you have a 
tremendous--much greater experience than ImClone has, in your 
experience, in looking over what happened here, do you think 
this is an FDA failure or is it a failure on ImClone's part to 
not follow the protocol and not adequately communicate with FDA 
what they are doing?
    Ms. Smaldone. I can't answer that directly, but I would 
like to provide you my perspective that hopefully can give 
you----
    Mr. Fletcher. If you can do that briefly, we would 
appreciate it.
    Ms. Smaldone. I will try to give you some perspective here. 
I think as we came into this picture, what we saw before us was 
a product that had a substantial pre-clinical profile that was 
very exciting, very strong potential for what it may be able to 
do in terms of inhibiting this particular receptor. There was 
data that was conducted by reputable oncologists, already 
presented to ASCO, which is a premier Scientific Congress for 
Oncology, that validated our understanding of the data. ImClone 
Systems was in very advanced discussions with the FDA, was 
already in Fast Track, already with a rolling BLA submission 
process underway, and the BLA responsibilities, the 
responsibility of ImClone.
    And as we went through all of this, as well as very 
extensive due diligence, from our perspective, what we saw was 
a promising anti-tumor agent, there were issues, in fact issues 
that you have before you that were raised that were both 
scientific and regulatory issues. But from our perspective, in 
conversations with ImClone, it seemed that these were issues 
that were under discussion with the FDA and that people seemed 
to be at least aware of them.
    Mr. Fletcher. So let me say, given this perspective--and my 
time has expired, so let me just finish with this--is this an 
FDA Fast Track procedural problem or is this an ImClone 
problem?
    Ms. Smaldone. I believe that what we saw was an FDA Fast 
Track that appeared to, in a sense, that was a validator that 
the protocol and the data that was coming forward was 
appropriate, because we didn't have any reason to believe 
otherwise. We were not in direct contact with the FDA. 
Everything was happening through ImClone Systems.
    Mr. Fletcher. A company doesn't invest that much money 
without probably substantial oversight with the experience you 
have. Back to it, FDA problem, ImClone or both? What do you 
think?
    Ms. Smaldone. I really can't comment specifically.
    Mr. Fletcher. Okay. Thank you. My time has expired.
    Mr. Greenwood. The Chair thanks the gentleman. The Chair 
recognizes the gentleman from Florida for 5 minutes. And before 
doing so would inform the committee that after Mr. Stearns' 
inquiry we will then recess for the series of votes until 2:30.
    Mr. Stearns. Thank you, Mr. Chairman. Dr. Waksal, you had 
indicated when the chairman was talking to you that if the 
information was not public, you didn't think it was material. I 
think that is what you said or did you not, sir?
    Mr. Harlan Waksal. No, I did not say that. I said that----
    Mr. Stearns. Do you remember what you said?
    Mr. Harlan Waksal. Yes. We didn't have material or public 
information at the time. There was not material information to 
disclose to the public, sir.
    Mr. Stearns. Okay. And so when Dr. Lee, at least we 
understand that Dr. Lee heard from the FDA about the 
possibility of this refusal-to-file letter. You are saying you 
did not know from her whether this was fact or not or she told 
you and you knew?
    Mr. Harlan Waksal. The conversation is similar to someone 
driving down the street and coming to a stop light.
    Mr. Stearns. Okay.
    Mr. Harlan Waksal. Red, yellow or green.
    Mr. Stearns. Right.
    Mr. Harlan Waksal. And it was not a conjecture of what----
    Mr. Stearns. No, I understand. But you had the impression 
that there could be a refusal-to-file letter from the FDA after 
talking to Dr. Lee on December 4; is that possible?
    Mr. Harlan Waksal. No, I did not.
    Mr. Stearns. Okay. Did you have any inkling at all?
    Mr. Harlan Waksal. No, I did not have any inkling until 
after December 12, sir.
    Mr. Stearns. Okay. Dr. Smaldone, you have indicated that 
this drug has great possibilities, and you have indicated a 
women has taken it and has been successful. That was your 
testimony.
    Ms. Smaldone. Thus far, yes.
    Mr. Stearns. Thus far.
    Ms. Smaldone. Yes.
    Mr. Stearns. So your company, the impression of you and the 
executives of Bristol-Myers is that this drug someday will be 
available and will be effective; is that true?
    Ms. Smaldone. That is correct. The assessment of our 
company was, and continues to be to this day, that this drug 
has promise and has activity as an anti-tumor agent. And in 
fact we have a number of dedicated personnel, probably over 50 
people, that continue to work on it across the company.
    Mr. Stearns. I understand. Did you see the ``60 Minutes'' 
CBS story about it?
    Ms. Smaldone. I did not.
    Mr. Stearns. Did you read the Business Week story about it?
    Ms. Smaldone. I did not.
    Mr. Stearns. Okay. Mr. Markison, did you see the ``60 
Minutes'' story?
    Mr. Markison. No, sir; I did not.
    Mr. Stearns. Okay. And Dr. Waksal, did you see the ``60 
Minutes'' story?
    Mr. Harlan Waksal. Yes. It was a story we did not 
participate in, sir.
    Mr. Stearns. Did you think it was hyped or was it accurate?
    Mr. Harlan Waksal. The story was about compassionate use of 
the drug, and it highlighted two families, one that received it 
and one that did not.
    Mr. Stearns. Well, the claims that the story indicated by 
inference, did you think they were exaggerated or were they 
accurate?
    Mr. Harlan Waksal. You would have to remind me about 
specifics. I looked at the story as a very negative one for the 
company, sir.
    Mr. Stearns. You did.
    Mr. Harlan Waksal. Yes, sir.
    Mr. Stearns. Okay. In 1999 and the year 2000, during 
ImClone's annual shareholders meeting, they were asked to 
approve the right for yourself and your brother Sam to acquire 
millions of stock options to exercise at certain prices to 
acquire ImClone common stock in the future; is that correct?
    Mr. Harlan Waksal. That is correct.
    Mr. Stearns. And why was that done?
    Mr. Harlan Waksal. We had been building the company, 
invested--well, I can speak for myself, I have invested 18 
years of my life in building this company from the ground up, 
and I believe the stock options are reflective of the effort 
and the time and the hard work that I have done over this 
course of time.
    Mr. Stearns. And how much total did you have in stock 
options at that point, approximately, just approximately?
    Mr. Harlan Waksal. I can tell you where I ended up at the 
end of the day, just so you know.
    Mr. Stearns. Okay.
    Mr. Harlan Waksal. In terms of stock option, 2 million 
shares as of 2001, and warrants of 500,000.
    Mr. Stearns. Okay. And at the height of the market, so they 
would be worth, what, $100 million?
    Mr. Harlan Waksal. They would be worth at the height of the 
market? That didn't include my shares as well. I had a total of 
3.6 million shares.
    Mr. Stearns. Okay.
    Mr. Harlan Waksal. So at the height of the market, $210 
million.
    Mr. Stearns. $210 million.
    Mr. Harlan Waksal. That is correct.
    Mr. Stearns. Okay. On December 6, it shows you disposed of 
700,000 shares, valued at roughly $75 for $50 million.
    Mr. Harlan Waksal. That is partly correct. I didn't dispose 
of them. I did not sell shares. What I did I entered into a 
pre-pay which allowed me voting rights on those shares and the 
upside potential of those shares, and it was part of a plan 
that I had had for months and months to go ahead and not only 
diversify but pay the taxes I owed on stock options that I had 
gone ahead and purchased as well as a result of the Bristol 
transaction.
    Mr. Stearns. Did you execute the trade so that you actually 
received $50 million?
    Mr. Harlan Waksal. Actually, $44 million.
    Mr. Stearns. $44 million. Okay. Did the company loan you 
money to do this?
    Mr. Harlan Waksal. No, it did not.
    Mr. Stearns. Okay. So you just based it then on a 
transaction put or call so that you wouldn't have to have a 
loan then or you had the money?
    Mr. Harlan Waksal. No. That was--I believe you are mixing 
up a couple transactions.
    Mr. Stearns. I probably am.
    Mr. Harlan Waksal. Yes. And if I could help with this, I 
wouldn't mind, sir.
    Mr. Stearns. Oh, sure. You can help me with this.
    Mr. Harlan Waksal. In July--well, in January of 2001, I 
purchased my warrants, 500,000 shares. Again, a strong vote of 
confidence on my part about the company and where it was going. 
In July of 2001, I purchased a little bit over two million 
shares. It was trading at around $42 a share, and I am sure you 
are aware that when you purchase stock options, you need to pay 
taxes on that.
    Mr. Stearns. Oh, yes.
    Mr. Harlan Waksal. And it was for those shares that I 
received a loan from the company at prime interest plus 1 
percent. Subsequently, I also engaged in the Bristol-Myers 
tender offer that took place and sold stock into that, and that 
paid for the loan I had taken from the company, the stock I 
had--the taxes on the stock I had purchased, the stock options. 
And, subsequently, I had another tax that I needed to pay on 
the monies that I had gained from Bristol Myers, since I didn't 
have any cash other than what was going to pay for the stock 
and go to taxes, sir.
    Mr. Stearns. Okay. I will just conclude because my time is 
up and we have to vote.
    Mr. Harlan Waksal. No problem.
    Mr. Stearns. I mean it seems to me you are intimately aware 
of the money that you are going on your stock options and how 
you are going to buy it. Yet the 9923 protocol that your 
company prepared and when we asked Dr. Weiss earlier about it, 
he said there were three serious problems with this: Patient 
eligibility criteria was not strictly defined, he talked about 
changing the dose and administration frequency, and he also 
said that the whole thing was such that you get so many vague 
answers. And we have a prominent oncologist who said that the 
overall protocol that was asked, that was created by your 
company, was not tightly written and efficient. The protocol 
generated far more questions than could be answered. It was 
just a production for vague answers. Yet it seems like you 
understood intimately all this about your own money, but the 
actual protocol that your company developed seemed to be vague 
and prominent oncologists say that it wasn't a good criteria. 
And then the FDA asked you to come back because the clinical 
procedures, you didn't even complete the application, and you 
admit in your opening statement that the application had flaws 
to it.
    So I am just a little puzzled why you seem to be so 
knowledgeable on everything about your warrants and about your 
own money, yet when it comes to actually applying to the FDA 
for the proper clinical procedures, you didn't get the full 
information in. And in developing the 9923 protocol, you missed 
out in terms of the criteria. Does that make sense?
    Mr. Harlan Waksal. Well, I think your confluence of 
information is----
    Mr. Stearns. Interesting interpretation.
    Mr. Harlan Waksal. [continuing] a little questionable. I 
don't really see the point that we were not paying attention. 
We were indeed. It happens to be that I differ on some of the 
opinions you have raised about----
    Mr. Stearns. You would agree you were paying attention with 
your own money, though.
    Mr. Harlan Waksal. Well, I was paying attention to the 
company.
    Mr. Stearns. Your warrants and all your options, yes. Thank 
you, Mr. Chairman.
    Mr. Greenwood. The time of the gentleman has expired. The 
Chair would note that there is 1 minute and 14 seconds before 
this vote closes. The committee will recess until 2:30 with 
apologies to the witnesses.
    [Brief recess.]
    Mr. Greenwood. The Subcommittee will come to order. The 
Chair thanks the witnesses for their forbearance. We do not 
expect any more interruptions today. And the Chair recognizes 
the chairman of the full committee, Mr. Tauzin, for inquiry.
    Chairman Tauzin. I thank you, Mr. Chairman. I believe we 
have copies now, Dr. Waksal, of the documents that I was 
referring to. Do you have those copies?
    Mr. Harlan Waksal. Yes, I do.
    Chairman Tauzin. Let me make sure that you have them now, 
and will the staff make sure that he has them. What I would 
like to have you have in your possession is the copy of the 
minutes that you have indicated that you had reviewed, and a 
copy of the January 12 letter from the Department of Health and 
Human Services to ImClone approving the fast track designation.
    Staff, would you make sure that those copies are available 
to the witness. While we are doing that, let me ask you a 
couple of questions and then we will get you those copies. Do 
you know whose handwriting these notes are in? Could you help 
me with that?
    Mr. Harlan Waksal. Yes, I do. They are notes taken by my 
chief financial officer, Dan Lunch.
    Chairman Tauzin. Okay. So all three of these pages are 
taken by him?
    Mr. Harlan Waksal. I believe so, sir.
    Chairman Tauzin. And I see a snake at the bottom of page 
three I take it?
    Mr. Harlan Waksal. Excuse me?
    Chairman Tauzin. There is a snake on the bottom of page 
three, I thought. I thought it would be a pretty identifiable 
little scribble, and it is his work; is that correct?
    Mr. Harlan Waksal. I don't know about his art work, sir.
    Chairman Tauzin. But it is his handwriting?
    Mr. Harlan Waksal. But it is his handwriting.
    Chairman Tauzin. It is his notes?
    Mr. Harlan Waksal. Yes.
    Chairman Tauzin. Thank you.
    Mr. Harlan Waksal. And by the way, for the record, happy 
birthday.
    Chairman Tauzin. Thank you, sir.
    Mr. Harlan Waksal. You are welcome.
    Chairman Tauzin. And while we are doing the handouts to 
you, you said that on the 26th that you began calling the team, 
the offices of the team, to let them know that you have 
received this information that a refusal to file letter was 
coming?
    Mr. Harlan Waksal. We had a working group from Bristol-
Myers and ImClone, which was a routine call that we were having 
at the time.
    Chairman Tauzin. Right. Did you ever get to talk to your 
brother?
    Mr. Harlan Waksal. I don't remember when, but I believe on 
the 27th I did. I'm sure that at some point that I did, but I 
don't recall any specific call.
    Chairman Tauzin. Did you similarly call family members and 
advise them as well?
    Mr. Harlan Waksal. Absolutely not. I did not call any 
family members or friends.
    Chairman Tauzin. Can you give us any explanation why so 
many family members sold stock on the 27th?
    Mr. Harlan Waksal. I can't give any insight into that, sir.
    Chairman Tauzin. All right. Let's look at the documents now 
if you don't mind. The documents that I referred to are, first 
of all, the minutes. And if you look at page two of the 
minutes, which I understand are exchanged after these meetings 
so that both sides approve the minutes, and confirm that this 
is what really occurred at the meeting. Is that correct?
    Mr. Harlan Waksal. We do exchange minutes.
    Chairman Tauzin. Right. And if you look at page two, you 
will see that this is a phase two open label study following--
it says following two courses of irinotecan, patients tumors 
are measured, et cetera. Is that correct?
    Mr. Harlan Waksal. I'm sorry, but I not with you quite yet. 
But, yes, I see it. On page three?
    Chairman Tauzin. I think page two.
    Mr. Harlan Waksal. Page two? One second.
    Chairman Tauzin. Page two, the middle of the page.
    Mr. Harlan Waksal. Yes, I see it.
    Chairman Tauzin. This defines a protocol, and this 
literally is the criteria of protocol; is that correct?
    Mr. Harlan Waksal. Well, it actually--it should. What we 
discussed in the August meeting in the slide presentation that 
was given to the FDA, and also that has been shared with this 
committee as well, is very clear.
    It speaks to protocol, the second protocol, and the 
amendment that was taking place, and the enrollment criteria 
within that, and I shared that with committee members.
    Chairman Tauzin. But I want you to look at the letter of 
January 12, 2001 that we also gave you.
    Mr. Harlan Waksal. Yes.
    Chairman Tauzin. And in the second paragraph, it clearly 
refers to the fact that the fast track development program is 
being designated, and where refractory is defined as 
progressive disease during at least two cycles of standard 
doses of these chemotherapy drugs. Is that correct?
    Mr. Harlan Waksal. It says where refractory is defined as 
progression of disease during at least two cycles of standard 
doses of 5-fu irinotecan.
    Chairman Tauzin. Right. And read the next sentence for us 
if you don't mind.
    Mr. Harlan Waksal. ``Please note that if the clinical 
development program you pursue does not continue to meet the 
criteria for fast track designation, the application will not 
be reviewed under the fast track program.''
    Chairman Tauzin. Wasn't this a very clear statement from 
the FDA that if you deviated from the two cycle requirements of 
the criteria that you would not be reviewed on the fast track?
    Mr. Harlan Waksal. Well, it clearly shows some confusion. 
However, I----
    Chairman Tauzin. Well, what is confusing about that? I 
mean, here the FDA is saying very clearly that they are 
designating you on the fast track, where in fact these two 
cycles of standard doses apply, and this is the criteria.
    And it says in the next sentence, ``please note that if the 
clinical development program that you pursue does not continue 
to meet the criteria for fast track designation,'' that the 
application will not be reviewed. How confusing is that?
    Mr. Harlan Waksal. In March of 2000, we submitted version 
two, and was stamped in and received by the agency. In August 
of 2000, we reviewed with them specifically the only content 
that was specific to the protocols was version two.
    And I recognize this, and I must say I didn't spend a lot 
of time reviewing this in this kind of detail. However, in the 
patients who were treated, the average number of cycles of 
treatment that these patients received wasn't two, but four 
cycles of treatment.
    Chairman Tauzin. Well, that may be an average, but the 
bottom line is that the FDA was clearly telling you that this 
is the basis upon which you are being approved. We are not 
going to continue you on the fast track if you deviate from it, 
and yet changes were made that you could have alerted the 
agency about, or you could have discussed with the agency.
    You could have informed the agency that they were working 
on the wrong protocol, and you could have corrected this 
misconception by the agency. And I am not being mean. I am just 
trying to understand.
    If you really wanted to get the drug approved, and you were 
being told this is what we believe we are approving you on, and 
this is the criteria that you have got to follow under what we 
believe we are approving you under for fast track.
    And you know that is not really what you are working on. 
You are working on some other iteration of it. Why didn't you 
inform the agency that they had approved you under a 
misconception?
    Mr. Harlan Waksal. Well, one, we always informed the agency 
what we were doing well before our August meeting, and during 
that August meeting, the only discussions presented by the 
company was version two. I think we were very clear throughout 
the time that we worked with them.
    Chairman Tauzin. But the minutes reflect something very 
different, and these are minutes that you reviewed and 
exchanged with the agency. The letter reflects something very 
different.
    And the letter is a document we can look at, and not a 
conversation that was not recorded. What I am looking at in 
documents is very clear evidence that the agency was approving 
you on the fast track under the misconception that the protocol 
was based upon this criteria when you knew that it wasn't.
    And I am not throwing and heaping blame on you. I am just 
wondering why if this approval process was so important to you 
as I know it is.
    Mr. Harlan Waksal. Absolutely.
    Chairman Tauzin. If it was so important to these cancer 
victims as you knew it was, and we know it is, why would you 
not at some point say to the agency that you have approved us 
under a misconception?
    Mr. Harlan Waksal. I believe I said right at the beginning 
when we started the questioning on this issue that at no time 
did I even have an understanding of the version one and version 
two until it was raised at this meeting. I was always under the 
assumption----
    Chairman Tauzin. But you did review these minutes?
    Mr. Harlan Waksal. Well, the company reviewed the minutes, 
and I am ultimately responsible for making sure that is done, 
yes, sir.
    Chairman Tauzin. But you are telling us that you personally 
did not know what I have shown you today until today?
    Mr. Harlan Waksal. I am telling you that, one, I didn't 
really look at that issue until today, but more importantly, I 
am still not certain that it really is an issue. That these 
patients were treated by their doctors using what is the 
standard of care.
    And if a patient fails a cycle of treatment, a single cycle 
of treatment, with tumor enlargement or new tumors, it is 
unethical to continue to treat them with a second cycle of 
irinotecan. That's why we made the modification. It wasn't to 
move away from the standard of care, sir.
    Chairman Tauzin. I am not saying that you were wrong to 
make a modification. I am not saying that may not have been the 
right thing to do. But having made the modification, according 
to the letter, you would not have been entitled to the fast 
track approval process. That's the point that I am making.
    And yet having made the modification, and knowing that the 
agency was operating under this misconception, that you were 
going to require a criteria based upon two cycles of standard 
doses, you never said to them, hey, you have approved us on the 
basis of a wrong protocol, and I don't understand why you would 
not have done that.
    Mr. Harlan Waksal. Well, again----
    Chairman Tauzin. You did review the letter did you not, Dr. 
Waksal?
    Mr. Harlan Waksal. I have. I have reviewed the letter 
today.
    Chairman Tauzin. I mean, did you review it when you 
received it?
    Mr. Harlan Waksal. I clearly would have read this letter 
when I received it.
    Chairman Tauzin. I would have thought that you would have, 
too. And it very clearly says that if the development program 
that you have pursued does not continue to meet this criteria, 
which you just described in the paragraph above, the 
application will not be reviewed under the fast track program. 
I don't know how that could be any clearer.
    Mr. Harlan Waksal. Well, there was no deception on our part 
on what we were doing. We were very clear with the agency, and 
I believe if the agency will be given the opportunity to 
respond, maybe they could clarify whether or not this was a 
relevant issue.
    I don't believe that this was a major problem as we move 
this forward.
    Chairman Tauzin. Well, apparently this becomes the major 
reason why the letter is--a refusal arrives. I mean, the agency 
finally recognizes that it was pursuing a course of approval 
here based upon a misconception.
    Mr. Harlan Waksal. I am not aware of that, sir.
    Chairman Tauzin. I am being corrected. I am told that they 
didn't realize that either until we pointed it out to them, 
which is really perhaps even more damning. Let me----
    Mr. Harlan Waksal. I don't believe that was an issue that 
the agency or the company focused on as being important.
    Chairman Tauzin. But that is amazing to me. It really is.
    Mr. Harlan Waksal. Well, I think it is because it really 
was not an issue that spoke to the heart of whether or not this 
drug was working or not. I don't believe that that is a 
critical component.
    Chairman Tauzin. Well, all we know is what the documents 
tell us, and what is concerning to us is that when an agency--
our problem is looking at this process to see whether it works 
well, and whether it fails or not.
    Mr. Harlan Waksal. Yes, sir.
    Chairman Tauzin. And we are seeing a process whereby the 
agency approves you for this fast track, which is a special 
procedure, based upon a criteria clearly defined.
    It gets changed, and the investigators for our committee, 
and in interviewing the senior FDA official, believes that in 
fact that they made their decisions based upon the wrong 
version of the protocol, and they also state, which you have 
denied under oath, that ImClone mislead them about the claim of 
single agent activity.
    So we have got a situation where we are going to have to 
find where the truth lies in between those two statements.
    Mr. Harlan Waksal. There is no question that at no time did 
we mislead the FDA regarding what we were doing, and again I 
want to emphasize that the fact that the FDA didn't emphasize 
this issue, even at the refusal to file time, and the fact that 
I didn't recognize it until today, this does not seem to be a 
major issue regarding why we received the refusal to file.
    Chairman Tauzin. Well, they seem to think it was a major 
issue when it was pointed out to them finally.
    Mr. Harlan Waksal. That's very possible.
    Chairman Tauzin. I want to take you to statements that your 
brother, Sam, made when he was chief executive officer on the 
29th, as reported by Reuters. Do you have a copy of that, too?
    Mr. Harlan Waksal. I do not.
    Chairman Tauzin. I am going to read it to you, and we will 
make a copy available to you as I read it to you.
    Mr. Harlan Waksal. I believe I have a copy now.
    Chairman Tauzin. All right. It says that Sam Waksal, 
ImClone's chief executive officer, told Reuters that the agency 
first wants more annotation information about how the company 
verified that patients enrolled in these trials had indeed 
failed, et cetera.
    It says also further down that there is a prediction that 
it would take only--Waksal said that company officials hope to 
meet with the FDA within 10 days to supply necessary 
information to the agency 6 to 10 weeks.
    There were a lot of statements made minimizing the effect 
of this letter apparently of denial, and then we have something 
that I hope the Bristol-Myers witnesses will help me 
understand. We have got a confidential document. Do you have it 
in front of you? It is B019629.
    And let me read it to you. It says, ``Nancy, I agree that 
some, a lot, of Sam's comments are misleading, and at this 
point we should continue to be silent.'' What does that mean, 
and what is Bristol-Myers doing at that point?
    I mean, you are hearing the chief executive officer of the 
company make these comments publicly, and then an e-mail is 
exchanged saying that we agree that some, a lot, of Sam's 
comments are misleading. At this point we should continue to be 
silent.
    What is the meaning of that kind of an e-mail? Mr. 
Markison.
    Mr. Markison. Well, sir, these are the comments of two 
people that are within the company. I am not quite sure they 
represent the entire company. However, we were certainly going 
through a period where we were trying to determine the best 
course of action, and that is where we were at that time.
    Chairman Tauzin. But of course the problem was that you 
were a partner in this operation, and you are aware that the 
chairman of the company is making misleading statements to the 
public in the middle of this crisis, or at least the comments 
were that you were, and that people in your company were saying 
that we should continue to be silent.
    Mr. Markison. Well, sir, these again--and I am sorry to 
point this out, but these are just two folks within the 
company. And again we were struggling with the new information 
received, and attempting to determine for ourselves----
    Chairman Tauzin. Were these two people pretty key people in 
the development of this product?
    Mr. Markison. Absolutely not, sir.
    Chairman Tauzin. They were not?
    Mr. Markison. In the development of this compound, they had 
no relevant roles.
    Chairman Tauzin. No, not in the development of the 
compound, but in the development of or the marketing of it. 
They were part of the team were they not on this particular 
drug?
    Mr. Markison. Both of them were part of the team.
    Chairman Tauzin. And they are saying in an e-mail that Sam 
is making misleading comments. But let's just be silent.
    Mr. Markison. Sir, I can't tell you if they are talking to 
themselves. I am not a party to this. This is the first time 
that I have seen it. I am acknowledging clearly that Bristol-
Meyers Squibb was trying to assess for themselves the exact 
extent of what needed to be done as we go forward, and that's 
clearly where we were.
    Chairman Tauzin. Well, Mr. Chairman, again, I think part of 
what I hope we will discern, and perhaps as we proceed further 
with the investigation, is how in fact the fast track process 
can be improved. I would hate for this hearing to somehow in 
any way cast dispersions upon what is an incredibly important 
process to make incredibly important drugs more quickly 
available to people once they have been properly tested.
    But at the same time, I suspect that we have some real 
problems with the way that the system works, and when an 
exchange of letters that looks so clear to me at this point can 
be so confusing to the partners involved here, and the parties 
involved here.
    And when approvals can be based upon wrong versions of 
protocols, and at least in the testimony of one FDA official on 
a misleading claim, the bottom line is, and I think you have 
said it, Mr. Waksal, and you apologized for it.
    But we all could have done a better job with your company 
and the FDA in making this process work so that an important 
drug could have been properly processed, and perhaps available 
today to the American public.
    And if we can straighten it out for the future, Mr. 
Chairman, I think we will have learned a lot from this hearing. 
Thank you very much.
    Mr. Greenwood. The Chair thanks the chairman, and 
recognizes the gentleman, Mr. Stupak, from Michigan, for 5 
minutes.
    Mr. Stupak. Thank you, Mr. Chairman. Dr. Smaldone, you 
indicated that you were part of the due diligence review for 
Bristol-Myers Squibb before they agreed to go in with ImClone, 
correct?
    Ms. Smaldone. Yes, I was.
    Mr. Stupak. And in fact you sent an e-mail to your 
colleagues, a Peter Ringrose, and a Beth Seidenberg, concerning 
ImClone. And it states that on a whole, and I am quoting now 
from the e-mail, ``that on a whole this remains a very high 
risk opportunity.'' Is that correct?
    Ms. Smaldone. That is correct. That was in June.
    Mr. Stupak. Right. In June. And then you went on and you 
pointed out certain critical outstanding issues that you cited. 
One--and again I am going to quote them There were three issues 
that you had here. The pivotal CRC colorectal cancer issues, 
single agent activity.
    ``The trial which is ongoing will need to be shared with 
us. We should attend the FDA meeting with ImClone when the data 
is final. There is no agreement that we could find that is 
reassuring regarding the activity level needed for approval.'' 
Is that correct?
    Ms. Smaldone. That is correct.
    Mr. Stupak. Okay. You go on to say that the weak dose 
selection rationale, ``they have developed APK pharmacokinetics 
rationale for dose selection. However, the dose is questionable 
for refractory patients, and the safety margin for the early 
stage patient, has not been determined.
    ``In their phase three first line study, they are 
evaluating the same dose used in refractory disease. This is 
already seen as a problem by the FDA and us.'' Is that correct?
    Ms. Smaldone. That is correct.
    Mr. Stupak. And safety, you indicated again, and quoting, 
``that the safety of the product specifically related to skin 
toxicity, bleeding, allergy, has not been well categorized. 
This reemphasizes the weaknesses of the dose selection 
argument.'' Is that correct?
    Ms. Smaldone. Yes, that is correct.
    Mr. Stupak. And then you went on to your executive, and you 
point out the risk of the results of the single study agent, 
and again let me quote you. That ``the FDA has requested that 
the data be provided on the anti-tumor activity of C-25 as a 
single agent. Pre-clinical data has thus far been provided to 
FDA to address this issue.
    ``But they have persisted in their interests that clinical 
data be provided. No accelerated approval has ever been granted 
for an oncology drug for use in a combination therapy.'' Is 
that correct?
    Ms. Smaldone. This is coming from the same memo? I'm sorry.
    Mr. Stupak. This is coming from the memo, yes, and the 
concerns about the single agent study and 9923 study were not 
completely resolved before you entered in your agreement. In 
fact, we have a copy of it if you would like to see it.
    Ms. Smaldone. If I may, please. Thank you.
    Mr. Stupak. Sure. Can we provide that to the witness. Here, 
give her this one right here, Alan.
    Ms. Smaldone. Thank you very much. Yes.
    Mr. Stupak. Okay. So no accelerated approval, and that is 
what you are going for here before you enter into this 
agreement, and this is June of 2000.
    No accelerated approval has ever been granted for an 
oncology drug for use in a combination therapy. Is that 
correct? And that's really what ImClone was asking to do?
    Ms. Smaldone. Right.
    Mr. Stupak. And whether we agree if it was protocol one or 
protocol two here you had to have, this approval fast track was 
based upon the combination therapy; is that correct?
    Ms. Smaldone. That is correct.
    Mr. Stupak. Even after the rejection though. So there 
should be no question here that we have to have a combination 
therapy and there is some weaknesses here.
    Bristol-Myers Squibb reviewed ImClone's application again 
after it was rejected in January of 2002, correct?
    Ms. Smaldone. In January of 2002, this was after the 
refusal to file letter, went through a full assessment again, 
yes.
    Mr. Stupak. Correct. Were you a part of that review?
    Ms. Smaldone. Certainly my team was, yes.
    Mr. Stupak. So you are familiar with it?
    Ms. Smaldone. Yes.
    Mr. Stupak. Dr. Weiss says that BMS review, and that 
performed by the independent review assessment committee. That 
is part of your team, right?
    Ms. Smaldone. I believe that may be referring to the 
independent radiology review that we pulled into place in 
August of 2001.
    Mr. Stupak. Okay. So, yours, plus this independent review 
committee, agreed that only 16 of the 21 patients admitted to 
the 9923 study has having progressive disease show a partial 
response to the combination therapy. This is 13.2 percent.
    Has the FDA ever approved an oncological drug with a 
response rate that low using only clinical end points?
    Ms. Smaldone. Yes, they have. In fact, if I may, 
Congressman----
    Mr. Stupak. And what drug did they use it on?
    Ms. Smaldone. For irinotecan itself----
    Mr. Stupak. But irinotecan was not used in combination. It 
was used as a single agent, correct?
    Ms. Smaldone. That is correct.
    Mr. Stupak. And it also increased life expectancy of the 
patient as we talked about with Ms. DeGette earlier, and your 
drug does not increase the life expectancy of a patient. It may 
at best shrink a tumor.
    Ms. Smaldone. At the present time under accelerated 
approval regulations, which is evaluating the effect on a 
surrogate marker, which in this case was response rate, at the 
same time it is necessary to evaluate the full clinical benefit 
if you will with long term data, which was the plan for this 
program in any event. If I may just make one clarification if I 
may.
    Mr. Stupak. Sure.
    Ms. Smaldone. In June 1901, what I was referring to were a 
series of issues, scientific and regulatory issues, that were 
bubbling forward at that point in time, which are part and 
parcel of what is seen throughout the due diligence process.
    One point in particular, just to get the sequence here, is 
that because of some of those issues that were raised, and 
further discussion within the company, as well as with outside 
experts, both oncologists, regulatory experts, we did create a 
separate independent review panel with radiologists that were 
identified to look at the 9923 data specifically, and 
reevaluate the responders in that particular study.
    So as a result of these issues and discussions on 
collapsing time here, Bristol-Myers Squibb took this step to 
reevaluate with a separate review panel of experts that 
particular study on those data.
    Mr. Stupak. Right. And in the review panel and all of this 
review, and rightfully so, Bristol-Myers Squibb did it, and it 
was in January of 2002 after refusal, right? That's what I am 
talking about, the refusal now.
    Ms. Smaldone. No, this was before. This is prior to the 
time of the agreement.
    Mr. Stupak. Okay. Now, we have all of this in June when you 
did your memo, and you agreed with me that no accelerated 
approval has ever been granted for an oncology drug for use in 
a combination therapy. And that was your statement back then, 
and that's true of what you said in June of 2001?
    Ms. Smaldone. Right.
    Mr. Stupak. Now, I am bringing you to January of 2002.
    Ms. Smaldone. Yes.
    Mr. Stupak. And you have gotten your RTF, and you have been 
rejected, and there is an internal review that you are doing; 
isn't that correct?
    Ms. Smaldone. Yes.
    Mr. Stupak. You are doing it with this independent 
committee, and Bristol-Myers Squibb, and you are saying what 
happened here. And your own document says that it was agreed 
upon by your independent assessment committee that the 9923 
study has having progressive disease show a partial response to 
a combination therapy.
    This is 13.2, because only 16 of the 121 patients 
responded. And that is less than the 15 percent that it was 
supposed to be, correct?
    Ms. Smaldone. What we did at that point in time--and this, 
Congressman, was in August.
    Mr. Stupak. No, no, January, 2002. You are not familiar 
with any of that?
    Ms. Smaldone. I'm sorry?
    Mr. Stupak. You are not familiar with the Bristol-Myers 
Squibb review in January of 2002?
    Ms. Smaldone. In the January-February timeframe, we went 
through several internal reviews within Bristol-Myers Squibb, 
as well as again another panel of experts that were brought in 
to assess all of the information.
    And at that point in time, what I believe is that the 
reassessment that was done in August was put forth to this 
group.
    Mr. Stupak. Forget August. In January of 2002, here is your 
draft document, confidential, Bristol-Myers Squibb, you are 
going through to see why you were refused, right? Are you 
familiar with this? It is January 11, 2002.
    Ms. Smaldone. I really couldn't say specifically. There are 
so many documents, and I would be happy to see it and comment 
if I may.
    Mr. Stupak. Okay. Did you tell our staff, the Congressional 
staff--you have been interviewed by them, right?
    Ms. Smaldone. Yes.
    Mr. Stupak. Right. Did you tell the staff that you would 
never have permitted Bristol to submit an application to the 
FDA of the quality of the ImClone submission of their 
application? Did you tell our staff that you would never allow 
your company to submit an application like that?
    Ms. Smaldone. The discussion was as it relates to quality 
and study conduct, and quality assurance. We within Bristol-
Myers Squibb work at very high standards, and after the refusal 
to file letter, and the extent, and the depth of the issues 
that were raised in the refusal to file letter, it was very 
clear that there were some very substantive--what I would call 
study conduct quality assurance types of issues, that is 
correct.
    Mr. Stupak. So you did tell our staff that you would never 
let----
    Ms. Smaldone. That's correct.
    Mr. Stupak. Okay. So, Bristol sent in an application such 
as what ImClone did, and you said there was some substantive 
issues, and that's why the refusal letter, right?
    Ms. Smaldone. Yes.
    Mr. Stupak. So it is more than just documentation?
    Ms. Smaldone. In its cumulative, it certainly appeared to 
be more than documentation.
    Mr. Stupak. And then in the substantive issues that the FDA 
raised in its refusal, the FDA was fully justified in sending 
ImClone an RTF based on the application that they submitted in 
the fall; isn't that correct?
    Ms. Smaldone. When we say, Congressman, the refusal to file 
letter, and went through a thorough review and evaluation of 
it, it became apparent that in accumulative of all of the 
issues that were raised there, it appeared difficult for--and I 
can't speak for the FDA, but based on my experience, it 
appeared difficult for them to reconstruct the datasets and 
follow the chain of evidence.
    Mr. Stupak. So if they couldn't follow the chain of 
evidence, and if they couldn't reconstruct it, they were 
certainly justified then in putting out the RTF were they not 
in your 17 years of experience as you said?
    Ms. Smaldone. If I can make some qualifications to that, 
sir. I have never seen a refusal to file letter before, and I 
have never since.
    Mr. Stupak. Well, the refusal to file was based upon those 
substantive issues that you said were lacking, correct?
    Ms. Smaldone. That is correct.
    Mr. Stupak. So if the refusal is based upon substantive 
issues, then the FDA was correct in putting an RTF on?
    Ms. Smaldone. I believe that it had some justification 
based on what I was able to see.
    Mr. Stupak. Okay. On December 4, there is starting to catch 
wind that maybe ImClone or that ImClone might be receiving an 
RTF or that there application would not be approved.
    Did you or anyone from Bristol-Myers Squibb call up and 
say, look, what do you need to make this thing work, and can we 
withdraw it, or can we rework it? Did anyone do anything like 
that that you know of?
    Ms. Smaldone. Excuse me, sir. With the FDA, or with----
    Mr. Stupak. With the FDA. Did you call the FDA and say how 
can we rework this. Can we withdraw. Let us do further work on 
this?
    Ms. Smaldone. We are not responsible at that point in time 
and still are not for the BLA or any of the dialog with the 
FDA.
    Mr. Stupak. Thank you.
    Mr. Greenwood. The gentleman's time has expired. The Chair 
recognizes himself for--well, first off, to--well, without 
objection, the Chair would enter into the record certain 
documents. The first of these is three pages of handwritten 
notes referred to by Mr. Tauzin.
    The second is a Department of Health and Human Services 
document, reference number BBIND5804, dated January 12, 2001.
    The third is a Department of Health and Human Services 
memo, dated September 22, 2000. And fourth is the e-mail 
referred to that is addressed to Nancy.
    [The information follows:]


[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

  
    Mr. Greenwood. The Chair recognizes himself for 5 minutes 
for inquiry. Dr. Markison, I would like to go back to the way 
that you learned of the refusal to file letter. How did you 
learn that was going to happen?
    Mr. Markison. Well, sir, there was a series of events 
throughout the month of December, an inkling it seems on 
December 4, and as the month progressed, certainly there was--
--
    Mr. Greenwood. It is an inkling that Dr. Lee described as 
three equal possibilities?
    Mr. Markison. That's the way that Dr. Lee described it.
    Mr. Greenwood. But you had an inkling that there was a 
greater likelihood of the three possibilities?
    Mr. Markison. There was an inkling, sir, and quite frankly 
that was in essence the beginning in my mind anyway of----
    Mr. Greenwood. It was an inkling in your mind?
    Mr. Markison. It was an inkling in my mind, yes.
    Mr. Greenwood. And how did that inkling get into your mind?
    Mr. Markison. That it was mentioned as a possibility.
    Mr. Greenwood. Mentioned by whom?
    Mr. Markison. Dr. Lee reported it from the FDA dialog.
    Mr. Greenwood. But did she say that it was more likely that 
there would be a refusal to file letter than that there would 
be an approval?
    Mr. Markison. No, sir.
    Mr. Greenwood. She just mentioned it as one of two or three 
equal possibilities?
    Mr. Markison. Dr. Lee just reported to our group on the 
results of her conversation.
    Mr. Greenwood. Okay. All right. And then on December 20th, 
there was a teleconference, which we referred to earlier where 
it was apparent that the FDA had made or come to a decision and 
told ImClone not to call them, and that they would receive 
their decision on the 28th.
    At that point, we had been working with Alan Bennett, 
outside counsel, for some time off and on, and he was familiar 
with the project, and I asked him if he could find out any more 
information that would be helpful, because at this point it was 
not definitive.
    Mr. Bennett then responded to me on Christmas Eve, as I 
have stated, in writing, and was----
    Mr. Greenwood. What time of day was that on Christmas Eve?
    Mr. Markison. I believe it was in the early evening because 
I was trying to head out the door with my children for 
Christmas mass.
    Mr. Greenwood. Okay. So you were in the office when you 
received that?
    Mr. Markison. No, I was at home, sir.
    Mr. Greenwood. You were at home when you received that 
information from Mr. Bennett early in the evening?
    Mr. Markison. Yes.
    Mr. Greenwood. And then who was the next person--who was 
the first person with whom you shared that information?
    Mr. Markison. Well, I left the house, and came home, and 
tried to reach Harlan Waksal, and again failed, and did not 
leave a message on his machine. I called him the next day and 
also----
    Mr. Greenwood. So you didn't share this information with 
anyone else over Christmas Eve?
    Mr. Markison. On Christmas Eve, no, sir. But on the next 
day, Christmas Day, it was shared within my company certainly.
    Mr. Greenwood. Well, Mr. Bennett knows the information, and 
Mr. Bennett gives the information to you. Does Mr. Bennett give 
the information to anyone else?
    Mr. Markison. He was also corresponding with Mr. Keene, 
legal counsel to Bristol-Myers Squibb, and Mr. Costa, also 
legal counsel to Bristol-Myers Squibb.
    Mr. Greenwood. So Mr. Bennett informed those two gentleman 
on Christmas Eve, as well as he informed you?
    Mr. Markison. They received a copy of the same e-mail that 
I did.
    Mr. Greenwood. A copy of the same e-mail. Okay. So the 
first person that you shared this information with was whom?
    Mr. Markison. I believe it would have been Harlan Waksal, 
or additionally I spoke to Cheryl Anderson, who is in 
regulatory affairs in our company as well.
    Mr. Greenwood. This is on Christmas Day?
    Mr. Markison. On Christmas Day, yes, sir. And I wanted to 
make sure that Cheryl communicated with the appropriate----
    Mr. Greenwood. Did you share the information with anyone 
else at ImClone?
    Mr. Markison. I only spoke to Dr. Waksal on this Christmas 
Day.
    Mr. Greenwood. And did you call anyone else at Bristol?
    Mr. Markison. Yes, sir, I did. I called Cheryl Anderson. I 
believe I also called my supervisor at the time, Mr. McBlaine, 
to inform him, and I believe I may have spoken to other people 
in the company at that time, but quite frankly I can't remember 
all of them.
    Mr. Greenwood. Did you inform those folks at Bristol before 
or after you spoke to Harlan Waksal?
    Mr. Markison. I can't recall exactly, sir, because I know 
that I made a number of attempts to call Dr. Waksal, and I did 
not want to leave this message on his machine.
    Mr. Greenwood. Mr. Waksal, I have a copy of a letter signed 
by your brother, Sam Waksal, and sent to the ImClone Board of 
Directors, on July 18, 2001. It appears that the purpose of the 
letter is to inform the Board that you and your brother had 
borrowed over $30 million from the company to exercise over 4 
million options. Is that true? Have you seen that letter?
    Mr. Harlan Waksal. Can I see a copy of that letter, please?
    Mr. Greenwood. While Mr. Waksal is looking at that, Mr. 
Markison, do you know how Sam Waksal did find out? You couldn't 
reach him, but do you know how Sam Waksal found out about the 
refusal to file letter?
    Mr. Markison. No, sir, I do not.
    Mr. Greenwood. You have no idea?
    Mr. Markison. No.
    Mr. Greenwood. Harlan Waksal, Dr. Waksal, do you have any 
idea how your brother learned of the refusal to file letter?
    Mr. Harlan Waksal. As I mentioned, I had told the senior 
management team about the refusal to file letter, or the 
potential for the--the strong potential for a refusal to file 
letter, and I believe he spoke to the head of investor 
relations at the company, Andrea Rabney, when he arrived 
sometime in the evening of the 26th.
    Mr. Greenwood. Have you had a chance to glance at that 
letter?
    Mr. Harlan Waksal. I'm sorry, I was. Just 1 second. But I 
am familiar with it. It was asking for permission to get a 
letter, a promissory note from the company to go and exercise 
the stock.
    Mr. Greenwood. So did you and your brother borrow the $35 
million to exercise the 4 million shares on July 12, knowing 
that you would use these shares during the tender offer from 
Bristol?
    Mr. Harlan Waksal. No. We did exercise our options, and we 
did enter into a promissory note with the company at the time 
that the Bristol deal was not completed, and due diligence was 
still ongoing.
    And, in fact, at the time we already had strong discussions 
with outside counsel that we could go ahead and do conditional 
exercise of the stock options. But I certainly would not have 
had to purchase the options, but could have used the stock 
options themselves in the offer if indeed we went down that 
pathway.
    So they were different types of issues. I exercised the 
stock because of the price of $42 a share, and my feeling that 
the company was going to continue to do strong, and continue to 
move forward, and in flexion points would add value to this, 
and that I wanted to gain the long term value of that equity in 
the company, and that is why I have so many shares today. I 
still believe that.
    Mr. Greenwood. Did you know by the end of June that 
Bristol-Myers Squibb was going to purchase roughly 20 percent 
of the company?
    Mr. Harlan Waksal. At the end of June, we had various 
discussions with Bristol, and options included them purchasing 
more, but 20 percent was around the number that we were 
negotiating at that time.
    Mr. Greenwood. How likely did you think that by the end of 
June that that was to happen?
    Mr. Harlan Waksal. In truth, I had been down this pathway 
so many times with companies that I felt at that time that it 
had probably a 50-50 chance of taking place.
    Mr. Greenwood. And did that have anything with the decision 
of you and your brother to exercise those options at that time?
    Mr. Harlan Waksal. I can't speak for Sam. But it had no 
impact on my exercising. If it had to do with a tender offer, 
and the question is economically what would have made more 
sense, it would have been simply to tender my stock options 
rather than exercise them, which would still have resulted in 
whatever financial gain.
    What I did was buy a stake in ImClone. It was a promissory 
note that was paid back. No money was given to me. I bought a 
large stake in my company, which I still hold today. I still 
have two million shares of ImClone stock, sir.
    Mr. Greenwood. My time has expired. The Chair recognizes 
the gentleman from Kentucky, Mr. Fletcher.
    Mr. Fletcher. Thank you, Mr. Chairman. I wanted to ask just 
a few questions following up.
    Mr. Greenwood. Excuse me, but the gentlelady is being very 
polite in allowing Dr. Fletcher to go ahead.
    Mr. Harlan Waksal. I hope this level of politeness 
continues in this direction as well.
    Mr. Fletcher. Dr. Smaldone, when we asked Dr. Waksal about 
compliance with the protocol, it mentioned that--and let me 
preface this by saying is this going through the refusal to 
file letter here, there seems like--and maybe it is just in 
retrospect, but I think you probably share that.
    But there is a lot of discrepancies here that are rather 
obvious. If you can document CT scans on results with 
irinotecan before you begin the combined therapy, you have no 
base line, and there was some problems there.
    But one of the things that was stated is that--for example, 
it mentioned the elevated liver function test and some other 
things of folks who have may been entered into the study that 
were not eligible, was that the oncologist may not have had the 
specific protocol right there in front of him.
    And my recollection, and we have had patients entered into 
protocols, and we have worked with protocols personally, and 
generally there is a whole team that works. Often times nurses 
that screen these patients, and they are very thorough, and the 
protocol is very clear.
    It is outlined in fact to assure that you meet the FDA 
criteria. All of these things are checked off and file forms 
are written, and all the criteria is written down. So how does 
that happen that these were entered and maybe some oncologist 
didn't know that they met the protocol? That seems odd to me.
    Ms. Smaldone. It seems odd to me, too, sir. I really can't 
comment beyond that.
    Mr. Fletcher. I mean, these are not fly by night 
oncologists. These are probably the world's experts. 
Oncologists is what we are talking about. I mean, is the 
protocol that poorly structured, and was it that poorly 
organized.
    I know that there are mistakes and things like that that we 
make, and we are humans, and there are times where there are 
deviations, or because of clinical reasons that you have to 
depart from the protocol.
    But these are things that are clearly aberrations, and I 
just wondered from your standpoint if you have ever seen 
anywhere where protocols are done where the clinician doesn't 
have the protocol in front of him.
    Ms. Smaldone. Normally, that is not the case, sir.
    Mr. Fletcher. Okay. Dr. Waksal, if you could maybe respond 
to that. I know that you said, well, maybe they didn't have it 
in front of them. I assume you are a clinician as well.
    Mr. Harlan Waksal. I am, but I can't give an explanation on 
it. It was not because of a lack of clarity in the protocol. 
Why it took place, I don't know. I can tell you that the 
majority of these had to do with what I mentioned before, the 
liver function test problems.
    And in fact that is something that makes the patient 
sicker. It means that these patients were a little bit more 
else. So the doctors must have felt, and I am speculating, must 
have felt that they still were going to be given a drug that 
would not result in an adverse event.
    But I am really speculating. I don't know why it took 
place.
    Mr. Fletcher. Well, I just find that very concerning, 
because most of the oncologists that we have worked with, as 
well as other clinicians in different areas, have done FDA 
studies, phase two.
    Mr. Harlan Waksal. This study was done at the University of 
Colorado, at Memorial-Sloan-Kettering, at the University of 
Alabama, at UCLA. It was done at prestigious institutions 
across the country, and with clinicians that were very good at 
doing these types of trials.
    Mr. Fletcher. Let me ask Dr. Smaldone. Are those normally 
done with a lot of intervention, or at least oversight from a 
company that is sponsoring these, to go in and make sure that 
there is compliance all along the protocol, and was that a 
problem with ImClone?
    Ms. Smaldone. I can tell you what we do, Congressman, which 
is there is significant oversight on the part of our clinical 
teams, our clinical monitors, or indeed the contract research 
organization if the study is contracted out to a research 
organization to assist in the clinical monitoring and study 
conduct.
    That's what we do, and I can't say exactly what the----
    Mr. Fletcher. To ensure things like some of these patients 
where they simply did not have any adequate CAT scans, which 
are pretty obvious that those kind of mistakes are not made.
    But let me ask you--and I want to ask both of you. Dr. 
Smaldone, from your standpoint, how much communication took 
place in your review, and I assume that you have reviewed this, 
especially since the refusal to file letter.
    How much communication took place on these concerns prior 
to the refusal to file, because I think Dr. Waksal, you said 
that on December 28, or even a few days before, that you were 
quite surprised at the refusal to file.
    Mr. Harlan Waksal. Yes.
    Mr. Fletcher. So obviously in your mind there was not the 
adequate information from the FDA that the data that you were 
giving them was not adequate or that the protocol was not 
stringent enough as they said it wasn't conducted properly.
    Mr. Harlan Waksal. Actually, my comment was that I thought 
it was reparable, and I knew that there were issues, but I 
thought that they were all issues that we could go ahead and 
fix.
    Mr. Fletcher. Okay. Dr. Smaldone.
    Ms. Smaldone. Sir, we did not review the clinical program 
of ImClone. So we----
    Mr. Fletcher. But did you review all the communications and 
everything that answered between--Dr. Lee, I assume that you 
were seeing the clinical aspects of that. Did you review all 
the communications to see where in the world--I mean, it is 
bound to have caught you by surprise as well.
    Ms. Smaldone. Congressman, we did a very extensive due-
diligence review of the scientific aspects, pre-clinical 
aspects, and clinical, regulatory, financial, full-team of 
people reviewing this.
    There are however certain levels of expectations on the 
part of the proposed partner that the study conduct, ways of 
approaching good clinical practice, and quality assurance, 
would be conducted as would be conducted with any 
pharmaceutical company according to guidelines.
    So it was with total hindsight at this point that some of 
those expectations were not met, but we did not review the 
program, and we were certainly not there to participate in any 
of the specific dialogs between ImClone as a sponsor in any of 
their clinical investigators.
    Mr. Fletcher. Okay. Thank you. Well, it is just that in my 
experience that clinicians rarely deviate from a protocol that 
is pretty well understood, especially if it is done well.
    Let me just say that the thing that really concerns me here 
is that you have got obviously the financial ramifications, the 
investors, and some of the other things. It is very, very 
important.
    And not only that, but it is just as important, and 
probably even more so, is the expectations, and it appears that 
the financial influence of this, particularly from the 
executives of ImClone, drove raising patient expectations, and 
that is very concerning.
    And I just wondered, Dr. Waksal, in retrospect, what would 
you have done differently to have prevented this debacle and 
tragedy actually?
    Mr. Harlan Waksal. Well, it is a tragedy, and I think most 
importantly one point that seems to be left out, and we talk 
about certain documentation, and one point that is left out is 
the response rates in these patients, and the response rates, 
which is really critical.
    And it wasn't survival, but other drugs have been indeed 
approved based on response rates, including irinotecan. 
Survival data came later that these types of effects that we 
are seeing in patients were remarkable, and we tried to give 
some testimonials.
    In fact, there is a patient here today, Amy Cohen, who 
again has been treated with this drug, and who had benefit, and 
I think that the most important thing that we did wrong--we are 
a small company, and we didn't have the resources to do some of 
the quality checks that needed to be done.
    We worked with outside groups, and clinical research 
organizations to do that work with us and for us. Unfortunately 
that is where the errors took place, in the quality and making 
sure that quality was intact. And we are working now 
continuously to reconstruct this to the best of our ability.
    Mr. Fletcher. Thank you. Mr. Chairman, one thing I would 
just recommend. If we have clinical trials that are FDA 
approved, and they are being conducted, and clinicians are 
not--in other words, if a company requires to have the kind of 
oversight to ensure that clinicians are not following the 
protocol, I think we have got some significant problems here. 
And I just wanted to add that to my closing. Thank you.
    Mr. Greenwood. The Chair thanks the gentleman and 
recognizes the gentlelady from Colorado, Ms. DeGette, for 5 
minutes.
    Ms. DeGette. Dr. Waksal, you said that you have provided 
testimonials from patients who have been helped by this drug. 
Would that include the letters that we have received in this 
committee?
    Mr. Harlan Waksal. That's correct.
    Ms. DeGette. And if I understand it, all of the letters 
that we have received in this committee have been received 
because the patients are getting the drug under the 
compassionate-use doctrine, which does not require pre-approval 
by the FDA; is that correct?
    Mr. Harlan Waksal. I believe that is correct. I am not 
sure, but I believe that could be correct.
    Ms. DeGette. And, Dr. Smaldone, is that your understanding 
as well, that these patients who have been helped, have been 
helped under the compassionate-use doctrine, and that in fact 
for these colorectal cancer patients who have no other help, 
that your company and ImClone can provide the drug to them 
without pre-approval by the FDA. Would that be correct?
    Ms. Smaldone. I am not aware of what testimonials were sent 
to the committee. I am very sorry. So I really can't comment.
    Ms. DeGette. Okay. But as far as you know, Erbitux could be 
provided to colorectal cancer patients without any other 
alternative under the compassionate-use doctrine.
    Ms. Smaldone. Under compassionate-use, it can, yes.
    Ms. DeGette. Thank you. Now, I just have a couple of more 
questions, Mr. Chairman. I do apologize, but I am going to have 
to leave to go get on an airplane because of the forest fires 
in my State, and so I will try to be quick because I want to 
hear a lot of what the FDA says.
    As I understand it, Mr. Markison, and also Dr. Smaldone, 
your company invested $2 billion in ImClone, right, Mr. 
Markison?
    Mr. Markison. Well, we invested $1 billion for nearly 20 
percent of the company, and then we paid--we structured a 
transaction that would have us paying another billion dollars 
for the right to market the product.
    Ms. DeGette. So that answer would be yes, $2 billion?
    Mr. Markison. We have not paid the $2 billion.
    Ms. DeGette. You have paid only $1 billion?
    Mr. Markison. $1 billion, plus $200 million up front.
    Ms. DeGette. Thanks. So I would think as a business man 
that you would want to make sure that there was some efficacy 
to a drug before you invested $1 billion plus, correct?
    Mr. Markison. That's correct, ma'am.
    Ms. DeGette. And, Dr. Smaldone, as I understand it, the due 
diligence review that was done before this business decision 
was made was that the patient who had a positive response were 
the only ones that were looked at, is that correct?
    Ms. Smaldone. The patients that had a positive response to 
Erbitux were reevaluated by an outside expert group that we 
brought in as part of the due diligence, that is correct.
    Ms. DeGette. And what else was done as part of the due 
diligence?
    Ms. Smaldone. We went through extensive evaluation of this 
product that identified many of the issues that we had talked 
about, and also evaluated this product and the entire 
arrangement, including the manufacturing capacity, and there 
were other things that were looked at as part of this.
    Ms. DeGette. But in terms of the efficacy of the drug, what 
else was done aside from this independent review of the 27 
patients that had a positive result?
    Ms. Smaldone. This was discussed internally and externally, 
and we went to outside experts. It was discussed with many 
individuals, including individuals that have since come to the 
company who had been experts in the field at the National 
Cancer Institute in the U.S.
    Ms. DeGette. So you didn't recreate any of the critical 
trials?
    Ms. Smaldone. We could not recreate any of the critical 
trials. Those were not possible to do.
    Ms. DeGette. Those were done in 1999, right?
    Ms. Smaldone. That was accepted as work done by ImClone, 
correct.
    Ms. DeGette. Okay. So when you had your independent experts 
review, the 27 patients with the positive response, the results 
went down from 22 percent to 13 percent, correct?
    Ms. Smaldone. That is correct.
    Ms. DeGette. And yet based on that, with 27 patients out of 
a roughly 130 some patients study, 27 patients with a positive 
response, in your independent review, it went down by 11 
percent; from 22 percent to 13 percent.
    But yet your team felt that was worth a $2 billion 
commitment for financing?
    Ms. Smaldone. After everything was said and done, and all 
the assessments were made in this review, which was essentially 
doing everything against the drug, and this was the worst case 
scenario analysis that was done, we believe that this drug had 
positive potential, and that at the end of the day was an agent 
that had promise for cancer.
    And again if you consider a 13 percent response rate with 
an unmet medical need in a setting where patients have no other 
alternative, and if this were a family member of anyone of the 
committees, I would think that this would be seen as something 
very important.
    Ms. DeGette. Now, wait a minute. First of all, Dr. 
Smaldone, if there was no other alternative, they could get the 
drug under compassionate use, right? I mean, the question that 
we are asking today is should the FDA approve this drug as a 
drug to be used by all patients in colorectal cancer, which 
would mean that you would want to have some kind of--I mean, 
that's why we do trials, is to make sure that the drugs work.
    And not just on one patient, but at a high level of 
percentage, and what I am asking you is a pretty simple 
question. You felt that 13 percent was adequate.
    Ms. Smaldone. Not only did we feel, but this was reviewed 
with many experts, and that was thought to be an important 
response rate in this particular setting of metastatic 
colorectal cancer, where really a response rate at this point 
in time of something of that magnitude is really unheard of.
    Ms. DeGette. Mr. Chairman, excuse me, but I am out of time. 
I just want to say, Mr. Chairman, that I think something else 
for us to look at here is how a company could be so dead sure 
of the efficacy of a drug to put a commitment of $2 billion in, 
and then only a few months later come back in January and say, 
oh, we reexamined the data, and we found it very, very 
defective. That is a mystery to me.
    Mr. Greenwood. The Chair recognizes Mr. Stearns of Florida 
for 5 minutes.
    Mr. Stearns. Thank you, Mr. Chairman. There was a 1993 
article in Barrons, and it talked about some of the loans that 
you folks made, and it said that ImClone loaned Sam Waksal 
$70,000 and gave him a miscellaneous cash advance of almost 
$90,000.
    And the loans in advance were repaid with interest, but the 
following year another loan of $117,000 non-interest bearing 
cash advance was made to him again. And then in the end, 9 
months ending December 31, 1992, the company loaned him another 
$275,000.
    These loans of course were on top of his salary and 
bonuses, and made him one of the best paid biotech CEOs. Now, 
according to Barrons, because of failed business ventures, 
Waksal needed the money to renovate his apartment, where he 
featured a collection of modern art and ancient relics.
    And when Barrons raised the question of the issue of 
borrowing, your chairman, Robert Goldhammer, disclosed a new no 
loan policy. He said the money is paid back, and would not be 
loaned to him again. So it is a historical event, rather than 
an ongoing one. But according to the SEC's filings, your 
company continues to make personal loans, and no interest cash 
advances to Sam Waksal over the last several years. So the 
question is are you continuing to make loans, and did Mr. 
Goldhammer not tell the truth about his no loan policy, or did 
you change it again, and what is the policy today?
    Mr. Harlan Waksal. Well, I can speak about the policy 
today, and I think it is critical for you to know that the 
company has appropriate governance in place that loans to 
officers will not be made.
    There are certain circumstances that will allow monies to 
be--promissory notes to be given. For example, stock option 
types of exercises, which is part of the stock option plan, as 
long as one can support the ability to pay it back.
    Mr. Stearns. Well, Barrons is talking about the personal 
loans, and it was said back in 1992 that we will not do this 
any more the chairman said, and so now you are saying that it 
is a policy now of no personal loans; is that what you are 
saying today?
    Mr. Harlan Waksal. As the president of the company, I am 
telling you that there will not be further loans to officers of 
this company.
    Mr. Stearns. Okay. But you understand that they were done 
in the past, even after Mr. Goldhammer said that we won't do it 
any more. Isn't that true?
    Mr. Harlan Waksal. I don't know the context of the 
interview, but I do know that loans were given after that 
comment was made.
    Mr. Stearns. Okay. At the time that you and your brother 
granted millions of more options in 1999, weren't you and your 
brother trying to sell the company?
    Mr. Harlan Waksal. Many times during the course of this 
company, in 1998, 1999, 2000, we met with a variety of 
companies, and entertained possibilities of ventures, including 
mergers and acquisitions.
    Mr. Stearns. Okay. At the time that ImClone accelerated the 
vesting of these options so that they would vest if the stock 
price climbed, wasn't ImClone trying to sell a majority equity 
interest in publicizing its attempt to get FDA approval?
    Mr. Harlan Waksal. Well, no, sir. Actually, the stock 
options that were granted, the stock option itself was one that 
was triggered by increases in stock prices. The incentive was 
based on an increase in stock price.
    The company at the time was having discussions, and it 
wasn't as if we were----
    Mr. Stearns. Did you change the policy? I don't think in 
the original policy it was set up that way?
    Mr. Harlan Waksal. Not to my knowledge.
    Mr. Stearns. Okay. At the time that you and other ImClone 
insiders got millions of dollars in loans from ImClone in mid-
July, weren't you deep in negotiations over the tender offer 
with Bristol, and it was clear that the premium price for 
shares tendered would be $70 when it was trading at $50?
    Mr. Harlan Waksal. We had a discussion on this earlier, and 
indeed, as I pointed out, my exercise of the stock at that time 
was based on my belief and faith in the company.
    I was able to tender into that offer with a conditional--
with just using my stock options. I didn't need to exercise 
those stocks. In fact, one that did was it raised money for the 
company because the monies weren't borrowed. Although I had a 
promissory note, they were repaid to the company.
    And what it did was increase my position in the company, 
which I still hold today, quite considerably.
    Mr. Stearns. Were other shareholders aware, and did they 
have the opportunity to get loans?
    Mr. Harlan Waksal. Shareholders, or people with stock 
option plans?
    Mr. Stearns. Either one.
    Mr. Harlan Waksal. It is a part of the stock option plan, 
yes. It is a standard part of our stock option plan.
    Mr. Stearns. But the shareholders could not get these loans 
that you and your brother could get?
    Mr. Harlan Waksal. Well, shareholders don't have stock 
options, sir. These are stock options.
    Mr. Stearns. But the point is that you were able to get 
these loans and the shareholders were not, right?
    Mr. Harlan Waksal. It was a promissory note. We didn't get 
cash from the company. We owed the company money, and it was an 
exercise of those options. And, yes, that is not something that 
the shareholders can do unless they would have stock options in 
the company.
    Mr. Stearns. Now, when you get these promissory notes, did 
you sign them personally?
    Mr. Harlan Waksal. Yes, I did.
    Mr. Stearns. And what did you put up for collateral?
    Mr. Harlan Waksal. What I had to represent to the company 
was my stock, and the stock----
    Mr. Stearns. You put up stock for collateral?
    Mr. Harlan Waksal. There was no stock transfer to the 
company, but I demonstrated to the company where the stock was, 
and that it was unencumbered.
    Mr. Stearns. Because if I go to the bank, I have to put up 
either collateral or I have to sign personally?
    Mr. Harlan Waksal. I signed personally and I needed to show 
to outside counsel, as well as counsel of the company, my 
ability to use my stock to repay that loan.
    Mr. Stearns. So the collateral was the stock?
    Mr. Harlan Waksal. Yes, it was.
    Mr. Stearns. On a promise that it would go to X, Y, Z?
    Mr. Harlan Waksal. No, sir, it was on no promise of 
anything. This was a non-recourse promissory note. They could 
ask for it back and it had nothing to do with stock price. In 
fact, if I had chosen at the time to go out and to sell my 
stock, at where it was trading at $42 a share, I could have 
done so.
    Mr. Stearns. And this is the last question, Mr. Chairman, 
and I will let you go. Is the advantage of a tender offer that 
it allows the largest shareholders to sell massive amounts of 
stock in 1 day without the disruption caused by day to day 
selling to work off a block of shares?
    Mr. Harlan Waksal. No, I don't believe that at all. I think 
the benefit of a tender offer is to make sure that all 
shareholders can equally participate if they choose to in an 
opportunity to divest whatever percentage of shares that would 
be.
    Mr. Greenwood. The Chair thanks the gentleman. We are just 
about to dismiss you, and I have one quick line of questioning 
for Mr. Waksal, and I would have preferred to ask these 
questions of your brother were he willing to testify.
    Do you have the same secretary that he had when you took 
over as CEO? Do you have the same secretary as your brother had 
on at least the 27th of December?
    Mr. Harlan Waksal. I have a different administrative 
assistant. However, the administrative assistants are now part 
of a corporate office that I have established to administer to 
the other senior people in the company.
    Mr. Greenwood. I think you have in front of you a phone log 
from December 27, and of course the committee has been 
interested, as the SEC has, and others, in who knew what that 
might have been inside information.
    And this shows--and I am just looking at some of the names 
and some of the messages that might have had something to do 
with the selling of shares. Carl Icon called at 11:05. A Mr. 
Weissbroad--do you know who Mr. Weissbroad is?
    Mr. Harlan Waksal. Yes, I do.
    Mr. Greenwood. Who is he, sir?
    Mr. Harlan Waksal. I believe he is a fund manager.
    Mr. Greenwood. Okay. He called regarding shares. Bob 
Cicuchi; do you know who he is, sir?
    Mr. Harlan Waksal. I do not.
    Mr. Greenwood. Okay. Martha Stewart. Something is going on 
with ImClone, and she wants to know what. She is on her way to 
Mexico, and staying at Las Ventanas. Jarrett, and I assume that 
is Jarrett Posner, a son-in-law of Sam, called.
    Mr. Harlan Waksal. That's correct.
    Mr. Greenwood. Do you know from discussions with the person 
who made this phone log, or by any other means, whether Sam 
conveyed information back to any of these folks about the 
status of the company with regard to their refusal to file a 
letter?
    Mr. Harlan Waksal. I have no information regarding that.
    Mr. Greenwood. Okay. And you have not learned from an 
administrative assistant or secretary, and whether any of these 
calls were returned?
    Mr. Harlan Waksal. I have not. The only information that I 
have heard is what has been really in the press, and otherwise, 
I am not familiar with any calls being returned or the kind of 
calls.
    Mr. Greenwood. Was your brother, Sam, in the office that 
day?
    Mr. Harlan Waksal. I believe so, but I would have to tell 
you that I was in Colorado at that time, and so I can't tell 
you absolutely.
    Mr. Greenwood. Well, did you speak with your brother on 
that day?
    Mr. Harlan Waksal. I did.
    Mr. Greenwood. And where was he when you spoke to him, or 
where did you reach him?
    Mr. Harlan Waksal. I don't remember. I just don't remember 
if I called him or me. It could have very well been at the 
office, or on his cell phone. I just don't recall.
    Mr. Greenwood. Okay. And you were in contact with other 
company officials that day in the office. You called the office 
and talked to other folks at ImClone?
    Mr. Harlan Waksal. We had a conference call that morning 
and certainly we were in discussions during that time, yes, 
sir.
    Mr. Greenwood. But you have no way of knowing whether any 
of these phone calls were returned by Sam or by anyone else?
    Mr. Harlan Waksal. I would have no way of knowing that.
    Mr. Greenwood. I thank you, Mr. Waksal, and I thank you, 
Dr. Lee, and thank you, Mr. Markison, and thank you, Dr. 
Smaldone.
    Mr. Stearns. Mr. Chairman, I think there has been some 
requests to put some documents in the record. Just so the 
record is clear, I had asked about the BMS memo of January 11, 
2002.
    We have a copy here, and I would ask that this copy in its 
entirety be placed in the record.
    Mr. Greenwood. Without objection, the document will be 
placed in the record.
    [The information referred to follows:]

[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]


    
    Mr. Stearns. Thank you, Mr. Chairman.
    Mr. Greenwood. The Chair thanks the witnesses for their 
patience, and calls our third and final panel, consisting of 
Dr. Patricia Keegan, Deputy Division Director, Center for 
Biologics Evaluation and Research at the Office of Therapeutic 
Research and Review, Division of Clinical Trials Design and 
Analysis, at the U.S. Food and Drug Administration; Dr. Richard 
Pazdur, Director of the Division of Oncology Drug Products, 
Office of Drug Evaluation, Center for Drug Evaluation and 
Research, at the FDA; Dr. Lee H. Pai-Scherf, M.D., Medical 
Officer, Clinical Reviewer, Center for Biologics Evaluation and 
Research, Office of Therapeutic Research and Review, Division 
of Clinical Trials Design and Analysis, Oncology Branch, FDA; 
Dr. George Mills, Acting Chief, Team Leader, Center for 
Biologics Evaluation and Research, Office of Therapeutic 
Research and Review, Division of Clinical Trials Design and 
Analysis, Oncology Branch, FDA; and Dr. Susan Jerian, M.D., 
Medical Officer, Team Leader, Center for Biologics Evaluation 
and Research, at FDA.
    Thank you all for your presence, and I thank you all for 
your forbearance and patience. You are aware that this is an 
investigative hearing, and that it is the practice of this 
subcommittee when holding such hearings to take testimony under 
oath. Do any of you object to giving your testimony under oath?
    [No response.]
    Mr. Greenwood. You are also aware that you are entitled 
pursuant to the rules of the House and this committee to be 
represented by counsel. Do any of you wish to be represented by 
counsel?
    Mr. Pazdur. Yes. I have my personal lawyer, Stephen 
Lieberman.
    Mr. Greenwood. Stephen Lieberman is with you?
    Mr. Pazdur. Yes.
    Mr. Greenwood. Very well. Anyone else? Yes, Dr. Keegan?
    Ms. Keegan. I am represented by the FDA General Counsel.
    Mr. Greenwood. You are represented by the FDA General 
Counsel?
    Ms. Keegan. Yes.
    Mr. Greenwood. Dr. Jerian.
    Ms. Jerian. I am represented by the FDA General Counsel.
    Mr. Greenwood. Okay. Anyone else?
    Mr. Mills. Dr. Mills, FDA General Counsel.
    Mr. Greenwood. And could you name the General Counsel for 
us that is representing all of you?
    Ms. Keegan. Michael Landa.
    Mr. Greenwood. The Chair would note that each of you is 
here under subpoena. The Chair would also note that it what we 
call a friendly subpoena, and that we felt that it was 
important to issue to protect any legal concerns that might 
come from your rules and regulations with regard to 
confidentiality. Would you please all rise and raise your right 
hand.
    [Witnesses sworn.]
    Mr. Greenwood. Okay. Thank you. And you may be seated, and 
I understand that you have chosen not to have opening 
statements, but are here to respond to our questions, and we 
thank you for that.

TESTIMONY OF PATRICIA KEEGAN, DEPUTY DIVISION DIRECTOR, CENTER 
 FOR BIOLOGICS EVALUATION AND RESEARCH, OFFICE OF THERAPEUTICS 
  RESEARCH AND REVIEW, DIVISION OF CLINICAL TRIAL DESIGN AND 
  ANALYSIS, U.S. FOOD AND DRUG ADMINISTRATION; ACCOMPANIED BY 
 RICHARD PAZDUR, DIRECTOR, DIVISION OF ONCOLOGY DRUG PRODUCTS, 
  OFFICE OF DRUG EVALUATION I, CENTER FOR DRUG EVALUATION AND 
RESEARCH, U.S. FOOD AND DRUG ADMINISTRATION; LEE H. PAI-SCHERF, 
   MEDICAL OFFICER, CLINICAL REVIEWER, CENTER FOR BIOLOGICS 
 EVALUATION AND RESEARCH, OFFICE OF THERAPEUTICS RESEARCH AND 
    REVIEW, DIVISION OF CLINICAL TRIAL DESIGN AND ANALYSIS, 
 ONCOLOGY BRANCH, U.S. FOOD AND DRUG ADMINISTRATION; GEORGE Q. 
    MILLS, ACTING CHIEF, TEAM LEADER, CENTER FOR BIOLOGICS 
 EVALUATION AND RESEARCH, OFFICE OF THERAPEUTICS RESEARCH AND 
    REVIEW, DIVISION OF CLINICAL TRIAL DESIGN AND ANALYSIS, 
 ONCOLOGY BRANCH, U.S. FOOD AND DRUG ADMINISTRATION; AND SUSAN 
 M. JERIAN, MEDICAL OFFICER, TEAM LEADER, CENTER FOR BIOLOGICS 
EVALUATION AND RESEARCH, DIVISION OF CLINICAL TRIAL DESIGN AND 
  ANALYSIS, ONCOLOGY BRANCH, U.S. FOOD AND DRUG ADMINISTRATION

    Mr. Greenwood. And let me begin----
    Ms. Keegan. Mr. Chairman, we were wondering if you would be 
interested in having us present, or having myself present, some 
background on the FDA chronology of this application as it 
might streamline your questioning.
    Mr. Greenwood. Sure. If you are prepared to do that, that 
would be most helpful, please. You are recognized.
    Ms. Keegan. I am Dr. Patricia Keegan. I wanted to say that 
the application, the IND, for ImClone's Erbitux, was filed in 
1994, and that the IND application was filed in order to 
conduct clinical studies in humans in the United States with 
the FDA.
    A number of studies have been submitted to that IND, and in 
the late spring of 2000, ImClone contacted us to talk and to 
request that we have a meeting to talk about what they thought 
were some very promising results with a Phase II study that has 
been submitted to that IND, and the study conducted in 1999 as 
you have heard.
    We agreed to meet and talk about the results of that study, 
and we met with the company in August of 2000. The discussion 
at that time was centered on whether or not the promising 
results that were being reported to us, which was a response 
rate of about 20 percent in patients with metastatic colorectal 
cancer, with no available therapy, might be sufficiently 
promising to warrant consideration for an accelerated approval 
based on that end point of that observation of tumor response 
or tumor shrinkage.
    We discussed at that meeting the adequacy of the trial 
itself, and I would say that we concur with the statements made 
by Dr. Waksal that that trial was not intended either by 
ImClone or ourselves to be a registration or a major efficacy 
trial.
    And the specific design elements of that trial had not been 
evaluated critically by the FDA. At the time of the meeting, we 
sat to discuss whether or not the data, which indeed appeared 
to be promising based on the report, could be used, or some 
portion of the study results could be used.
    Also, what the limitations of that data were and what 
additional information that the FDA might need to consider 
whether or not there might be enough data to submit an 
application.
    The critical elements of that protocol that we looked at 
were that a significant proportion of the patients, close to 90 
percent, were purported to have had tumor growth, progressive 
disease, while receiving irinotecan therapy.
    We understood at the time that there was progressive 
disease in the face of at least two cycles of irinotecan 
therapy so that the patients had an adequate amount of drug in 
order to determine whether or not their tumor would shrink or 
would grow.
    In addition, patients whose tumors had not shrunk on 
irinotecan that were enrolled in the study went on to receive 
not only Erbitux, but irinotecan at the same dose and schedule 
that they had received earlier.
    These design elements were critical in our considerations 
because we felt that they were necessary to determine whether 
or not the results that were being observed might be attributed 
to Erbitux, the addition of Erbitux, or whether we could not 
discern that.
    And it was on that basis that we felt that the design might 
be adequate to assess whether the addition of Erbitux was 
causing tumor shrinkage. We also recognized that the design was 
not adequate to identify other aspects that were important 
here.
    And the other aspect was whether or not irinotecan was 
contributing to that effect. At the meeting, we discussed 
ImClone's perceptions of their drug and how they felt that it 
worked. Specifically, that Erbitux would not act alone, but 
would only act in collaboration with a chemotherapy drug such 
as irinotecan.
    And in fact the way that Erbitux worked was to overcome the 
tumor resistance to that prior therapy, the irinotecan, in this 
case. And that was the way in which it was effective. We have 
asked where the data to support that statement might exist. And 
the response that we received was that it was based upon prior 
other studies conducted in human beings, and animal studies 
that were conducted.
    And that that data resided currently in the application as 
of August 2000. Based on those discussions, we informed the 
company that we thought that there might be reasonable promise 
to go forward and pursue discussions of a license application.
    Subsequent to that time, we conducted an extensive review 
of the information in the file, and we reached a different 
conclusion from that provided by ImClone, which was that we did 
not think that the information currently in the file showed 
that Erbitux would not be active by itself.
    Our conclusion was that there was insufficient information 
to judge whether it would work alone or not, and that the only 
way to address that was to conduct an additional trial.
    In January of 2001, we conveyed to the company, both by 
letter and in a subsequent telephone conversation, that we 
disagreed with their assessment of the data in the file, and 
that they needed to conduct another study.
    The representatives of ImClone did in fact begin another 
study that was begun in April of 2001, and that study was 
considered critical to provide a critical piece of evidence for 
the license application that they were intending to file.
    That is the study that I think some refer to as 0141. And 
in June of 2001, the initial portions of the license 
application were filed and submitted to the FDA, and the last 
portion of that application, which was the clinical study data, 
was submitted in October 2001 as you have heard.
    And I think the rest is obvious to the committee that upon 
review of that information, we felt that there were multiple 
deficiencies in the application, primarily arising not only 
from the inconsistencies and defects in the data and missing 
data, but also issues with regards to the conduct of the 
clinical trial.
    Mr. Greenwood. Thank you. Dr. Keegan, why don't I start my 
questioning with you, and I would ask anyone else if you feel 
that you can add to her response, please do, or maybe you feel 
it is more appropriate to respond.
    According to an October 12, 2001 e-mail from BMS chief 
scientific officer Peter Ringros to other BMS executives, 
Bristol-Myers Squibb executives, which reads, ``I just had Sam 
Waksal on the phone regarding the single agent data. 
Apparently, it came out at 13 percent, which he feels is half 
the C225, plus CPT-11, data. They have informed the FDA, who 
were pleased, and confirmed that they would be on for the 
February 28 ODAC,'' which is the Oncological Drug Advisory 
Committee.
    ``He reckons that they will be on the market by March. I am 
planning to meet with Sam in New York the week after next.''
    Did any of you ever get contacted by ImClone about the 
results of the study testing Erbitux alone before ImClone 
completed its application submission on October 31, 2001?
    Ms. Keegan. I don't believe I can recall any contacts 
regarding that before the end of the submission.
    Mr. Greenwood. Anyone else?
    [No response.]
    Mr. Greenwood. Okay. Did any of you ever inform anyone at 
ImClone that they would be on the agenda for a February 2002 
ODAC meeting?
    Ms. Keegan. I did not.
    Mr. Greenwood. Anyone else?
    [No response.]
    Mr. Greenwood. Dr. Pazdur, the FDA announced as the 
protocol design of the ImClone 9923 is seriously flawed, not 
adequate, or well controlled. Are you familiar with the 
protocol design?
    Mr. Pazdur. That was the original protocol that had 
irinotecan, plus CPT-11, plus Erbitux, correct? The original 
study?
    Mr. Greenwood. Yes.
    Mr. Pazdur. Yes, I believe--you are asking for my opinion 
regarding that trial?
    Mr. Greenwood. Yes.
    Mr. Pazdur. I believe that trial was a flawed trial for a 
registration trial. It really never answered the question do 
you need irinotecan with Erbitux, and that is a critical 
question to be answered here.
    The whole development of this drug, I think, was one of 
very--it put the drug in very serious regulatory jeopardy, and 
violated several principles of medical oncology.
    First of all, a heavy reliance on pre-clinical activity and 
pre-clinical design is based on animals models. We know that 
animal models can give us an inclining or a suggestion of where 
to go.
    But to conduct a whole development plan and a sole 
development plan on an animal model is a very risky venture. 
Second, they are asking patients to continue a drug, 
irinotecan, after they have progressed, or after their tumors 
have gotten larger on this.
    This violates every principle that I know of in medical 
oncology, and in order to do that, you better have very good 
evidence that that is the thing to do here before you just go 
ahead and do it.
    The drug, irinotecan, is a fairly toxic drug, and in the 
original registration trials for that drug, there were at least 
a 3 to 5 percent death, as well as a 20 percent hospitalization 
rate for toxicity related to irinotecan.
    Again, if you are using this drug in a relatively 
unconventional study after the tumors have grown, it again 
points to the need to have adequate confirmation that this is a 
thing to do.
    The way that this drug should have been developed is in a 
randomized trial. If they really believed that you needed the 
combination, they needed to do a randomized trial, which is 
being done now, looking at irinotecan, plus their drug, plus 
Erbitux alone. That would be the correct way of developing this 
drug.
    Mr. Greenwood. Well, did the FDA share that information or 
make that suggestion to ImClone? Did you say to them--I mean--
--
    Mr. Pazdur. Could I say just one thing?
    Mr. Greenwood. Please.
    Mr. Pazdur. I am not a member of the review team, and I am 
from a different center here, although my expertise is in 
colorectal cancer.
    Mr. Greenwood. Okay. What Dr. Pazdur just said was pretty 
damming information. He said that this is a risky venture, and 
he said that if you really want to get this drug approved, you 
should have developed a randomized trial. That is language that 
even I can understand.
    Did the FDA--do you agree with Dr. Pazdur, and if you do, 
is that a recommendation that the FDA shared with ImClone at 
any time in this long tortured history?
    Ms. Keegan. What I would say is that the company believed 
based on data which we didn't find as compelling as they 
obviously did, that this drug would not be active on its own.
    And if one truly believed that to embark on a large 
randomized controlled trial, might not be in the best interests 
of patients who got the Erbitux by itself, because one would 
enter it with the presumption that none of those patients would 
respond, and I think we would all find that to be a disturbing 
way to develop the drug if one was truly convinced by the data.
    We did not find that data compelling, but we actually 
reviewed that data after the fact, after the Phase II study was 
completed. Based upon that, we recommended that a randomized 
study be performed. The company was persistent in their belief 
that Erbitux is not going to be an active agent, or would not 
have been an active agent when give alone.
    And they requested permission to conduct a small study in 
which the premise, the hypothesis, was that no patient would 
respond. And if they showed that in a relatively small number 
of patients, it could stop the exposure to patients of what 
they felt would be an ineffective therapy.
    We recognized that could have been a risky approach because 
their premise could have been wrong, and in fact it turned out 
we believe to be wrong, although I would have to say we have 
not yet verified any of the data even in the single-agent 
study.
    Mr. Greenwood. Given the limited time we have, I had two 
more questions of a very general nature. Where did this company 
go wrong? Where did ImClone make its gravest errors?
    Because what strikes every one of us is that there is this 
enormous gap between the buzz on this drug. This is attracting 
capital by the hundreds of millions, and this was attracting a 
company with the prestige of Bristol-Myers Squibb, and they put 
$2 billion on the table.
    This was a drug that was touted as the wonder drug or 
perhaps the best drug ever developed for cancer, and on, and 
on, and on, with highfalutin buzz on this drug, and yet as we 
have sat here all day long, what we have seen is a risky 
venture.
    What we have seen is a dearth of information or we have 
seen lots of sizzle, but not a lot of steak here. So that is 
what this hearing is all about. How could such a disparity 
between the promise made to the patients about this drug, and 
the promise made to the investors, could have existed when in 
fact just last December this was a fizzling dud?
    Ms. Keegan. Well, I think there is sometimes a discrepancy 
between the promise as it may sound to outsiders, and to an 
oncologist, who would actually find a response rate of 20 
percent in patients with no available therapy for colorectal 
cancer to actually be something of significance clinically and 
medically.
    So if that were in fact the case, I think we would find 
that probably compelling and that was why we were willing to 
listen to the company in August 2001 and when we pursued this.
    One of the major deficiencies that I see was in the conduct 
of the clinical trial, and in the oversight of the clinical 
trial, and in ensuring that the investigators followed the 
clinical trial, and that the data that the protocol required to 
be collected, was collected, and that the records were 
available for review.
    I think that was one major deficiency. And as Bristol-Myers 
Squibb said earlier, that was a basic expectation of Bristol, 
and that was a basic expectation of the FDA that that would 
have been done. We did not even discuss that issue. We presumed 
that it had occurred, and it did not, and I think that is a 
significant failing that none of us anticipated.
    Mr. Greenwood. And to what would you attribute that? The 
thing that is remarkable about this is that if you tell the 
world that you have in your possession the Holy Grail of cancer 
treatment, and then when it comes to the conduct of the 
clinical trials, you have this half-hazard conduct, the two--I 
can't get these two things to compute. How could that happen? 
Dr. Pazdur.
    Mr. Pazdur. It is called good drug, bad development plan, 
and there is nothing that we can do about that at the present 
time. For example, we may have a meeting with the company, and 
talk to them about a development plan, and they could walk out 
of this office and do another development plan if they wish.
    I cannot take a gun to somebody's head basically and say 
you must do what I say here. Nor do I have any recourse to 
publicly address that issue.
    Mr. Greenwood. One final question. When the FDA approves of 
a drug, it is very, very prescriptive in what you may and may 
not say about the efficacy of that drug, very, very 
prescriptive. Very complicated labels as to the claims that may 
be made.
    In the period prior to approval of a drug, or prior to the 
refusal to file a letter of disapproval, it seems that the 
company can say just about anything. I mean, it seems that the 
company has this tremendous latitude to say this drug will 
enable you to fly to the moon and back.
    The FDA has some pre-market jurisdiction with regard to 
such claims, and so could someone help me here with again the 
discrepancy between--what I am wondering is does the FDA need 
more power to rein some of these companies in, because a 
phenomena in which a company pumps up its potentiality to draw 
investor capital dollars, and to draw in big players in mergers 
and acquisitions, and so forth, they have tremendous power to 
do that.
    And regardless of whether what they have is really going to 
do what it says, and very few investors are going to be able to 
understand the complexities of a cancer treatment. So is there 
a problem here that the FDA needs to have a little bit more 
regulatory ability with regard to the claims that companies can 
make while their product is pending?
    Ms. Keegan. What I would say is that we actually do have 
the ability if we believe that somebody is clearly making false 
and misleading statements. But what we don't have are the 
resources and the staff to continually monitor for this.
    Mr. Greenwood. Well, someone said that some of the FDA 
staff were cringing as they were watching 60 Minutes, and so 
forth. Were any of you among the cringers watching 60 Minutes?
    Ms. Keegan. My personal recollection of that 60 Minutes was 
very much like Dr. Waksal's, which is the focus of that meeting 
was really on access for patients, and how that was not 
equitable. I don't recall a lot about things that made me 
cringe in that.
    Mr. Greenwood. But what you have said is that if you had 
more resources and personnel that you could do a better job of 
perhaps making certain that the claims that are made about 
pending drugs and other products are reasonably close to 
accurate?
    Ms. Keegan. Yes. That is actually done by a different 
group. I mean, our particular staff are medical officers, and 
that is not our function. But if there was better resources in 
order to monitor, I don't think we have a systematic program 
for doing that. We usually are reactive in that sense if 
somebody brings a particular claim, or a particular egregious 
statement to our attention.
    Mr. Greenwood. Thank you.
    Mr. Pazdur. Here again, most of these are made--most of 
DDMAC, which handles the advertising, and looks over 
advertising of drugs, okay? These claims of pre-approval are 
usually press releases, et cetera.
    And which I am not quite sure how much DDMAC gets into. But 
we have really no regulatory authority over, I don't believe, 
of press releases after a meeting with the FDA.
    For example, where we could have a very contentious 
meeting, and this is not uncommon that our medical officers 
then pull something off Reuters News or something like that, 
that says that the meeting with the FDA was a very fruitful and 
productive meeting, which is exactly the opposite of what it 
was. And we have no way to basically counteract that in 
essence.
    Mr. Greenwood. The Chair recognizes the gentleman from 
Michigan, Mr. Stupak.
    Mr. Stupak. Thank you, Mr. Chairman. But doesn't the FDA 
get concerned when as in Business Week, the first question I 
asked today, that this drug was the furthest along of a handful 
of new cancer treatments that precisely home in on a growth 
signal found in up to 50 percent of all cancer types? Isn't 
that an over-hype of the statement?
    Ms. Keegan. I am not certain that it is. It is the one for 
which we have had a pre-BLA meeting the earliest, and it does 
work against the growth factor receptors. So I am not certain 
what about that statement that you find particularly 
disturbing.
    Mr. Stupak. Well, in the cancers that we have heard about 
thus far today is colorectal, and I think there might have been 
some renal, and there was some questions about neck cancer. 
There is more than six times of cancer isn't there?
    Ms. Keegan. That's correct. The epidural growth factor 
receptor that Erbitux reacts with, and that other drugs are 
working on, are found on a variety of solid tumors.
    Mr. Stupak. So 50 percent would be a rather misleading 
statement would it not?
    Ms. Keegan. I think that is where that comes from, yes.
    Mr. Stupak. So even though you were in the process of doing 
an accelerated statement, you didn't think the FDA as a public 
health agency had a right to comment on this?
    Ms. Keegan. I am not sure that I am finding it to be as 
problematic as you are.
    Mr. Stupak. Well, maybe we see it as problematic of all the 
investors, of all the patients, and all their family members 
who were basically led down the road on this miracle drug that 
is going to cure up to 50 percent of the growth in cancer 
tumors in the United States.
    In fact, after the USA Today article ran, they were 
receiving 400 calls a day. I am sure that the FDA must have 
received at least one call. I mean, I see that you are 
laughing, but I don't find that a laughing matter.
    We are having a hearing because if we are going to have 
people out there over-hyping their drugs, and the FDA knows 
that it is not true, and they don't say anything, how does the 
American people, the investors, large and small, know what the 
heck is going on here?
    And when it shoots up into the top 100 drugs of NASDAQ, 
that is a concern here. And we look to the FDA, at least us up 
here, and some of us who have been on the committee for a while 
at O&I, to at least set the record straight when misstatements 
are being made that not only harm people who have cancer, but 
also investors, and companies, and individuals who may finally 
put their faith in there because they are at a very desperate 
stage in their life, especially those who have cancer.
    And so I think there is a responsibility here of the lead 
public health agency in the United States to at least say 
something, and not just write it off as, oh, well, it is just 
another hype story.
    Ms. Keegan. I'm sorry. I smiled because you said you 
figured that the FDA got at least one phone call, and I am 
certain that we got way more than one following the publication 
of that.
    I completely agree that it is extremely unfortunate when 
this information is provided and when cancer patient's hopes 
are raised. I would say that particularly for pre-market 
applications that we don't always have all the information in 
hand, and we rely on the investigators who are publishing 
results, and on the company who are providing summary data to 
provide accurate information.
    And we don't always have all the information available to 
know if every statement being made is true or false, and we 
certainly don't have the resources to review every statement 
made about every drug in the pre-market phase and determine its 
accuracy.
    Mr. Stupak. We are not asking for every statement or every 
press release to be reviewed. It's just that in your area of 
expertise of cancer oncology--I mean, you are looking at a drug 
here which is the second most prevalent--I'm sorry, a cancer 
that is the second most prevalent, and probably one of the most 
deadliest.
    And I think that there is some responsibility there for the 
FDA to at least when they see, whether it is 60 Minutes, or USA 
Today, or Business News, to at least say something to inform 
the public. After all, it is the public that you are supposed 
to keep foremost in your mind.
    Let me ask you this. Fast track. Is it used only for life-
threatening drugs, or is it used for drugs where there is an 
unmet medical need?
    Ms. Keegan. It should be used for both those conditions; 
either life-threatening, or serious disease where there is an 
unmet medical need.
    Mr. Stupak. And fast track has been around since Congress 
granted it in 1997. Has any other drugs other than cancer drugs 
where fast track has been used to get cancer drugs up there?
    Ms. Keegan. I don't know the history of all the others, but 
I would guess that there are some other drugs that have been 
evaluated, and AIDS would certainly fall in that 
classification.
    Mr. Stupak. So AIDS would be one of them. Dr. Pazdur, are 
there any others?
    Mr. Pazdur. I was just going to say AIDS is the most common 
one now.
    Mr. Stupak. And that was the one that really spurred the 
1997 amendments to PDUFA?
    Mr. Pazdur. Yes.
    Mr. Stupak. All right. There was a pre-meeting of your 
August 2000 meeting with ImClone, and in the pre-meeting, the 
primary FDA medical review officer indicated her reservations 
concerning the 9923 study, and that is Dr. Jerian. Is that you?
    Ms. Jerian. Yes, that's me.
    Mr. Stupak. Who is part of this team that met in August of 
2000 with ImClone?
    Ms. Jerian. This the IND Review Team, which would typically 
consist of the clinical reviewer, the oncology reviewer, often 
including the supervisors of those reviewers, and the 
regulatory project manager. And at times also including the 
product reviewer.
    Mr. Stupak. So your recommendation that this not be--or at 
least your reservations, that was shared with everybody was it?
    Mr. Jerian. I shared my opinion about the request of the 
sponsor at that meeting.
    Mr. Stupak. At the meeting?
    Mr. Jerian. At the pre-meeting.
    Mr. Stupak. And then you had the meeting of August 11, 
correct, with ImClone?
    Mr. Jerian. Yes.
    Mr. Stupak. And you were there?
    Ms. Jerian. Yes.
    Mr. Stupak. Okay. What transpired and did you change your 
mind about those reservations at this meeting?
    Ms. Jerian. I did not change my mind.
    Mr. Stupak. Okay. How then was this allowed to proceed then 
if you did not change your mind? You are the medical officer, 
and you are the person who is primarily responsible for 
overlooking this application, or this request for fast track; 
is that not correct?
    Ms. Jerian. I am the primary medical officer, and I report 
to my supervisors, and my supervising medical officer at that 
time during the meeting felt that a different approach would be 
appropriate.
    Mr. Stupak. Okay. Just one person thought that, your 
supervisor, or did everyone thing that? Obviously, you didn't, 
but I mean, did the rest of the people there think that?
    I guess I am trying to figure out how did this come about? 
I mean, you are at a meeting, and you have this memo or pre-
meeting at which yo decide that they have to go a long way to 
convince us.
    And you are in the meeting, and you are the primary medical 
review officer, and they have not convinced you, but somehow 
they get this application to go forward.
    Ms. Jerian. If I am in a meeting with a sponsor, and my 
supervisor has made a decision, that person is my supervisor, 
and I defer to them.
    Mr. Stupak. Okay. So is the decision made upon review of 
medical or new medical evidence, or just upon hierarchy?
    Ms. Jerian. I would have to defer to my supervisor to 
answer that question, because it----
    Mr. Stupak. Well, let me put it like this. Was there new 
medical evidence submitted on August 11, which would change 
your opinion?
    Ms. Jerian. In my recollection, there was no new medical 
evidence based on my review.
    Mr. Stupak. Well, your supervisor was Dr. Keegan then, 
right?
    Ms. Jerian. That's correct.
    Mr. Stupak. So then, Dr. Keegan, why was the medical review 
overruled if you will, or the supervisor overruled the 
decision, or the medical review officer's indications?
    Ms. Keegan. I would attribute it to a difference of opinion 
in looking at the information. It was my assessment that a drug 
that is purported to give an approximately 20 percent response 
rate in patients with refractory disease was something that 
should be evaluated further.
    And we should provide guidance to the company on the kinds 
of information, and the way they should go about providing 
evidence to the FDA so that we could consider that and review 
the data.
    Mr. Stupak. So before August 11 then, did you review the 
medical evidence that had been submitted?
    Ms. Keegan. I did not review the entire file. I reviewed 
the pre-meeting package, which was provided to us, which was 
the summary data.
    Mr. Stupak. And in that pre-meeting documentation, it had 
Dr. Jerian's recommendation that we not move forward with this, 
correct?
    Ms. Keegan. Could you repeat that?
    Mr. Stupak. Sure. You said that you reviewed the pre-
meeting documentation, and you read some of it, and there was a 
summary, and I expect that would include Dr. Jerian's 
recommendation that you not move forward with this?
    Ms. Keegan. Dr. Jerian's recommendations were really 
verbal. We had a meeting, a discussion, for which there were no 
minutes kept, and I think the handwritten notes were really her 
assessment written down, but there was no formal memo written. 
I think it was just the discussion of the review team.
    Mr. Stupak. Okay. Well, her memo, and her notes from the 
meeting, state that ORR, overall response rate, equals 15 
percent clinically significant for colorectal track--I'm sorry, 
for colorectal CPT-11 failure, correct? That is one of her 
concerns, right?
    Ms. Keegan. Yes.
    Mr. Stupak. Is that correct?
    Ms. Jerian. May I clarify?
    Mr. Stupak. Sure.
    Ms. Jerian. I believe what you are reading from, although 
it would help if I could see the document, are the questions 
that the sponsor was asking of us.
    Mr. Stupak. Okay. And then there is another one that says 
CP02-9923, and that is the protocol that we are talking about, 
meet accelerated approval criteria in fast track, and then 
after that it says no. So that would be from your notes, right?
    Ms. Jerian. Those are from my notes, yes.
    Mr. Stupak. Okay. So was it the 20 percent then, because 
the medical review officer was saying 15 percent; and is it the 
20 percent that was in that you decided that we should shoot 
for?
    Ms. Keegan. Well, actually, it was the precedent that has 
been set by the approval of the irinotecan, which was approved 
on an overall response rate of 13 percent.
    And if 13 percent was sufficient to approve irinotecan, it 
is hard for me to believe that we should judge a much higher 
standard for Erbitux.
    Mr. Stupak. Sure. Irinotecan was a single agent?
    Ms. Keegan. That's correct.
    Mr. Stupak. And also demonstrated life expectancy, correct?
    Ms. Keegan. Not on the original approval. The original 
approval was based only on response rate information in 
patients who had failed the available standard therapy. So the 
setting was very similar in the question being addressed to us.
    Mr. Stupak. Okay. Well, is it fair to say then that you 
were mislead on the single agent idea that was put forth?
    Ms. Keegan. By ImClone?
    Mr. Stupak. Yes.
    Ms. Keegan. I felt that when they told me, or when they 
told the group at the meeting, that the information in the 
application would satisfy us, that we would find that 
compelling and convincing, I felt mislead personally.
    That may be a difference of interpretation. They certainly 
seemed to very much believe that even after we told them that 
we didn't concur with that assessment.
    Mr. Stupak. So you told them that you didn't concur with 
that, but they insisted that they could prove this to you on 
this single agent? You have to say yes or no.
    Ms. Keegan. I'm sorry, yes. They felt that they could. They 
felt very strongly that--and they represented to us, to the 
point of saying that they felt that it would be unethical to 
conduct a single agent study, and that is where we felt we 
could not agree with that statement, and why we told them they 
should do a study.
    Mr. Greenwood. The gentleman's time has expired. The Chair 
recognizes the gentleman from Kentucky, Dr. Fletcher.
    Mr. Fletcher. Thank you, Mr. Chairman, and certainly I 
thank you all for coming. It has been a long day for you, I'm 
sure. Let me just ask first, and I guess Dr. Keegan, this would 
be probably addressed to you.
    But was this the first clinical drug trial or request for 
approval of a particular agent from ImClone to the FDA?
    Ms. Keegan. They have a number of studies in development 
programs in other cancers, and we had been talking about other 
development programs. But this was their first approach with a 
completed study sent that they felt might be reasonable to 
consider for accelerated approval.
    Mr. Fletcher. Does the FDA, who works with a lot of 
companies, many like Bristol-Myers Squibb, who had extensive 
experience with the FDA, and given that, does the FDA have any 
protocol for new, relatively small, companies that come out to 
assist them to make sure that they comply with the protocols 
that they are adequately informed as we go through this 
process?
    Ms. Keegan. No.
    Mr. Fletcher. Do you think that would be helpful?
    Ms. Keegan. I am sure that it would be helpful to the 
companies. I am not sure how we would accomplish that given our 
current resources.
    Mr. Fletcher. Let me go back. I believe you were here and 
you heard Dr. Waksal talk about--and I guess you reported that 
the discipline of the clinical trial was poor.
    And yet we are dealing with the premier institutions in the 
United States, and probably the premier in the world, and how 
does that occur, and have you seen this before?
    Ms. Keegan. I would say that most protocols have a very low 
rate of protocol violations, but I have never seen a perfect 
study. The number of deviations in this protocol was out of the 
norm in my experience, and it exceeded what we expected 
certainly.
    Mr. Fletcher. Dr. Pazdur, do you have any comment on that?
    Mr. Pazdur. Yes, I do. I have been an investigator for 
almost 20 years before I joined the FDA at the Anderson Cancer 
Center, and I have done work in colorectal cancer.
    The issue here is the supervision that a pharmaceutical 
company has to give the sites, and there has to be a fairly 
frequent auditing of the data by qualified auditors either from 
the company, or from a CRO, a contract research organization.
    I don't know if this was in place since I was not involved 
with this study, but it is not just the institutions. There is 
obviously people that are there and variations in the 
investigators in any institution.
    But the overall supervision of a study is the 
responsibility of the company, and there has to be some type of 
careful auditing plan. Usually a periodic audit of the data on 
a monthly, or bi-monthly, quarterly basis, would have caught 
some of these errors.
    So they would not have been problematic and this data would 
not have been submitted in such poor quality shape here.
    Mr. Fletcher. My understanding is that clinicians do not 
deviate from requirements based on their best judgment, and 
that the patient is eligible for the study. Is that a legal 
requirement?
    Ms. Keegan. All the investigators who conduct studies under 
IND sign a statement, a government form, called a 1572, in 
which they agree to basically conduct the study according to 
good clinical practices.
    It is not enumerated in that, but it basically is a 
statement that they will adhere to their obligations as a 
clinical investigator. In that sense, it is a legal 
requirement. I am not certain that every physician who signs 
that form understands that, but it is a legal requirement, and 
a form that they are to sign.
    Mr. Fletcher. Dr. Pazdur, you obviously participated in 
this. I have been a participant somewhat as a clinician, and 
more of referring patients, and kind of following them along 
and training, but we were pretty strict on that, because it is 
your reputation at stake. And what happened here?
    Mr. Pazdur. I don't know. I don't know. You are entirely 
right. When you have a protocol, and it specifies the 
eligibility criteria, a competent investigator should follow 
those eligibility criteria. It is not a game of chance here.
    If it says that a BUN has to be such and such value, then 
it has to be that value, or less, or greater than a particular 
value. It is not left up for the judgment of the investigator.
    Mr. Fletcher. Well, there is one patient here, Patient 
Number 20635, that received the irinotecan for a certain period 
of time, and there was no CAT scan to evaluate the response 
during this period. It indicated that as a matter of fact that 
the CAT scan report on one cycle of the drug that we are 
talking about showed that the patient had no metastatic disease 
at all.
    And the question is was this a miraculous cure, or was 
there any metastatic disease at the very beginning, and that is 
just very troubling. There is something called a special 
protocol assessment, and----
    Mr. Pazdur. But could I just--I think what you are pointing 
to and getting at is that it is sloppy work.
    Mr. Fletcher. Well, that's it, and I have the utmost 
respect for our institutions of health care in this country, 
even though a company has the inexperience, and that's why I 
wanted to ask you about this special protocol assessments.
    Is there a mechanism that when you have a company that may 
have an excellent product, and some very brilliant minds that 
have developed something, that as they bring it to the FDA that 
there is some assurance that there are some special protocol 
assessments that are done to ensure that they are following 
this protocol?
    Because that is in the interests of the patient, and I 
realize that there is staffing limitations, et cetera.
    Mr. Pazdur. The special protocol assessment isn't to follow 
a protocol or to audit it as you are suggesting. What special 
protocol assessments are, are basically we have a meeting with 
the company, an end of phase two meeting, where we discuss 
their pivotal registration trials.
    Those trials, the written protocol is then sent to the FDA. 
That protocol is then reviewed in detail. The statistical plan 
is looked at, and the eligibility plan is looked at. The 
treatment plan is looked at. They then get a written letter 
back from the FDA with what the FDA would like to see in the 
protocol, and what the company would like to see in the 
protocol. A meeting of minds is had there, and an agreement on 
a final protocol is established.
    The meaning of a special protocol assessment then is that 
the FDA cannot deviate from its agreement with the company on 
that unless there is an overwhelming new medical discovery that 
comes along, or new medical situation.
    So it locks the FDA and the sponsor into an agreement, and 
that has to be so that the FDA does not have the complaint that 
we are arbitrary and capricious in our decisions, and in our 
review, and we said this at one time, and we said something 
else at another time. It locks us into an agreement.
    Mr. Fletcher. Let me ask a couple of other questions. One 
is do you think--I mean, these are patients where we have to 
understand from a clinical standpoint that you are dealing with 
patients who have no other hope.
    So there is a strong desire to give them some hope, and if 
a clinician sees that this medication--I just came from a 
patient who had a response to this, and it is promising, 
certainly there would be a great deal of pressure to make sure 
that this individual was eligible.
    You are dealing with real people, and you are dealing with 
hope where there is no hope. So do you think that influenced 
the discipline, or the lack of discipline that we see in this 
study or not? Including the hype about the effectiveness of 
this drug.
    Mr. Pazdur. Possibly, but we see that in other areas, and 
that doesn't account for really sloppiness to be honest, and to 
really evaluate the situation.
    There are other mechanisms to avail the patient to 
therapies, rather than trying to get them in to the protocol in 
an artificial fashion, and those include a compassionate use 
program, expanded access program, et cetera.
    Mr. Fletcher. So that is not an excuse for not complying?
    Mr. Pazdur. It should not be.
    Mr. Fletcher. Because actually in the long run from what I 
understand, you would discredit the trial, which would hurt 
patients in the future, which is exactly what happened here. 
Dr. Keegan, let me ask you something.
    We have this disparity, in the sense that as a trial is 
being done, a company has the ability to issue press releases 
and with the result in this situation of producing a lot of 
enthusiasm about a drug that may be overstated and maybe not.
    But in this case, you all are setting--and I think the 
chairman mentioned this, you are there watching this happen, 
and yet one of the requirements or restrictions on the FDA of 
speaking up when you see this going on, especially--and, Dr. 
Jerian, you mentioned that you had some concerns about the 
clinical trial as it goes on.
    I mean, are you all restricted from coming out and saying 
anything? What kind of restrictions do the regulations have? I 
know that there is some proprietary information that you have 
that you can't disclose, but what are the restrictions on you 
all speaking up as you see this disparity of a lot of hype that 
went on in the ImClone situation?
    And do you have a protocol on that? I mean, how do you all 
deal with this?
    Ms. Keegan. I don't know that we have an absolute standing 
operating procedure that is written. If we were to see 
something very disturbing in the Center for Biologics, because 
we have a slightly different administrative structure, we would 
refer our concerns to the advertising and promotional labeling 
branch, and say we have some concerns about this.
    And to the extent that we have in our hands the facts and 
can document that the statements are untrue, and the statements 
are very egregious, it is possible that the advertising and 
promotional labeling branch could write some sort of letter to 
the sponsor indicating which statements we object to and which 
we think are false and misleading.
    I think we are often hampered in the pre-marketing setting 
by, one, not actually having the facts and the raw data, and 
not being able to tell how far off the mark they are, and the 
others might be ones of semantics. If someone says interesting, 
it is hard to say that is a misleading statement.
    Mr. Fletcher. In this situation, and I know that the August 
meeting of 2000 requested fast track, and you felt like the 
trial was adequate at that time given the fact of a 23 percent 
response. You didn't feel like a randomized trial was necessary 
at that time because you didn't want to deprive patients from 
the medication, and we can understand all of that.
    But as things started to unfold did you all become more 
skeptical of this, and if you did, how much communication was 
there where you picked up the phone and said, Sam, I think you 
all are overselling this thing, and you might want to back off?
    Ms. Keegan. I would say that I think that a reviewer, or an 
individual could feel that they could make those statements to 
a sponsor, but that would not carry the same weight as coming 
to--as a letter or some other action.
    However, I think again that the situation was in somewhat a 
state of flux at the time, particularly during the review as we 
were just becoming aware of some of these.
    And I think that we have spent our focus on assessing the 
application and not on monitoring the statements that were 
being made publicly. At least I would say for myself that I 
really don't on a regular basis review the press releases and 
the clippings, because I have other things that occupy my time.
    Mr. Fletcher. Mr. Chairman, I certainly appreciate the 
opportunity. Thank you very much, and thank you all.
    Mr. Greenwood. The Chair thanks the gentleman. Dr. Mills, 
when did you come to the realization that the deficiency in the 
ImClone application were too great and that a refusal to file 
letter would be necessary?
    Mr. Mills. At the standpoint that there were a number of 
points, where we were talking with ImClone and discussing 
elements that we found in the submission which were defective. 
By November 30, where we had a telecon with ImClone, and 
discussing some additional elements on that day.
    At that time, the number of defects that I had discovered 
with Dr. Lee Pai-Scherf, such that we both came to the 
conclusion in that telecon that we felt we needed to recommend 
to our group that it was time to consider a refusal to file.
    When we had just come out of that telecon, we briefed Dr. 
Keegan at that time, and we gave her the information. She 
certainly understood our concerns, and she certainly felt that 
we needed to provide the documentation to her because we were 
just coming out of the telecon.
    In the course of the following week, it was arrived that we 
were going to refuse to file, based upon that information that 
we had discovered in the course of the review, and the filing 
issues.
    Mr. Greenwood. Did you have a meeting on December 4 with 
Lilly Lee?
    Mr. Mills. That is correct.
    Mr. Greenwood. Okay. Now, you were here for her testimony?
    Mr. Mills. Yes.
    Mr. Greenwood. Would you characterize that meeting in terms 
of the likely, or how you presented to her the likelihood of 
various outcomes, because it seemed to me that she was saying 
that what she came out of that meeting with was that, well, we 
could get a green light, or we could get a red light, or we 
could get a yellow light.
    The odds are relatively equal that we could get any of 
those outcomes. How would you characterize that meeting?
    Mr. Mills. I characterized it with Dr. Lee very carefully, 
that there were indeed four options that could occur. I wanted 
to maintain a very even balance, while I knew that my 
recommendation and Dr. Pai-Scherf's recommendation to Dr. 
Keegan a couple of days before was that we should refuse to 
file it.
    I also knew that we had not arrived at that decision as a 
group, and so, I presented to her in the discussion as it came 
up, would there be a potential that there would be a refusal to 
file? I went over the four potential options.
    Mr. Greenwood. Did you tell her that you had recommended to 
Dr. Keegan that there be a refusal to file?
    Mr. Mills. No.
    Mr. Greenwood. Why not?
    Mr. Mills. From the standpoint that that was an internal 
communication. I did not feel that it was appropriate. If I 
told her my recommendation at that time, then that would be 
disclosing information that was informal at that moment with 
Dr. Keegan one is the supervisor.
    Dr. Keegan's decision is what is going to hold the weight. 
As any of your staff would make staff recommendations from time 
to time, but you in your situation have to come to that final 
conclusion.
    So I would not disclose to her my internal recommendation, 
which was still based upon developing information. When I am 
still in the midst of doing the filing review, I may find 
additional information which may sway me back.
    At this time, though, I knew that I had that concern, that 
recommendation, but I wanted to be sure to present to her all 
of her options, and not to overweigh any of the options because 
I did not represent the entire organization at that moment.
    Mr. Greenwood. Did she specifically raise the question or 
ask the question are we going to get an RTF?
    Mr. Mills. That is my recollection of that conversation. 
She did ask that question.
    Mr. Greenwood. But you did not assign any probability to 
that?
    Mr. Mills. No, I did not. I told her and I explained that I 
could not. That it was the matter of our internal group 
discussion, and we do have a BLA review committee that is 
operational here. We also have our own internal organizational 
structure, a matrix management, where we discuss this and 
arrive at that type of decision.
    I, again, reviewed the four options that could occur from 
this point, but I was careful to maintain an even weight to 
them because we had not yet arrived at a decision.
    Mr. Greenwood. When the RTF letter came out, it had four 
concerns I think raised about the--well, four reasons why the 
RTF letter was given. Were those reasons shared with her? Were 
those concerns that eventually found their way to the RTF 
letter?
    Mr. Mills. Often----
    Mr. Greenwood. Were they shared with Dr. Lilly at that 
time?
    Mr. Mills. I want to be sure in terms of what we were 
sharing at that time, because it was an ongoing process. It is 
December 4, and we are going to go to December 28. So issues 
are coming in as we go.
    There was a stream of communications between Dr. Lee, Dr. 
Pai-Scherf, and myself over the course leading up to December 
4. Most of those issues that I was raising with her related to 
the review of the CT scans and the independent review.
    I had carefully documented those and made sure that ImClone 
was aware of them, and that they were able to give me full 
input, and to make sure that I was correct in my assessments 
that these were defects and that they were going to need 
repair.
    In each one of those cases that I had raised, we had 
communications back from Dr. Lee in the documents that we 
presented to the committee that indeed that she had agreed, and 
that they were going to need to be repaired.
    Mr. Greenwood. By December 4 was it clear to you and was it 
conveyed to Dr. Lee that more studies would be necessary?
    Mr. Mills. I don't know whether I could determine that more 
studies would be necessary. But, indeed, it was quite clear 
that the independent review committee was going to have to be 
brought back together, and the CT scans were going to have to 
be reviewed, and that they were going to have to be 
reassessed----
    Mr. Greenwood. I am referring specifically to a single 
agent study.
    Mr. Mills. The single agent study had come in and I believe 
that we actually had the result come in, and while I have heard 
December 4 throughout, I believe I knew about that result on 
December 3.
    But that she was aware of that result, and from the 
understanding that I had, that that was a remarkable piece of 
information, inasmuch as it had originally been purported to me 
that Erbitux alone was not going to show any responses.
    Mr. Greenwood. And finally in retrospect, and in looking 
prospectively to future applications, one of the things that is 
particularly troubling about this matter is that this drug 
had--that it may still hold great promise; great drug, bad 
study, as Dr. Pazdur said.
    Mr. Mills. Yes?
    Mr. Greenwood. It had such a hard landing, and when a drug 
has a hard landing like this, and the stock goes into a free 
fall, and investor confidence crumbles, and patient confidence 
and hope crumbles, and so forth, could that have been avoided, 
and should that have been avoided by the FDA at a date like 
December 4, saying, look, you might have had this conversation 
with Dr. Lilly.
    You might had said, look, I am going to tell you something, 
I have recommended an RTF You may want to--I think that is what 
is likely to happen. I can't be positive because it is subject 
to review. But you folks may want to pull back and withdraw 
your application now, and work on some of these things.
    And come back with this when you are ready so that your--
because you know when an RTF letter comes out, it is a 
relatively unusual thing, and you know that the impact that is 
likely to have on the product with such enormous expectations, 
and this sudden and hard, and devastating landing for the 
product.
    Would it not have been better had you done what I 
suggested, and that is offered them the opportunity to withdraw 
their application, and work on it, and come back later to avoid 
this relatively public embarrassment?
    Mr. Mills. From the standpoint of the four options that I 
discussed with her, the fourth option that I was clear to 
remind her of, that in view of the single agent study, Erbitux 
alone, the result had just come in, plus the findings to date, 
which showed a number of things that were going to need to be 
repaired, and which she agreed to already, that ImClone always 
has the option to withdraw, and to be able to come back and 
represent this data. So there were three options that were 
available to the FDA, in terms of the review, and the fourth 
option was there with ImClone.
    While I made sure that the balance was there, it was 
remarkable for me at that moment in time, half-way through the 
review cycle for filing purposes, to be able to tell a sponsor 
that that is a consideration, and you should consider it in 
view of everything that you know to date, and especially when 
you decided, as she had, to come down independently that day 
unannounced prior to an e-mail coming from her on the train 
that she would like to meet with us, and that she had had that 
much concern.
    Mr. Greenwood. Well, I might question whether in fact your 
presentation should have been so balanced, when in fact the 
likelihood in your own mind was that those were not equally 
likely outcomes.
    Mr. Mills. Well, from that standpoint here, I fully 
understand your question. Please bear with me, in terms of 
understanding that I was only halfway through the filing 
assessment, and I still had to present all of my data and to 
get confirmation from my organization.
    I don't think you want, necessarily, a medical reviewer 
independently deciding to tell any sponsor that their drug 
should be withdrawn halfway through the filing, necessarily, 
without full coordination with the rest of the agency.
    And while I might think that my opinion is the opinion, it 
is an organization that is a matrix, and there are a number of 
people who have input.
    Mr. Greenwood. Well, when the team made the decision the 
next day to go to the RTF, and then there was nearly 3 weeks, 
or about 3 weeks went by before they got their letter, you did 
have the opportunity to assertively contact the company and say 
I am now not compelled to give you such a balanced review, but 
to suggest to you strongly that your options have narrowed to 
two; withdrawal or an RTF.
    And I would ask the question, Dr. Pazdur, how would your 
side of the shop have handled it?
    Mr. Pazdur. I think that you really hit upon a very 
important point here, and that is that there is a high degree 
of inconsistency on how the agency communicates with sponsors.
    And I think that maybe this puts a spotlight on it. And a 
lot of it has to do with personal preference of the director of 
the division, for example, and I can't really speak for what 
goes on in CBER.
    For a refuse to file, for example, that we had recently, we 
took a look at the data, and within 1 week we realized that 
they forgot to collect an important element, the duration of 
responses.
    So I called up the sponsor and said no way this is going to 
make it. I am not going to waste our resources reviewing a 
document when you know that you have a fatal flaw here. Why 
don't you withdraw it, and you are going to need a new study.
    We have meetings before an application comes in and 
frequently if I realize that there is a fatal flaw in the 
application, why not address it up front with a sponsor and say 
don't even bother submitting this.
    I don't want to waste our review time, our resources. It 
takes one medical officer on a priority review 6 months 
basically full-time, and if you already know on a priority that 
there is a fatal flaw here, why bother going through the 
mechanics of a review.
    So I think in essence that there is a high degree of 
variability from one division to another. For example, even on 
non-approval letters, with some companies we may call them up 
once we have reached that decision and say you have the option. 
Do you want a non-approval letter or do you want to withdraw 
the application, and here again there is not a consistent 
approach within the agency dealing with this, and I think it is 
a very important element that needs to be addressed.
    Mr. Greenwood. Dr. Keegan, do you want to say something?
    Ms. Keegan. Yes. I would agree with Dr. Pazdur that if at 
the time that we met with the company on a particular product 
that we felt that there was no way that we were going to be 
able to approve--for example, if we knew that the major end 
point of the study, that the primary goal of the study had 
failed, and that they had not shown what they had intended to 
show, we would tell a company and that we considered this to be 
a negative study, that they should not file it and they should 
not even attempt to submit an application. I think the 
circumstances here are a little bit different, in that some of 
the flaws only became available to us as we reviewed the 
application. And there is a difference in approach here.
    We have not to my knowledge in the Center for Biologics in 
our office called up the sponsor and said we are going to 
refuse to file this application. Do you want to withdraw.
    I think we don't do that for several reasons and I can't 
speak to all of them because we haven't actually gone through a 
major discussion, but one consideration would be that such a 
phone call might to some extent be considered coercive; to call 
up a company and say do this, and if you don't withdraw, we are 
sending you this letter. It is a consideration that some people 
might----
    Mr. Greenwood. I don't know. I think if someone said to me 
that you can step off the scaffold, or we can pull the trap 
door, I think I would like to exercise my options. The 
gentleman from Michigan.
    Mr. Stupak. Well, thank you. Along those lines then, if 
ImClone had the inclining that they might get an RTF, did they 
ever call and ask can we withdraw our drug until we submit 
further documentation?
    Ms. Keegan. I was never contacted with a request like that.
    Mr. Stupak. Was anyone?
    Ms. Keegan. And I don't know of anyone who was.
    Mr. Stupak. And like the FDA, and instead of them taking 
the positive approach, or however you want to look at it, the 
approach that maybe you should withdraw, the company also could 
have requested a withdrawal before that December 28 RTF came 
out, correct?
    Mr. Mills. I had advised them on December 4 that that was 
their option, and reminded them that is an option that they can 
exercise. Let met emphasize that on December 12 that we had a 
follow-up telecon with Bristol-Myers, also on the line at that 
time, where we went through each of the issues again that we 
had focused on all of the telecons up to that date to make sure 
and reconfirm each time.
    At that time, they were quite aware that these were 
significant issues, and there were numerous issues, and that 
they were going to require significant amounts of time to 
repair.
    Mr. Stupak. Now, the design of the 9923 protocol, that was 
ImClone's stage two study, correct?
    Mr. Mills. Yes.
    Mr. Stupak. And that was later submitted as a study for 
this fast track approval, correct?
    Mr. Mills. Yes.
    Ms. Keegan. What was requested was the portion of the study 
that met the criteria that we discussed in the August 11 
meeting, the subset of the patients in that study, but not the 
protocol itself, but some modification of that.
    Mr. Stupak. Well, the experts, and I think that Dr. Weiss 
had talked about this, that the protocol for 9923 was really 
flawed. In fact, they cite another oncologist that stated, and 
let me quote, that overall this was a protocol that asked the 
wrong questions, and then is not tightly written and efficient. 
The protocol generates far more questions than it could ever 
answer. It is a blue print for the production of vague answers.
    So the protocol from the very beginning had fatal flaws in 
it.
    Ms. Keegan. I would disagree with that. I think that there 
were issues with the protocol that were problematic, but 
presented with the results of the study, we didn't consider it 
to be a fatal flaw, but a protocol that didn't answer every 
question necessary to review the drug for approval.
    And that reflects the approach that I recommended that we 
take.
    Mr. Stupak. If the protocol was not a fatal flaw, then did 
you, Dr. Keegan, tell them what they had to do to correct 9923?
    Ms. Keegan. They couldn't correct the protocol after the 
fact. What we could do is arrive on a group of patients on whom 
we could assess the effectiveness, the activity, of Erbitux, 
and that is how I viewed the August 11, 2000 meeting; to 
determine whether or not there was a significant population.
    And we were told approximately 120 patients of the 138 in 
that study in whom we could assess Erbitux, and we discussed 
the criteria to be applied for that study, and how we would 
look at that.
    Mr. Stupak. And actually when you applied the criteria the 
138 went down to 89, which then made it statistically 
unacceptable, correct?
    Ms. Keegan. That was an issue with the conduct of the 
study. If in the conduct of the study data were not correct, 
that is different from the design, and I would just like to 
make that distinction.
    Mr. Stupak. Sure. And on August 11 when you met with 
ImClone, you not only met with your officials, but you met also 
with their consultants, right?
    Ms. Keegan. Yes.
    Mr. Stupak. And were these consultants of reputable stature 
within----
    Ms. Keegan. Yes. Dr. Saltz was their consultant for their 
colorectal application.
    Mr. Stupak. And did that doctor present some of ImClone's 
positions to you at that time or were they just there?
    Ms. Keegan. As I recall, he made the presentation of the 
study results as an investigator on the study 9923. And then 
other portions of the presentation were made by various 
additional members. I don't know if Dr. Mills or Dr. Jerian 
recollect any differently.
    Ms. Jerian. What I recall of what Dr. Saltz discussed was 
with what Dr. Keegan mentioned, and in addition when we asked 
about the issue of single agent use of Erbitux, he expressed 
the opinion that he felt that it would be unethical to study it 
as a single agent.
    Mr. Stupak. And, Dr. Pazdur, you said it is a good drug, 
bad development plan. Is it a good drug or a good idea behind a 
drug, and a bad development plan?
    Mr. Pazdur. Well, you have to understand that when we see 
activity, tumor shrinkage, in heavily pre-treated patients, 
that gives us the initial signal that there is something there 
to further develop.
    I think that this drug has shown some activity.
    Mr. Stupak. For shrinkage?
    Mr. Pazdur. Tumor shrinkage, okay. It's life's story is 
just beginning basically. What needs to be done is obviously to 
show that this drug works, and as I stated before, I firmly 
believe that as it is being done now that you needed a 
randomized study to show this.
    Mr. Stupak. To show that it works in what way?
    Mr. Pazdur. To show that it works with CPT-11. The clue 
here, or the major crux of the situation is in that original 
study with CPT-11, plus Erbitux, do you need the CPT-11 or 
irinotecan. I have no idea.
    And what their subsequent study, the single agent study, 
was that in order for that to work, you had to have a zero 
percent almost in the single agent Erbitux study. So in essence 
they were betting against their own drug to get the combination 
approved, which is a very faulty design.
    And that's why I am saying for a similar study or for a 
similar drug under development in our center, we have demanded 
that the sponsor do a randomized study, and work with the 
sponsor to achieve that, and they did for the exact same 
indication, a 600 patient study, and answered the question.
    So can it be done? Yes, it can be done, but you have to 
make sure basically that the sponsor adheres to the plan, and 
for the one indication for this drug, we actually had to work 
with the sponsor very closely in developing the protocol.
    But I guess to answer your question, Mr. Stupak, what I am 
saying here is that its initial activity is seen, and once 
these drugs get approved in a refractory setting, they are used 
in less advanced disease studies.
    They are eventually sent into patients that are adjuvant 
therapy, after surgery and very early staged patients that are 
at a high risk for a relapse. And that may even save lives of 
people who are at high risk for having a relapse after surgery.
    So it is a glimmer of activity that needs to be further 
developed.
    Mr. Greenwood. The gentleman's time has expired. The Chair 
recognizes the gentleman from Kentucky, Mr. Fletcher, for 5 
minutes.
    Mr. Fletcher. Thank you, Mr. Chairman. Let me certainly 
thank all of you for coming. Dr. Pai-Scherf, you are currently 
the medical review officer for Erbitux; is that right?
    Mr. Pai-Scherf. That's correct.
    Mr. Fletcher. And when did you take that position?
    Mr. Pai-Scherf. July 15, 2001, the file was transferred to 
me.
    Mr. Fletcher. Okay. So you have been through this process 
quite a bit. Now, as a medical review officer, what are your 
responsibilities on overseeing this study and the approval 
process?
    Mr. Pai-Scherf. My responsibility is to review the clinical 
portion of the BLA.
    Mr. Fletcher. Now, do you get ongoing reports back from 
these studies? In other words, as the data comes through, I 
guess you don't get all the data at once. Do you begin to get 
part of it?
    Mr. Pai-Scherf. The first portion of the clinical studies 
came in early October, and the final piece came on December 3. 
So I started my review in early October.
    Mr. Fletcher. And when did you really begin to see that, 
hey, there are some problems here, or did you see that there 
were problems?
    Mr. Pai-Scherf. In a very early stage of my review, I 
noticed some problems, and the first one is that we did not 
have documentation of the CT scan of the patients receiving 
irinotecan.
    Mr. Fletcher. So you could not document that they were non-
responders?
    Mr. Pai-Scherf. Yes. Yes, and that was the first piece and 
a very important piece.
    Mr. Fletcher. And at what point--well, who did you 
communicate that to?
    Mr. Pai-Scherf. With Dr. Lilly Lee.
    Mr. Fletcher. Dr. Lee with ImClone?
    Mr. Pai-Scherf. Yes.
    Mr. Fletcher. And that was reported that, hey, you have got 
some real documentation. Did they report back to try to get the 
documentation? Because that certainly looked to have a 
significant impact on the refusal to file letter.
    Mr. Pai-Scherf. First she reported that there were 11 
patients, and she sent me a table stating that there were 11 
patients who were ordered to have a CAT scan, or the physician 
never ordered, and felt that the patient progressed because of 
clinical judgment.
    Mr. Fletcher. And that is not adequate for your study at 
all. I mean, just a clinician's feeling from clinical judgment 
that the tumor has progressed is not an adequate data 
collection; is that right?
    Mr. Pai-Scherf. Not for a clinical study supporting 
licensure, no.
    Mr. Fletcher. Okay. Thank you. In your communication were 
you at a meeting with Dr. Lee on December 4 when she asked 
whether the FDA was going to send an RTF letter?
    Mr. Pai-Scherf. Dr. Lee was clearly concerned about all the 
issues that we had raised at that point.
    Mr. Fletcher. Were you at that meeting?
    Mr. Pai-Scherf. Yes.
    Mr. Fletcher. And so you were at that meeting. Okay.
    Mr. Pai-Scherf. And she stated that--she asked us if there 
would be an RTF.
    Mr. Fletcher. And what did you say?
    Mr. Pai-Scherf. Dr. Mills answered the question, and I 
agreed with what he said.
    Mr. Fletcher. Well, you had mentioned that earlier, but go 
ahead.
    Mr. Mills. From the standpoint again that I offered the 
four options that were available, three of which were FDA, and 
one of which was that I offered to ImClone that certainly they 
could withdraw.
    Mr. Fletcher. Let me ask a question, and I guess it is--I 
guess this probably goes to Dr. Keegan, but if somebody else 
has a responsibility, don't hesitate to answer it.
    We got testimony earlier from Mr. Bryan Markison that on 
December 25, of all days, Christmas, that he received a call 
from someone, and I don't know that we got that individual's 
name. But he received a call on December 25 that you all were 
likely--well, not only likely, but that it was going to occur, 
that an RTF letter would be issued.
    And the letter that came out, or at least the one that I 
see, has got stamped on it December 28. Now, what is the 
protocol here? Who leaked the information, and is that normal 
to leak the information, or is that okay to leak the 
information? It had tremendous impact on the executives, and 
family, friends, and other folks who ended up selling off a 
whole lot of stock based on that information.
    Ms. Keegan. Well, as Dr. Pazdur says, we do have the 
option, and in his center, he will actually inform a sponsor, a 
commercial firm, that they would refuse to file the application 
ahead of issuing the letter.
    There is no prohibition against telling a company that you 
will refuse to file their application. We did not choose to 
tell them that definitely before we sent the letter, but there 
is no prohibition against it.
    Mr. Fletcher. Given the fact, and I know that your area of 
expertise is not that of the SEC, or some of the other things, 
but should there be something? As someone mentioned, there is 
no standardization of communications to the companies, and Dr. 
Pazdur, you may have made that statement.
    Mr. Pazdur. Correct.
    Mr. Fletcher. Should we have some standardization given the 
impact of markets, the venture capital that is required in the 
development of these, and obviously the number of investors 
involved that were affected tremendously by this December 28 
letter, and some who used inside information to make a bundle?
    Ms. Keegan. Well, I think how someone chooses to use the 
information is not part of our procedure, and certainly any 
communication that we would provide, we would expect that the 
company would use it responsibly, or the individuals who 
received that.
    What I would say about standards is that I am not certain. 
I don't know if it is preferable to companies to be told and to 
have the opportunity to withdraw. It is certainly something 
that we could consider.
    As Dr. Pazdur says, every office within the Center for 
Drugs, as well as the three review offices within the Center 
for Biologics, may differ somewhat in terms of how they might 
approach that, and whether a standardization is preferable or 
beneficial, I don't know.
    Mr. Fletcher. Well, let me ask one final or just a few 
questions. Dr. Pazdur, you mentioned that this is probably a--
well, is this a promising drug?
    A promising drug class probably, but is it a promising 
drug?
    Mr. Pazdur. I think it is. I think it is, and what we have 
seen here as I have stated before is a good drug, bad 
development plan.
    Mr. Fletcher. What is the time line that you think that 
this randomized study will come out that this may come back and 
be issued? How soon do you think we can have this drug, if it 
is good as you feel it is, and obviously Bristol-Myers----
    Mr. Pazdur. I am not saying that it is as good as it is. I 
am just saying that it has the potential.
    Mr. Fletcher. Well, if it is 13 percent effective, and 
people have no other hope, and if it is that in some very 
recalcitrant tumors, think what it is in some less recalcitrant 
tumors.
    Mr. Pazdur. You've got it.
    Mr. Fletcher. I mean, you are able to affect shrinkage in 
tumors that have been resistant to everything. So that is a 
tremendous potential.
    Mr. Pazdur. Yes.
    Mr. Fletcher. So what is the timeframe that you think----
    Mr. Pazdur. I don't know what the current study is. Pat 
knows as far as the European study.
    Ms. Keegan. There is a study being conducted by another 
partner with ImClone, Merck KGA, and they are conducting a 
registration trial in Europe that is looking at a randomized 
trial of Erbitux alone, versus Erbitux plus irinotecan.
    That study has completed accrual, and I don't believe that 
the data are mature enough to analyze at this point. And I 
don't know the specific timeframes, but the study was conducted 
and has been completed, but is not yet ready for submission.
    Mr. Fletcher. Would that be submitted to the FDA, or would 
that be approved only in Europe?
    Ms. Keegan. No, at the time that we met with ImClone after 
the refusal to file letter in February 2002, we discussed the 
source of additional data, and they committed to providing the 
results of the Merck study to the USFDA and Merck committed to 
do that.
    Mr. Fletcher. Thank you. Mr. Chairman, I would just like to 
say in closing that there are several things which I think have 
been brought to our attention. One is the lack of discipline in 
this study, even by some of the finest experts in the country, 
and I think that is shocking.
    Second, I believe that the lack of standardization in 
communication is a real problem here, especially given the 
market impact that it has, and the financial impact that it has 
on a lot of investors that were caught unaware.
    And so I appreciate you holding this. I think it has 
uncovered some very important issues that need further work. 
Thank you.
    Mr. Greenwood. The Chair thanks the gentleman for his 
comments, and also for his attendance and participation in the 
hearing. I would add to that list of policy issues for us to 
address, and that I think we need to address the question of 
making sure that there is some process by which the claims of 
companies who have applications pending can be reviewed, and if 
necessary, curtailed, and reined in if in fact those are 
raising expectations that are significantly beyond the 
expectations that ought to be raised.
    Let me clear up just one final piece of information with 
Dr. Pai-Scherf and Dr. Mills. When Dr. Lilly arrived 
unannounced or had an unscheduled meeting on December 4, I 
believe it was her testimony earlier today that she did not 
initiate the question of are we going to get an RTF letter, and 
that she just wanted to check on things and see what the 
options were.
    I believe that it was both of your testimonies that she did 
raise that issue. So you are both nodding your heads?
    Mr. Mills. That is correct.
    Mr. Greenwood. For the record, since we don't record head 
nods.
    Mr. Mills. That's right. That is correct.
    Mr. Pai-Scherf. That is correct.
    Mr. Greenwood. Okay. Thank you. Thank you all for your 
presence and for waiting to testify, and I thank you for the 
work that you do on behalf of our country. The hearing is 
adjourned.
    [Whereupon, at 5:03 p.m., the subcommittee was adjourned.]













             AN INQUIRY INTO THE IMCLONE CANCER-DRUG STORY

                              ----------                              


                       THURSDAY, OCTOBER 10, 2002

                  House of Representatives,
                  Committee on Energy and Commerce,
              Subcommittee on Oversight and Investigations,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:10 a.m., in 
room 2123, Rayburn House Office Building, Hon. James C. 
Greenwood (chairman) presiding.
    Members present: Representatives Greenwood, Stearns, 
Whitfield, Fletcher, Deutsch, Stupak, Strickland, and DeGette.
    Staff present: Alan Slobodin, majority counsel; Anthony M. 
Cooke, majority counsel; Will Carty, legislative clerk; and 
David Nelson, minority Counsel.
    Mr. Greenwood. The meeting will come to order.
    Today the subcommittee continues its inquiry into the 
ImClone cancer-drug story. The purpose of this hearing is to 
help this committee, as well as the public, understand the 
circumstances surrounding the Food and Drug Administration's 
refusal to file the application for Erbitux, a highly 
publicized cancer drug developed by ImClone Systems, and how 
the cancer-drug approval system can be improved.
    Erbitux initially attracted national attention because it 
offered new hope for seriously ill colon cancer patients; and 
because of the premarket publicity about the drug, ImClone's 
record-setting $2 billion alliance with Bristol-Myers Squibb to 
market Erbitux, the controversy over the accuracy of ImClone's 
public descriptions of FDA's concerns in a nonpublic letter and 
multimillion dollar stock trades by ImClone insiders in the 
weeks before FDA's negative decision.
    On June 12, Samuel Waksal, one of the founders of ImClone 
and its former CEO, was arrested on a Federal criminal 
complaint for insider tipping, attempted insider trading, and 
false statements. In its complaint, the Federal Government 
alleged that members of Samuel Waksal's family had sold about 
$10 million worth of stock on December 27, 2001, based on tips 
by Dr. Waksal the day before the FDA's decision. Dr. Samuel 
Waksal himself allegedly attempted to sell about $5 million 
worth of ImClone stock by initially gifting the stock to one of 
his daughters and having her immediately sell it.
    At the subcommittee's hearing on June 13, we heard 
testimony from one of the committee's investigators and the 
committee-retained oncology consultant who reviewed some of the 
data and documentation from the key study on Erbitux. In 
addition, Dr. Samuel Waksal appeared and exercised his 
constitutional right not to testify. We heard testimony from 
witnesses from ImClone Systems, Bristol-Myers Squibb and the 
FDA.
    Some of the key findings from this hearing were that the 
primary FDA medical reviewer handling the Erbitux matter did 
not believe that ImClone's key study met the criteria for 
accelerated approval and fast-track designation. However, at a 
meeting between FDA and ImClone in August 2000, the senior FDA 
medical official in effect overruled the primary medical 
reviewer and said the protocol design was probably acceptable. 
The senior FDA official testified that she believed she was 
misled by ImClone about its claim that a human clinical trial 
showed that Erbitux had no activity when used alone.
    FDA granted fast-track designation to ImClone's Erbitux 
based on the wrong version of the protocol for the key study 
and was made before the agency had the single-agent data on 
Erbitux.
    ImClone testified that its officials believed that FDA had 
accepted the protocol design, that FDA had the correct protocol 
version and that they were not led to believe that any of the 
documentation problems and flaws in the studies would actually 
result in FDA refusing to file the Erbitux application.
    On December 24, a law firm retained by Bristol-Myers 
obtained information from an FDA source that confirmed ImClone 
would receive a refusal-to-file letter. This information in 
turn was passed to Harlan Waksal, the then chief operating 
officer at ImClone, on December 25.
    On December 28, 2001, FDA sent ImClone the refusal-to-file 
letter on the Erbitux application. In subsequent days, Samuel 
and Harlan Waksal portrayed the reasons for FDA's refusal-to-
file letter as based on a lack of proper documentation. 
However, excerpts of the refusal-to-file letter appeared in a 
trade publication that showed that FDA's concerns were more 
serious than just missing documentation and, in fact, raised 
serious questions about whether ImClone would have to obtain 
additional data from other preexisting studies or conduct new 
studies in order to get approval.
    The committee's oncology consultant testified that there 
were serious problems in the key study including high rates of 
patient ineligibility and waivers. In addition, Bristol-Myers' 
independent radiology review showed that strict scrutiny of the 
study data yielded only a response rate of 12.5 percent, less 
than ImClone's 15 percent goal and much less than the 22.5 
percent response rate presented to the public.
    Testimony from the FDA officials showed inconsistent 
approaches on drug product applications and interactions with 
companies between FDA's Center for Biologics and FDA's Center 
for Drugs.
    Since the June 13 hearing, there have been a number of 
major developments reported. On June 19, ImClone Systems 
received a Wells Notice from the Securities and Exchange 
Commission that appears to indicate that the SEC staff is 
considering recommending the Commission bring an action against 
ImClone relating to the company's disclosure immediately 
following its receipt of the refusal-to-file letter on December 
28.
    Besides Samuel Waksal and members of his immediate family, 
other individuals, notably Martha Stewart, have emerged as 
subjects of investigation for conduct related to trading 
ImClone stock immediately before the FDA letter was issued. 
With respect to Ms. Stewart, the committee on September 10 sent 
a bipartisan letter to the Attorney General requesting his 
consideration of concerns and information related to statements 
that Ms. Stewart caused to be made to the committee concerning 
her trade of ImClone stock.
    In August, a Federal grand jury in New York indicted Samuel 
Waksal on 13 felony counts, including obstruction of justice 
and bank fraud. Dr. Waksal has pleaded not guilty to these 
charges.
    A few days later, ImClone Systems sued Samuel Waksal for 
breach of contract and for breach of fiduciary duty based on 
the company's belief that Dr. Waksal falsely affirmed that he 
was cooperating with the Federal investigations. FDA granted 
accelerated approval to a colon cancer drug called Eloxatin. 
The approval was noteworthy for two reasons. The drug was 
finally available in the U.S. after being on the market for 
years in over 50 countries, and the company gained approval by 
conducting a three-arm randomized trial in less than 2 years 
with FDA approving the application in 46 days.
    An FDA advisory committee recommended approvability for 
Astra-Zeneca's Iressa based on a 10 percent response rate where 
the drug was used alone in seriously ill cancer patients who 
had few, if any, alternatives.
    These new developments and additional information obtained 
by the committee provide the subcommittee with reasons to 
continue this inquiry and discussion with today's witnesses. 
For example, the committee has learned that ImClone insiders 
sold $244 million of ImClone stock in the 2 months before the 
FDA rejection, and the volume of options trading of ImClone on 
December 27 and December 28 was unusually high.
    This subcommittee is encouraged by FDA's reorganization, 
but still has questions about how the FDA envisions improving 
the approval process for cancer drugs. We will also want to 
hear the FDA's views on the adequacy of its law and procedures 
on dealing with misleading premarket statements by industry 
officials to patients and the investing public about data or 
events contained in confidential FDA meetings and documents.
    The subcommittee remains interested in discussing drug 
approval issues with ImClone, but in addition, this 
subcommittee will also want to discuss issues bearing on 
corporate governance. For example, ImClone's legal department 
told the committee staff that it discovered that Samuel Waksal 
had forged the signature of ImClone's general counsel in a 
document certifying Samuel Waksal owned stock warrants that he 
no longer had. We have also learned that Samuel and Harlan 
Waksal purchased shredders in January shortly after Sam 
received a phone call from an SEC investigator.
    Many aspects of Samuel Waksal's financial problems and past 
professional record have come to light. We will want to learn 
what ImClone's board and management knew about these issues, 
and when and how these decisionmakers responded.
    As the committee continues its inquiry, the picture comes 
into sharper focus. The ImClone-Erbitux story is truly a 
tragedy, particularly for cancer patients and especially those 
making 400 telephone calls to ImClone daily for compassionate-
use access. The evidence shows, in the months leading to the 
December 2001 rejection, ImClone management spent much of its 
time nailing down its billion-dollar tender offer with Bristol-
Myers, publicizing Erbitux, making millions, but failing to 
provide the necessary quality control of the clinical package 
in its application.
    At the same time, there appears to have been confusion and 
miscommunication at FDA. Profits before patients and regulatory 
incoherence is a betrayal of cancer patients and is at odds 
with the Federal mission of promoting the public health. 
Through this accounting of what happened at this hearing, it is 
my sincere hope that this will enhance the public's confidence 
in the biotechnology industry and the FDA, and produce a more 
efficient and effective drug approval process.
    I look forward to hearing from the witnesses and working in 
a bipartisan fashion with my colleagues to produce a better 
cancer-drug approval system for patients.
    The Chair recognizes for purposes of an opening statement 
the ranking member, the gentleman from Florida, Mr. Deutsch.
    [The prepared statement of Hon. James C. Greenwood follows:
 Prepared Statement of Hon. James C. Greenwood, Chairman, Subcommittee 
                    on Oversight and Investigations
    Today the subcommittee continues its inquiry into the ImClone 
cancer-drug story. The purpose of this hearing is to help this 
committee as well as the public understand the circumstances 
surrounding the Food and Drug Administration's (FDA) refusal to file 
the application for Erbitux, a highly publicized cancer drug developed 
by ImClone systems, and how the cancer-drug approval system can be 
improved.
    Erbitux initially attracted national attention because it offered 
new hope for seriously ill colon-cancer patients and because of the 
pre-market publicity about the drug, ImClone's record-setting $2 
billion alliance with Bristol-Myers Squibb to market Erbitux, the 
controversy over the accuracy of ImClone's public descriptions of FDA's 
concerns in a non-public letter, and multi-million dollar stock trades 
by ImClone insiders in the weeks before FDA's negative decision. On 
June 12th, Samuel Waksal, one of the founders of ImClone and its former 
CEO, was arrested on a federal criminal complaint for insider tipping, 
attempted insider trading, and false statements. In its complaint, the 
federal government alleged that members of Samuel Waksal's family had 
sold about $10 million worth of stock on December 27, 2001 based on 
tips by Dr. Waksal, the day before the FDA's decision. Dr. Samuel 
Waksal himself allegedly attempted to sell about $5 million worth of 
ImClone stock by initially gifting the stock to one of his daughters 
and having her immediately sell it.
    At the subcommittee's hearing on June 13th, we heard testimony from 
one of the committee's investigators and a committee-retained oncology 
consultant who reviewed some of the data and documentation from the key 
study on Erbitux. In addition, Dr. Samuel Waksal appeared and exercised 
his constitutional right not to testify. We heard testimony from 
witnesses from ImClone systems, Bristol-Myers Squibb, and the FDA. Some 
of the key findings from this hearing were:

--The primary FDA medical reviewer handling the Erbitux matter did not 
        believe that ImClone's key study met the criteria for 
        accelerated approval and fast-track designation. However, at a 
        meeting between FDA and ImClone in August 2000, the senior FDA 
        medical official in effect overruled the primary medical 
        reviewer and said the protocol design was probably acceptable.
--The senior FDA official testified that she believed she was misled by 
        ImClone about its claim that a human clinical trial showed that 
        Erbitux had no activity when used alone.
--FDA granted fast-track designation to ImClone's Erbitux based on the 
        wrong version of the protocol for the key study and was made 
        before the agency had the single-agent data on Erbitux.
--ImClone testified that its officials believed that FDA had accepted 
        the protocol design, that FDA had the correct protocol version, 
        and that they were not led to believe that any of the 
        documentation problems and flaws in the studies would actually 
        result in FDA refusing to file the Erbitux application.
--On December 24th, a law firm retained by Bristol-Myers obtained 
        information from an FDA source that confirmed ImClone would 
        receive a refusal-to-file letter. This information in turn was 
        passed to Harlan Waksal, the then chief operating officer at 
        ImClone, on December 25th.
--On December 28, 2001, FDA sent ImClone the refusal-to-file letter on 
        the Erbitux application.
--In subsequent days, Samuel and Harlan Waksal portrayed the reasons 
        for FDA's refusal-to-file letter as based on lack of proper 
        documentation. However, excerpts of the refusal-to-file letter 
        appeared in a trade publication that showed that FDA's concerns 
        were more serious than just missing documentation and in fact 
        raised serious questions about whether ImClone would have to 
        obtain additional data from other pre-existing studies or 
        conduct new studies in order to get approval.
--The committee's oncology consultant testified that there were serious 
        problems in the key study, including high rates of patient 
        ineligibility and waivers. In addition, Bristol-Myers 
        independent radiology review showed that strict scrutiny of the 
        study data yielded only a response rate of 12.5%, less than 
        ImClone's 15% goal and much less than the 22.5% response rate 
        presented to the public.
--Testimony from the FDA officials showed inconsistent approaches on 
        drug product applications and interactions with companies 
        between FDA's center for biologics and FDA's center for drugs.
    Since the June 13th hearing, there have been a number of major 
developments reported:

--On June 19th, ImClone systems received a wells notice from the 
        Securities and Exchange Commission (SEC) that appears to 
        indicate that the SEC staff is considering recommending the 
        commission bring an action against ImClone relating to the 
        company's disclosure immediately following its receipt of the 
        refusal-to-file letter on December 28th.
--Besides Samuel Waksal and members of his immediate family, other 
        individuals, notably Martha Stewart, have emerged as subjects 
        of investigation for conduct related to trading of ImClone 
        stock immediately before the FDA letter was issued. With 
        respect to Ms. Stewart, the committee on September 10th sent a 
        bipartisan letter to the attorney general requesting his 
        consideration of concerns and information related to statements 
        that Ms. Stewart caused to be made to the committee concerning 
        her trade of ImClone stock.
--In August, a federal grand jury in New York indicted Samuel Waksal on 
        13 felony counts, including obstruction of justice and bank 
        fraud. Dr. Waksal has pleaded not guilty to these charges.
--A few days later, ImClone systems sued Samuel Waksal for breach of 
        contract and for breach of fiduciary duty based on the 
        company's belief that Dr. Waksal falsely affirmed that he was 
        cooperating with the federal investigations.
--FDA granted accelerated approval to a colon cancer drug called 
        Eloxatin. The approval was noteworthy for two reasons: the drug 
        was finally available in the U.S. after being on the market for 
        years in over 50 countries and the company gained approval by 
        conducting a three-arm randomized trial in less than 2 years 
        with FDA approving the application in 46 days.
--An FDA advisory committee recommended approvability for Astra-
        Zeneca's Iressa based on a 10% response rate where the drug was 
        used alone in seriously ill cancer patients who had few if any 
        alternatives.
    These new developments and additional information obtained by the 
committee provide the subcommittee with reasons to continue this 
inquiry and discussion with today's witnesses. For example, the 
committee has learned ImClone insiders sold 244 million dollars in 
ImClone stock in the two months before the FDA rejection, and the 
volume of options trading of ImClone on December 27th and December 28th 
was unusually high.
    The subcommittee is encouraged by FDA's reorganization but still 
has questions about how the FDA envisions improving the approval 
process for cancer drugs. We will also want to hear the FDA's views on 
the adequacy of its law and procedures on dealing with misleading pre-
market statements by industry officials to patients and the investing 
public about data or events contained in confidential FDA meetings and 
documents. The subcommittee remains interested in discussing drug-
approval issues with ImClone, but in addition the subcommittee will 
also want to discuss issues bearing on corporate governance. For 
example, ImClone's legal department told the committee staff that it 
discovered that Samuel Waksal had forged the signature of ImClone's 
general counsel on a document certifying Samuel Waksal owned stock 
warrants that he no longer had. We have also learned that Samuel and 
Harlan Waksal purchased shredders in January shortly after Sam received 
a phone call from an SEC investigator. Many aspects of Samuel Waksal's 
financial problems and past professional record have come to light. We 
will want to learn what ImClone's board and management knew about these 
issues, when, and how these decisionmakers responded.
    As the committee continues its inquiry, the picture comes into 
sharper focus. The ImClone-Erbitux is truly a tragedy, particularly for 
cancer patients, and especially those making 400 telephone calls to 
ImClone daily for compassionate-use access. The evidence shows in the 
months leading to the December 2001 rejection, ImClone management spent 
much of its time nailing down its billion-dollar tender offer with 
Bristol-Myers, publicizing Erbitux, making millions, but failing to 
provide the necessary quality-control of the clinical package in its 
application. At the same time, there appears to have been confusion and 
miscommunication at FDA. Profits before patients and regulatory 
incoherence is a betrayal of cancer patients and is at odds with the 
federal mission of promoting the public health. Through this accounting 
of what happened at this hearing, it is my sincere hope that this will 
enhance the public's confidence in the biotechnology industry and the 
FDA, and produce a more efficient and effective drug approval system.
    I look forward to hearing from the witnesses and working in a 
bipartisan fashion with my colleagues to produce a better cancer-drug 
approval system for patients.

    Mr. Deutsch. Thank you, Mr. Chairman. We have two separate 
panels today, and I think they highlight the two separate 
trends in our hearings and our investigation.
    First, with the head, acting head of the FDA, I think we're 
here--we will hear an excellent story of really an agency and 
Congress working very well together, and our staffs, both of 
our staffs, really doing the work of this subcommittee, really 
its investigative arm that I think we are so well known and so 
talented about. And that is--in fact, my understanding is that 
the FDA has or is in the process of changing its review 
procedure for human organism drugs to basically--back to the 
Center for Drug Evaluation from the Center for Biologics. And 
from all of our understandings, one of the problems of the 
Erbitux was really a problem--a procedural problem in a sense 
in terms of the expertise within those two parts of the FDA.
    Clearly, there are challenges in that animal studies are 
different for biologics and chemicals in terms of preclinical 
trials, but I think our best assessment, as well as the 
agency's best assessment, is that this review potentially has 
some very dramatic, positive effects for all Americans and, in 
fact, all people throughout the world; and so I'm very proud of 
the work that we've done in a very bipartisan, workmanlike 
fashion, doing our job.
    The second part of the hearing is, I guess, more a step 
forward in a sense, in our continuing look at some of the 
corporate disasters that have occurred and looking both at 
specifics and then systematic issues. I hope that we will focus 
on systematic issues today, and I think there are some that are 
clearly there.
    In this case, I think the largest focus is really the role 
of board of directors, in a case where their judgment, in terms 
of independence, is very much open to question. I 
specifically--there will be many questions that will come up 
this morning, but with all that the board knew in terms of Sam 
Waksal's actions, including--my understanding is the general 
counsel whose signature was forged will be here--with all of 
that information available to the board, the fact that the 
board still did not seek to remove him even at others' 
suggestion--obviously issues about some of the consulting 
relationships with the board, really, and the independence.
    What I've said previously in other hearings is, even with 
downturns almost on a daily basis in equity markets, our 
economy is still by far the strongest economy in the world and 
the strongest economy in the history of the world, and a lot of 
that has to do with transparency. And what we've seen, step 
after step, seem to be problematic issues related to 
transparency.
    To some extent, it is unfortunate that we're doing this in 
the waning hours of this Congress, because we still have 
legislation which, hopefully, although it appears more and more 
unlikely to pass, is trying to protect investors, trying to 
protect 401(k) owners as well.
    Thank you, Mr. Chairman.
    Mr. Greenwood. The Chair thanks the gentleman.
    The gentleman from Kentucky, opening statement.
    Mr. Fletcher. First, Mr. Chairman, I want to thank you for 
holding this subsequent hearing to the hearing that we had 
previously. I think as we look--just very briefly, and I'll 
enter a statement, a little more, later, but it's about 
patience and investors, public trust.
    First, I'm glad to hear some of the changes that the FDA is 
making in their drug approval process, particularly that some 
of the problems were uncovered as we looked at the process, the 
fast-track approval; and also the relationship between the FDA, 
the SEC, when products are being marketed and statements are 
being made by companies related to those products that are 
under review by the FDA.
    Second, I think it's very important--and I want to thank 
the chairman for the second panel as well--corporate 
responsibility. There are some grave concerns about oversight 
on the board during all this problem with the approval of 
Erbitux and ImClone's management. So let me introduce my more 
lengthy statement, but conclude with that.
    And thank you, Mr. Chairman.
    Mr. Greenwood. The gentleman's statement will be made part 
of the record, as will any other opening statements that 
members wish to include in the record.
    [The prepared statement of Hon. Ernie Fletcher follows:]
Prepared Statement of Hon. Ernie Fletcher, a Representative in Congress 
                       from the State of Oklahoma
    Chairman Greenwood; thank you for having this hearing today.
    We have all seen the devastation that Cancer can cause. We know the 
emotion and physical destruction that this disease brings to patients 
and their families.
    In the US where we have one of the best healthcare systems in the 
world, there will be more than 1.2 million new cancer cases diagnosed 
this year alone. This year about 555,500 people will die from cancer.
    It is no surprise that patients and physicians are excited when a 
promising new drug or therapy becomes available. The Energy and 
Commerce Committee has worked hard to see that groundbreaking research 
can provide physicians with the tools to provide treatment for cancer.
    While new drugs, Like Erbitux show great promise, we must also 
balance their development with the public's interest--including 
patients, their families, and investors. They must be proved safe and 
effective before they are available for general use.
    I have deep concerns that ImClone ignored important advice from Dr. 
Frederick Sparling that the scientific advisory board (SAB) could help 
the company's situation regarding clinical trials if they would just 
bring them together to ensure the company could recognize what sound 
science should look like. I am concerned that the decision to not bring 
the SAB together, was made because some on the Board were too close to 
the clinical trials and Erbitux itself to make unclouded judgements 
about what were best practices in order to achieve a study void of 
design and conduct flaws.
    At our last hearing, I wanted to make sure that FDA was doing the 
best job possible to balance these two issues. I still believe we must 
continue our conversations with the FDA, but I am pleased to see the 
FDA making some positive changes that will help balance safety and 
effectiveness. I hope that we can continue to work with FDA to develop 
policy that allows these new technologies to be available to patients 
as quickly and safely as possible.
    Equally as important, we must look at corporate governance issues 
such as CEO misconduct, the ImClone insider trading policy, conflicts 
of interest within the Board and management, and changes in corporate 
policies made in 2002 in response to this Committee's inquiries, the 
media attention, and enactment of the Oxley-Sarbanes Act.
    It is my hope that many new cancer treatments, including Erbitux 
can be approved for marketing as quickly and safely as possible. It is 
FDAs responsibility to maintain the Gold Standard of safety. ImClone 
needs to recognize that they must not only work to ensure that Erbitux 
is approved, but also that is safe and effective according to the FDAs 
standards.
    Again, I thank the Chairman for holding this hearing today.

    Mr. Greenwood. The gentlelady from Colorado is recognized 
for an opening statement.
    Ms. DeGette. Thank you, Mr. Chairman. Just to say briefly, 
I'd like to commend you on holding this hearing today.
    Like the other members, I've been quite concerned for some 
time about what the role of corporate boards has been in all of 
our investigations on corporate responsibility. And what we've 
seen over the last year during the hearings of this 
subcommittee, which have been incredibly productive, we've seen 
throughout the economy, every industry, from energy to 
telecommunications to pharmaceuticals; corporate officers, 
corporate employees almost running rampant with the resources 
of the company, and the boards just standing by and rubber-
stamping whatever these employees wanted to do.
    I think that our continuing investigation into board 
activities and board accountability will be greatly helped by 
our hearing today, and I just want to thank you for really 
refocusing this committee's efforts with respect to ImClone on 
the board activities and also the FDA approval process. I think 
it will yield a lot of evidence as we move forward to decide 
what, if any, additional legislation Congress needs to examine 
to improve the system.
    And I yield back the balance of my time.
    Mr. Greenwood. The Chair thanks the gentlelady.
    The gentleman from Florida, Mr. Stearns.
    Mr. Stearns. Thank you, Mr. Chairman, and I commend you for 
this hearing.
    I think many of us have either been on television or heard 
from the news media. They always ask the question: Congress 
doesn't need to aggressively inquire into these cases of 
corporate governance; why don't we just turn these over to the 
Department of Justice? Why don't we turn them over to the 
Federal Trade Commission? And my response is that we do have a 
responsibility here in Congress. We make the laws, both on drug 
approval and securities trading, and therefore we need to be 
informed of examples where events do not proceed as the law 
intended, because we are making the laws here.
    One of my concerns was how ImClone was hyping Erbitux on 60 
Minutes and the cover of Business Week. Meanwhile, the FDA's 
hands were tied in not correcting any exaggerated claims made 
by this company. So, rightly so, we have to explore these, and 
I think this hearing is important to do that. We'll hear today 
from the FDA on Federal trade secrecy laws and how they might 
be permitted to communicate with the subcommittee in such cases 
where the stock prices have these exaggerated claims.
    Furthermore, I'm glad that this committee will again 
examine these corporate governance issues, because the 
oversight committee on commerce has the responsibility--and 
that is what we're elected to do--how directors of companies 
abuse their positions, get interest-free loans, the CEOs and 
the like. For this whole system of capitalism to work and the 
general public to have transparency, we need to have a better 
understanding of how companies in the biotech industry, like 
ImClone, work and how we as legislators can make it so it is 
more transparent to the investors.
    Integrity is the elixir that will attract capital and lead 
to this life-saving innovation which ImClone is trying to do. 
And to see this poison that is eroding investors' confidence 
today--so I think this hearing is timely and important, and I 
commend you, Mr. Chairman.
    [The prepared statement of Hon. Cliff Stearns follows:]
Prepared Statement of Hon. Cliff Stearns, a Representative in Congress 
                       from the State of Florida
    Mr. Chairman, thank you for holding this follow-up hearing today. 
On August 25, I was interviewed on MSNBC News, and the reporter asked 
me didn't I feel that Congress doesn't need to aggressively inquire 
into cases of corporate governance, that we should just turn these over 
to the DOJ's antitrust lawyers and the FTC. My response was, and is, 
that we in Congress make the laws on both drug approval and securities 
trading, and therefore we need to be informed of examples where events 
do not proceed as the law intended. And so here we are again.
    One of my grievances at the last hearing was how while ImClone was 
hyping Erbitux on ``60 Minutes,'' and the cover of Business Week, the 
FDA's hands were tied in not correcting any exaggerated claims made in 
these features. And rightly so: their role is not as watchdog of the 
media. I am especially pleased, therefore, that today we will hear from 
the FDA on Federal Trade Secrecy laws, and how they might be permitted 
to communicate with the SEC in such cases where stock price may be 
affected.
    Further, I am glad this Committee will again examine corporate 
governance issues: how directors of companies abuse company debt, get 
interest-free loans, and the like. For the system of capitalism to 
work, where the general public invests in private ventures for the 
betterment of themselves, of the economy, and in the case of a biotech 
company, the betterment of patients, there needs to exist complete 
transparency and integrity in a company's operations. Shady executive 
practices lead to damaging effects rippling through the economy: 
Integrity is the elixir that will attract capital and lead to 
lifesaving innovation, while deceit is the poison that is eroding 
investor confidence. Thank you.

    Mr. Greenwood. The Chair thanks the gentleman.
    The gentleman from Ohio, Mr. Strickland, for an opening 
statement.
    Mr. Strickland. Mr. Chairman, I would like to enter my 
statement into the record, and I would like to yield my time to 
Mr. Stupak who has an opening statement.
    Mr. Greenwood. The gentleman from Michigan is recognized to 
make an opening statement.
    Mr. Stupak. Thanks, Mr. Chairman. We just called a vote. 
We're less than 10 minutes, so I won't give my full statement.
    First of all, we talked about another hearing. I'm pleased 
to see that we're having one on Erbitux and ImClone, and the 
two aspects are how the FDA approves their drugs in the 
biologics approval and also how ImClone, as a company, failed 
its investor.
    You know, Mr. Stearns brought up the exaggerated claims we 
heard at the last hearing. Dr. Frank Papineau, who said that--
well, the claims may have been exaggerated, and the officials 
were aware, FDA officials were aware they could do nothing 
about it because of the secrecy, the trade secrets and stuff of 
drug applications, he said. I find that sort of just plain 
wrong. I fail to see how trade secrets are exposed by a simple 
rebuttal of claims; or at the very least, a statement of 
caution to the public by the FDA should have been taken. It 
should have been put out.
    After all, the FDA's responsibility here is to protect the 
health, safety and welfare of the American people. And when 
exaggerated claims are being made on so-called ``miracle 
drugs,'' as this was, there should be something there to be 
able to rebut it; and I hope that is one of the policy 
decisions this committee will handle.
    I also have great reservations about how the FDA handled 
drug and biologic approvals, and I'm not sure that just 
switching over to biologics approval to the Center for Drug 
Evaluation will work. I'll withhold my judgment on that until 
we hear more about it.
    Finally, we've seen in the long series of cases Oversight 
and Investigation has done, once again a corporate board has 
allowed its officers basically to take a publicly owned company 
and use it as their own privately owned piggy bank; and again, 
I'd be remiss if I did not once again say, I think all this 
started back in 1995 when we passed a Private Securities 
Litigation Reform Act that should be repealed.
    The Private Securities Litigation Reform Act of 1995 
created a permissible legal environment for the threat of 
lawsuits that were removed and the loser pay--and that law 
should just be repealed, and I would once again ask the 
committee to consider repealing the Private Securities 
Litigation Reform Act.
    With that, I'd yield back and submit my full statement for 
the record.
    [The prepared statement of Hon. Bart Stupak follows:]
 Prepared Statement of Hon. Bart Stupak, a Representative in Congress 
                       from the State of Michigan
    Mr. Chairman, we are here today to continue our investigation of 
the ImClone/Erbitux disaster.
    I am pleased we are taking up two very important aspects of this 
fiasco: how the FDA conducts its drug and biologic approvals, and how 
ImClone as a company failed its investors.
    On June 13, 2002 we had a hearing on ImClone, and I questioned Dr. 
Frank Papineau, an investigator for this committee and a witness at the 
hearing, about how FDA could have let ImClone make such exaggerated 
claims about its drug, Erbitux.
    I asked him how it was that the FDA did not take steps to publicly 
correct these misstatements. He replied that FDA officials were aware 
of these misstatements but could not do anything because of ``the 
secrecy--the trade secrets and stuff of drug applications.''
    He went on to say that the FDA officials saw the ``60 Minutes'' 
story, the USA Today story, and the Business Week cover story, and 
still could not say anything.
    When I brought up this point to Pat Keegan, the officer who 
overruled her own staff and allowed the Erbitux application to go 
forward, she found it amusing and laughed. I do not think this is any 
laughing matter.Well, this is just wrong. I fail to see how trade 
secrets are exposed by a simple rebuttal of claims, or at the very 
least a statement of caution to the public from the FDA.
    I have great reservations about how the FDA handles drug and 
biologic approvals, and I am not sure that switching over the biologics 
approval to the Centers for Drug Evaluation will work. I will withhold 
judgment on that.
    Today, we are also looking at how the senior officers and board 
members of ImClone may have worked the system in their favor at the 
expense of their shareholders.
    It appears we have a classic case of corporate malfeasance, 
although further investigation is ongoing.
    What I--and the shareholders who got the short end of the stick--
want to know is, ``What happened?''
    What we do know at this point is that top officers sold large 
amounts of stock after privately receiving bad news. Stock prices 
plunged.
    It seems as though certain people may have treated this publicly-
owned company as a privately-owned piggybank.
    I hope this is not what happened.
    Perhaps shareholders would have had more recourse if those in 
Congress didn't strip away their rights in 1995 as part of the Contract 
on America.
    The Private Securities Litigation Reform Act, or PSLRA, stripped 
away shareholders rights and virtually eliminated deterrence.
    It created a permissive legal environment where the threat of 
lawsuits were removed and the loser pays.
    PSLRA should be repealed, and I request the support of my 
colleagues for my bill that would do just that, H.R. 3829.
    Mr. Chairman, I yield back the balance of my time.

    Mr. Deutsch. Mr. Chairman, I have a statement from the 
ranking member of the full committee, Mr. Dingell.
    Mr. Greenwood. Without objection, Mr. Dingell's statement 
will be made a part of the record.
    [The prepared statement of Hon. John D. Dingell follows:]
    Prepared Statement of Hon. John D. Dingell, a Representative in 
                  Congress from the State of Michigan
    Mr. Chairman, thank you for holding this hearing. As our first 
ImClone hearing and reports in the press have revealed, this company 
belongs in the infamous pantheon of firms whose executives have been 
allowed to treat publicly traded businesses as their own personal 
cookie jar. Apparently the ImClone Board of Directors, like many 
others, has been content to take their fees while at best turning a 
blind eye to abuses that were occurring under their very noses.
    This investigation, however, has also addressed another issue of at 
least equal importance to corporate misdeeds--the efficiency and 
fairness in the expedited approval process at the Food and Drug 
Administration (FDA) for drugs to treat illnesses, often life 
threatening, for which no alternative treatment regime exists.
    Congress enacted a process that expedites new experimental 
treatments to the market in record time, based on very little evidence 
of effectiveness. Even under these very lax procedures, ImClone was 
unable or unwilling to undertake the research necessary to make the 
necessary showing of possible efficacy.
    This hurt colorectal cancer patients for whom this drug was the 
last hope. No drug currently on the market as a treatment for 
colorectal cancer is much better from a placebo. Even ImClone only 
claimed its drug, in combination with a chemotherapy agent, shrunk 
tumors, not actually extended life but shrunk tumors, in less than a 
quarter of the 120 patients in the study. Analysis of the data by 
Bristol Meyers put that number at less than 13 percent. The Waksals 
raised false hopes, and stole the hope that did exist, from those 
suffering, or whose loved ones are suffering, from this terrible 
disease.
    It appears that the FDA has taken a positive step in the direction 
of a more rational, consistent approach to expedite these applications. 
When the reorganization that transfers all drug reviews to the Center 
for Drugs is complete, all applicants should realize that if they hope 
to get small Phase II studies considered for early approval, that the 
science behind those limited studies will have to exhibit the kind of 
rigor that Dr. Pazdur advocated at our last ImClone hearing.
    While this proposed transfer of authority holds the promise of 
consistency and good science as the heart of expedited consideration, 
the devil remains as always in the details. Congress, and particularly 
this Subcommittee, will need to watch carefully. Will needed expertise 
be transferred? Will bureaucratic delay and uncertainty cause FDA to 
lose important scientific expertise? Will employee rights be respected? 
This transfer must be done right, or FDA may make matters worse.

    Mr. Greenwood. We have just over 7 minutes left in this 
vote, so the committee will recess and return immediately after 
the vote.
    [Additional statement submitted for the record follows:]
 Prepared Statement of Hon. W.J. ``Billy'' Tauzin, Chairman, Committee 
                         on Energy and Commerce
    Mr. Chairman, thank you and let me commend you and the staff on 
both sides of the aisle once again for the path-breaking work in this 
ImClone investigation. There is so much more to this than people just 
following the news stories over the summer may realize.
    Ultimately, this investigation comes down to doing what's right for 
cancer patients. By exposing the problems that occurred with ImClone's 
Erbitux and the FDA, you are helping to point the way for us to improve 
the drug-approval system--to make it work better for these and other 
patients desperately hoping for breakthrough treatments.
    So with all the attention on insider trading and corporate 
governance--subjects we will take on today as they relate to the 
problems here--the public should not forget that potential flaws in 
FDA's drug approval process have been at the center of this 
investigation all along.
    These flaws allowed a study of questionable quality to become the 
basis for fast-track application. They allowed irresponsible hyping of 
a promising drug as FDA silently stood by--thus raising and dashing 
hopes of thousands of cancer patients.
    I am encouraged that since the June ImClone hearing, the FDA has 
reorganized pharmaceutical product reviews to enhance consistency and 
performance. This is a good first step and we are very interested to 
learn how FDA envisions this reorganization will improve the drug-
approval system, especially for cancer drugs. I welcome Dr. Lester 
Crawford, FDA's Deputy Commissioner, who can discuss this for us.
    There's clearly room for improvement. We know this from FDA's own 
work. Consider Eloxatin. This colon-cancer drug was approved on an 
accelerated basis by FDA's Center for Drugs on August 12, 2002, within 
46 days of submission--a new FDA record. And it was approved based on 
an interim analysis of a Phase III randomized trial--a trial that 
measures actual patient survival--instead of less reliable Phase II 
study-data on surrogate endpoints, which had been the basis for past 
accelerated-approvals and were the basis for ImClone's application.
    Eloxatin shows a company can get accelerated approval just as fast 
as ImClone had hoped its drug would be approved, and with better data. 
Perhaps the Eloxatin case can be a useful model for the future. It 
clearly suggests that ImClone's experience might have been different, 
if there had been better communication between FDA and ImClone.
    I understand that FDA is working on a communications policy that is 
aimed at improving interactions between the agency and the companies it 
regulates. This is encouraging and I am hopeful that FDA is moving in a 
constructive direction.
    I look forward to hearing about FDA's views on pre-market promotion 
or pre-market statements--a topic that also gets to ImClone's actions 
and governance. This aspect of the ImClone story is essential to our 
inquiry.
    We now understand that ImClone directors and officers reaped 
millions from the sale of ImClone stock before FDA's refusal-to-file 
letter. Cancer patients, of course, got their hopes dashed. And what 
did many ImClone shareholders get from the rejection of Erbitux? An 88% 
reduction in share price, delay in the development of Erbitux, a CEO--
Sam Waksal--who resigned and then was arrested and indicted.
    ImClone Systems has now sued Sam Waksal because it believes he did 
not cooperate with the federal investigations while he affirmed to the 
company that he was cooperating.
    Yet we have now learned that for years ImClone did not trust Sam 
Waksal with the company's corporate credit card. It actually installed 
special procedures to ensure he did not charge the company for his 
personal expenses.
    Why would ImClone management have trusted Dr. Waksal?
    The media have already reported his financial problems, and his 
past firings for allegedly misleading and even falsified scientific 
work. Fortune reports that, over the past 20 years, dozens of lawsuits 
and tax liens have been filed against Waksal by the IRS, New York 
State, American Express, banks and brokers, art galleries, contractors, 
and individuals.
    Are we to believe that ImClone management was totally unaware of 
these issues? Did the Board and management act properly in light of 
these red flags? We will be interested to hear from the ImClone 
witnesses on these questions and others surrounding the rejection of 
Erbitux.
    Mr. Chairman, it is my hope that, from this investigation, we will 
see an improved drug-approval system--where the public has confidence 
in the companies, the FDA and the companies are clearly communicating 
with each other, and drug-studies are conducted properly to provide 
information that will optimize the chances for approval, so patients 
can be helped.
    Thank you, Mr. Chairman.

    [Brief recess.]
    Mr. Greenwood. The committee will come to order. The Chair 
apologizes for the delay.
    And we welcome Dr. Crawford. Thank you for being with us. 
And I think you're aware that this committee is holding an 
investigative hearing, and when we hold investigative hearings, 
we take testimony under oath.
    Do you have any objections to giving your testimony under 
oath?
    Mr. Crawford. None whatsoever.
    Mr. Greenwood. I also should advise you that pursuant to 
the rues of this committee and the House, you are entitled to 
be represented by counsel.
    Do you choose to be represented by counsel this morning?
    Mr. Crawford. Not at this time.
    Mr. Greenwood. Okay. If it gets dicey and you need a 
lawyer, just let us know.
    Mr. Crawford. We have some waiting in the wings, Mr. 
Chairman.
    Mr. Greenwood. All right. In that case, if you would stand 
and raise your right hand.
    [Witness sworn.]
    Mr. Greenwood. You are under oath, and recognized to make 
your statement.

TESTIMONY OF HON. LESTER M. CRAWFORD, DEPUTY COMMISSIONER, FOOD 
                    AND DRUG ADMINISTRATION

    Mr. Crawford. Mr. Chairman and members of the subcommittee, 
I am Les Crawford, Deputy Commissioner of the Food and Drug 
Administration. I appreciate the opportunity to address the 
committee's questions about the agency's communications policy.
    The recent announcement of a plan to transfer 
responsibility for the premarket review of certain therapeutic 
biological products from our Center for Biologics Evaluation 
and Research (CBER) to our Center for Drug Evaluation and 
Research (CDER) and the agency's authority to police the 
marketplace for false or misleading statements made by 
companies about their products that are being reviewed by FDA 
prior to marketing.
    In conjunction with the June 2002 reauthorization of the 
Prescription Drug User Fee Act of 1992, FDA agreed to meet 
specific performance goals. Under the PDUFA goals, as they are 
called, CBER and CDER agreed to draft a joint guidance for the 
agency and industry on how we define good review management 
principles for the first review cycle of a new drug application 
or a biologics license application, otherwise known as a BLA.
    At this committee's hearing in June on the subject of the 
review of the BLA submitted by ImClone for Erbitux, questions 
were raised about whether CBER and CDER had consistent policies 
for communicating with sponsors of premarket approval 
applications. Thus, the importance of this guidance document 
was highlighted further. This guidance, when finalized, will be 
based on the agency's best practices for efficient management 
of review processes and will emphasize the need for effective 
communications between the agency and sponsors during premarket 
review.
    We recognize the need for guidelines to ensure the 
consistency of communications. While our overriding 
responsibility is to help assure the safety and effectiveness 
of drugs and medical devices, we're also aware that information 
concerning the status of premarket review and the likelihood of 
FDA approval can substantially affect the financial markets for 
publicly held companies.
    We anticipate publishing the draft guidance in the next few 
months and will welcome comments from the public.
    As you may know, in September, I announced a plan to 
transfer responsibility for premarket review of certain 
therapeutic biologics from CBER to CDER. As part of continuing 
efforts to improve agency efficiency and consistency, in the 
fall of 2001, the Office of the Commissioner hired consultants 
to evaluate the drug review process to identify best practices 
and make recommendations for improving those processes. The 
consultants conducted reviews with CBER and CDER staff and 
reported their findings to me.
    Also, during the renegotiation of PDUFA, industry 
representatives expressed their views to Secretary Thompson and 
me about the importance of achieving consistency across all 
review divisions.
    Members of my scientific management team gathered data on 
specific issues of concern and developed a list of options for 
improving efficiency and consistency at FDA. After reviewing 
these options, I concluded that CBER performs a variety of 
functions, such as vaccine and blood regulation, that are 
distinguishable from the review of most therapeutic biologic 
products. Furthermore, I concluded that consolidation of 
certain review functions within CDER would promote efficiency 
and consistency within the agency.
    To manage the transfer of these functions, we have 
established a team of staff from both centers. The transfer 
will be accomplished with the greatest attention given to 
minimizing disruption to current product reviews.
    Last, I would like to address questions that have arisen 
concerning the extent of FDA's authority to take action with 
respect to false or misleading statements, made by sponsors to 
the public, regarding products undergoing FDA review.
    FDA's paramount statutory mandate is to help assure that 
patients have access to safe and effective medical products. 
That is our focus during the preapproval stage. While FDA has 
authority to correct false or misleading sponsor statements, in 
appropriate circumstances, primary responsibility for assuring 
the truthfulness of company statements aimed at investors 
resides not with FDA, but with the Securities and Exchange 
Commission.
    The SEC has broad authority under Federal securities laws 
to take action against any sponsor that makes false or 
misleading statements in connection with a securities 
transaction. SEC enforcement action based on false or 
misleading statements to the markets regarding the progress of 
FDA premarket review is commonplace. FDA has a very effective 
relationship with the SEC. To further strengthen interagency 
ties, FDA has taken a systematic review of our interactions 
with the talented and dedicated people at SEC, and we intend to 
systematize our interactions further, based on discussions with 
those individuals.
    Thank you very much for the opportunity to be here. I look 
forward to the further proceedings of this committee.
    [The prepared statement of Lester M. Crawford follows:]
   Prepared Statement of Lester M. Crawford, Deputy Commissioner, FDA
    Under the PDUFA goals, CDER and CBER agreed to create a joint 
guidance for the Agency and industry on how we define Good Review 
Management Principles for the first review cycle of a new drug or 
biologics licensing application. This guidance will be based on the 
Agency's best practices for efficient management of review processes 
and will emphasize the need for effective communications during 
interactions between the Agency and industry.
    In September Dr. Crawford announced a plan to transfer review of 
certain therapeutic biological functions from CBER to CDER. FDA has 
established a team of staff from CBER and CDER to manage this 
transition.
    FDA's primary responsibility during the preapproval stage is to 
conduct thorough and prompt premarket review of products under 
investigation. Primary responsibility for assuring the truthfulness of 
company statements aimed at investors resides with the SEC. FDA has 
undertaken a systematic review of its interactions with the SEC, and we 
intend to systemize our interactions further based on discussions with 
those officials.

    Mr. Greenwood. Thank you. The Chair recognizes himself for 
10 minutes for questions.
    Mr. Crawford, on June 27, 2002--in light of the ImClone 
hearing, the committee sent you a bipartisan letter--I believe 
it is being handed to you now--asking the FDA to harmonize best 
practices for designing clinical trial protocols and 
communications with companies about drug approval issues.
    The question is, what action has the FDA taken to encourage 
more agreements between companies and the FDA about clinical 
protocol design?
    Mr. Crawford. Well, under the recently negotiated PDUFA 
goals and standards, we agreed that we would engage in a 
certain number of increased meetings with the industry, 
meetings that--for which minutes are kept, in which we review 
what their intentions are, what their progress is, and also 
offer the best interpretation that we can along scientific 
lines and medical lines of what we expect the company to do.
    These minutes have been referred to in the open press as 
``contracts'' between FDA and the sponsoring firms. In point of 
fact, they're not, technically speaking, that, but they are an 
understanding of what the company has to do and also what we 
expect they will need to do in order to gain approval.
    These will be increased, as I mentioned, as a result of 
PDUFA; and also we are now going to be publishing, as I 
mentioned, these good review practices for public comment, and 
that will be part of a larger document where the intention will 
be not only to systematize, but to bring some consistency 
between what the different centers say to the industries that 
are sponsoring these products, but also from reviewer to 
reviewer, what is said. And that is a result of this 
committee's interest and actions and also this letter.
    So that will be proceeding apace, we expect, in a very 
short time, perhaps by the end of the year, that we will have 
this package out for comment.
    We will give a reasonable amount of time for comment, and 
it also will be submitted to this committee for any action you 
would like to take, including further meetings with the 
subcommittees of FDA personnel, including myself and the new 
commissioner; and we would like to work with the committee on 
making sure that we refine these practices.
    I think it's worth noting that there have always been 
commonly understood mechanisms and techniques that FDA will use 
to communicate with the industry. I think it is axiomatic that 
we have to communicate throughout the review process, because 
we have to ask them for more information, and they have to----
    Mr. Greenwood. Let's get right to the ImClone case here, 
because a number of lay people have said to me, isn't this 
awful that the FDA leaked this information out that caused the 
panic at ImClone and the insider trading and so forth? And my 
response is actually a little different than they expect, 
because I've been pushing since the mid-90's for more and more 
transparency at the FDA.
    It seems to me that if I look at this particular case, when 
Ms. Lee was in the FDA's office in--I think it was December 4--
at that time, the FDA reviewers with whom she was meeting knew 
that they had or were about to make a recommendation to their 
superiors to issue a refusal-to-file letter, and yet that 
information was not shared with her. And, in fact, there was a 
lack of transparency from that point forward, except for the 
fact that the Bristol-Myers lobbyist was able to worm his way 
in and get some information.
    And so it seems to me that cases like that in FDA would be 
better off--the patients would be better off, the companies 
would be better off with maximum transparency, so that if 
companies--so that conversation might have happened where the 
FDA said, look, we've got some serious--we have some serious 
problems with your study here. These are what those problems 
are, and we're inclined to recommend a refusal to file. You 
should know this. You may want to withdraw your application and 
do some more work and come back to us, and that might have 
prevented this very precipitous issue.
    How would you respond to that?
    Mr. Crawford. Well, I think a couple things, based on that 
case.
    One is, we believe--and it's memorialized in these draft 
guidances that we're trying to get together as quickly as 
possible--that the result of the FDA review should be committed 
to writing. There should be a letter that can change hands, 
because there were many different interpretations of what was 
said and who said what, et cetera, et cetera.
    So we are moving toward vesting in the division director 
the requirement that when the decision has been made, to hand 
out this written statement and I believe that will make for a 
lot of progress.
    Mr. Greenwood. Well, but again, that's when a decision has 
been made.
    What I'm talking about is ongoing dialog; and I understand 
the need to memorialize that dialog in written form so there 
isn't confusion or there aren't legal concerns. But it seems to 
me that companies ought to be able to make written inquiries 
with regard to the status of their applications and receive 
written responses along--all along the process.
    Mr. Crawford. They can and do do that. And I think 
``written'' is a key thing.
    The other thing is that although there are certainly early 
warning signs all along, the final decision on whether or not 
we're going to file rests with the division director. So 
theoretically a division director can overturn the decisions 
early.
    So we have to have a focal point for transmitting the 
information.
    Mr. Greenwood. Let me get to the question of preapproval 
promotion, because it's a big issue here.
    Without making any judgments about this particular product 
and how it was promoted and how that compared with the facts, 
as the company knew them, when a product is approved, it has a 
very tightly worded label, and it's quite clear as to what 
claims cannot be made for the product. Prior to approval, there 
is very little that goes on in terms of the FDA's regulation of 
what a company can say.
    Now, in your opening statement in your testimony, you 
talked about the SEC being responsible for this, and the status 
of communications between the SEC and the FDA. Clearly, the SEC 
is unlikely to have reason to second-guess a company's claims, 
unless they get some information from the FDA first. SEC has a 
lot to do and certainly has limited personnel and isn't going 
to be able to monitor every press release, every printed 
statement about a potential product.
    And there is a lot of opportunity there, putting Erbitux 
aside for a moment, there's a lot of opportunity to exaggerate 
claims in order to attract investment.
    Do you think that there should be consideration by the 
Congress of having some review process at the FDA or disclosure 
process so either the company says, we'd like to make this 
claim or we'd like you to review it, or we've made this claim 
and you should see it, so the FDA can monitor and, if need be, 
refer a case to the SEC?
    Mr. Crawford. We'd like to work with the committee on that.
    Two quick points: One is that we are--I have asked our 
office chief counsel the volume of interchange between FDA and 
SEC, and I'm assured that it is on a daily basis going both 
ways. So I think this is a case where two executive branch 
agencies do communicate well.
    The second thing is that in the preapproval process, if a 
company makes some egregious claims that have come to our 
attention, there are some things that we can do now under the 
statutory authority that we have. One is that we can send 
letters, which are commonly called ``untitled letters,'' to the 
company asking them, in effect, to cease and desist.
    If that doesn't work, we can--what we would do historically 
is send a second untitled letter, and then finally a warning 
letter. And it is possible for us legally, if the egregious 
claims continue, to actually suspend review of the drug.
    So we do have that authority.
    Mr. Greenwood. Let me squeeze one more question in before 
my time runs out.
    What can you tell us about the current status of Erbitux 
and its review by the FDA, and who is doing--which center is 
doing the reviewing?
    Mr. Crawford. That reviewing is taking place in the Office 
of Oncology, where it was before. And the second thing is that 
there are some clinical trials that have begun. And there's one 
fairly large clinical trial, involving about 300 patients, that 
is presently under way; and there are a couple more of about 
1,000 patients that are being contemplated. And the firm is 
interacting with FDA in order to be sure that these set up 
correctly.
    Mr. Greenwood. Any sense as to when you think the FDA will 
be--these trials will be completed and the FDA will be in a 
position to approve or disapprove this drug?
    Mr. Crawford. You know, I can't predict. I just can't. 
Every time I do, I----
    Mr. Greenwood. Months away or years away?
    Mr. Crawford. Let me confer just 1 second.
    Yeah. The first review, the first trial, the data should be 
in by the end of the year. Typically we take about 6 months to 
review, and we don't know whether the--at the completion of the 
review, you know, we'll file, it will be approvable, but that 
would be sort of the earliest, like midyear next year.
    Mr. Greenwood. Very well. My time has expired.
    The gentleman from Florida for 10 minutes.
    Mr. Deutsch. Thank you, Mr. Chairman.
    Dr. Crawford, it's widely alleged that the decision to 
transfer the review of most biological drugs from the Center 
for Biologics to the Center for Drugs was not originated from 
either center, but rather was imposed by the department at the 
behest of the biotech drug industry.
    Without judging that decision, because it's not yet been 
implemented, I would like to explore how it came about and what 
preliminary steps your office is taking to see that no 
requisite expertise is lost from the agency.
    First, when and from whom did you first hear this proposal 
expressed within the government?
    Mr. Crawford. When I joined FDA--or rejoined FDA on 
February 25 of this year, very shortly after that--I believe it 
was probably in early March--I was briefed about a review of 
CBER, or a review of their therapeutic biologics, that was 
going on and that the group that was reviewing it was shortly 
coming to some conclusions and we might be putting in place a 
system to develop recommendations based out of that.
    There was an internal review committee and also outside 
consultants that were doing that, and so the--that's the first 
I would have heard of it.
    Mr. Deutsch. Excuse me for a second. Who briefed you? Do 
you recall?
    Mr. Crawford. Yes. It was a woman who was in a--a senior 
associate commissioner named Linda Suydam.
    Mr. Deutsch. And the outside consultants?
    Mr. Crawford. The names of them?
    Mr. Deutsch. Correct.
    Mr. Crawford. I'll have to get that for you. I can submit 
that for the record.
    [The following was received for the record:]

    The team included: Dr. Linda Suydam, Mr. William Hubbard; 
Dr. Theresa Mullin; Mr. Jeff Weber; Mr. Daniel Troy; and Dr. 
Murray Lumpkin. The outside consultants were Mr. Paul Coppinger 
and Dr. Elizabeth Jacobsen, who were hired for this task by Dr. 
Suydam.

    Mr. Deutsch. Okay.
    When did Dr. Woodcock and Dr. Zoon first propose or were 
informed that they would have to accept this idea?
    Mr. Crawford. Dr. Zoon was told that we were considering 
this around August 1, and she asked for the privilege of 
responding in writing to the proposal and the idea, which she 
did.
    Dr. Woodcock would not have been informed until after that 
was done. So it would have been, like, the first of September, 
somewhere around in there.
    Mr. Deutsch. And who in FDA and HHS were asked to basically 
offer opinions on the impact of this prior to the announcement 
of the shift? Who else did you seek counsel?
    Mr. Crawford. Well, the--there is a--I put together a 
review committee to make recommendations. They were in the 
Associate Commissioner for Policies' office and also the Acting 
Deputy Commissioner's office. And the Office of Budget of FDA. 
There were about 10 or 11. I can provide those names for you if 
you like.
    Mr. Deutsch. I appreciate that. What outside groups have 
been consulted or were consulted?
    Mr. Crawford. Groups outside the FDA?
    Mr. Deutsch. And HHS, outside the government.
    Mr. Crawford. When the decision was being made?
    Mr. Deutsch. Prior to that decision being made, that's 
correct.
    Mr. Crawford. None. At HHS, I conferred with the secretary 
about what was contemplated.
    Mr. Deutsch. Okay. So your testimony is that you did not 
get any outside--I mean, the outside consultants who you used 
and you would not consider them outside or other----
    Mr. Crawford. Well, they were not, no longer employed by 
the FDA. Both of them had been previously employed.
    Mr. Deutsch. So we're talking about really two people, two 
individuals.
    Mr. Crawford. Two people and then there was a--the team 
that was developing recommendations when I got there had 
conferred with some outside organizations prior to my getting 
there. And we can get you a list of those if you like.
    Mr. Deutsch. Okay. But from the time you arrived you didn't 
interact with anyone.
    Mr. Crawford. I did not personally interact with anyone on 
the outside no.
    Mr. Deutsch. And just these two consultants.
    Mr. Crawford. I did meet with the two consultants once 
within a few days of my arrival.
    Mr. Deutsch. And again, you don't recall their names.
    Mr. Crawford. I can get those for you.
    Mr. Deutsch. All right. That's fine. Okay. Throughout the 
PDUFA reorganization process, FDA repeatedly reminded the 
Congress that the failure to act well in advance of the 
September 30 sunset would result in FDA losing a very large 
investment in human capital as reviewers with expertise leave 
in the face of uncertainty. What steps has the agency taken to 
assure that the reviewers will have continuing employment under 
comparable conditions after this reorganization?
    Mr. Crawford. Well, actually, several things both--some 
before and some after the decision. One is that PDUFA itself in 
the early passage gave assurance to people who would be 
involved in this review process that there would be funds 
enough to keep them on board. As you may recall from the PDUFA 
hearing, we were concerned that we would have to begin laying 
off people if we couldn't get the decision before August, or 
that is late in this legislative year. Since that time we have 
identified key personnel that may be leaving, and we have the 
authority now to offer them incentives to stay, that is 
monetary incentives to adjust their salaries, and then I get a 
weekly report on movement of personnel and I attempt to be very 
careful about unusual changes.
    So far we have not--once PDUFA was signed and presented, we 
have had very few losses.
    Mr. Deutsch. Okay. I understand what you just said. I am 
told that Dr. Zoon has said that she is already losing top 
people. Would you say that is not accurate, inaccurate or maybe 
not to your knowledge at this point?
    Mr. Crawford. There haven't been any unusual losses. FDA 
has an annual turnover rate of about 8 percent, and the record 
shows that's continuing.
    Mr. Deutsch. Okay. Thank you. Thank you, Mr. Chairman.
    Mr. Greenwood. The gentleman from Florida is recognized for 
10 minutes.
    Mr. Stearns. I thank the chairman.
    Dr. Crawford, when ImClone was hyping their--the drug 
Erbitux, Erbitux, were you familiar with their hyping? Did you 
know of their hyping?
    Mr. Crawford. Unfortunately, Mr. Stearns, I was not there 
at the time.
    Mr. Stearns. Okay. Did your predecessor know of it? Did he 
ever say to you boy, these folks are really hyping this drug.
    Mr. Crawford. I didn't come until late February, so I would 
not have had any interaction. I did talk to my predecessor 
about the major items that were developing and had developed 
during the year that he had been acting commissioner and that 
subject did not come out.
    Mr. Stearns. So nobody in the FDA ever talked about ImClone 
hyping the drug Erbitux?
    Mr. Crawford. They did not talk to me about it no.
    Mr. Stearns. They did not talk to you. And you had no--to 
your knowledge, you had no awareness that there was hyping 
going on at ImClone?
    Mr. Crawford. Well, had I been there, I may have known 
about it. But I wasn't there.
    Mr. Stearns. No, I mean after you were appointed and once 
you were there, no one ever talked to you about it? It was 
never a subject and no one said, you know, as a result of this, 
we should do some new procedures.
    Mr. Crawford. Actually, I believe that the procedures that 
I discussed earlier may have emanated from that, and I have 
reason to believe that they did. I'm just--you know, there was 
no specific conversation where someone said to me, because of 
that incident we need to push these forward. However, I do 
believe that the procedures that are now in draft form will 
help and I think they are part of that. I don't dispute that at 
all.
    Mr. Stearns. Yeah. What I'm trying to establish with this 
line of questioning is that the new procedure established 
because of ImClone's hyping the drug, one of the reasons these 
procedures have been established. Do you think that's fair to 
say?
    Mr. Crawford. It would be surprising to me if that was not 
the case, yes.
    Mr. Stearns. Okay. Once the FDA is doing their pre-new drug 
application, they meet with a drug company and get an 
opportunity to sell the agency, you know, the company meets 
with you folks and has an opportunity to sell you on it in the 
pre-new drug application. But after the application is 
submitted, explain to me the opportunities that they have for 
face-to-face meetings with the company. Okay.
    Mr. Crawford. Well, they--we hope they sell through 
science, I mean it's a form of selling, but we do, from the 
very beginning, have an understanding with them of what will be 
expected in order to get the claims that they're seeking. It 
has to be first a decision about what the drug will be used for 
and what the claims will be. Their opportunity to meet with FDA 
is unfettered. Prior to the Prescription Drug User Fee Act, I 
am told that that was a problem in terms of resources. But the 
passage of PDUFA and the utilization of some of those funds for 
this activity has improved that remarkably. So I don't believe 
anyone is being denied a meeting. There are a great number of 
meetings, and we can provide that for the record if you like.
    Mr. Stearns. I guess what we're trying to also establish on 
this committee is sort of the vision for improving the whole 
approval process for cancer drugs. I mean, ImClone is one 
example, but we're trying to put in place procedures so that 
these things are expedited. You know, and lots of us feel that 
the FDA sometimes moves slowly on this process. Do you think 
that there's a way to expedite this anyway if we have more 
face-to-face meetings between the company and the FDA? I mean, 
all--and a little bit in ImClone's defense, they want to know 
what's going on. They don't know what's going on. They want to, 
you know, they're sitting there waiting and waiting and 
waiting. Obviously, they shouldn't have been hyping it. But on 
the other hand, at the same time more FDA face-to-face meetings 
would have been helpful.
    Mr. Crawford. They had access to face-to-face meetings and 
these were regularly held. As I mentioned, under the 
Prescription Drug User Fee Act, we have resources that are 
expended for these meetings which are resource-intensive, to be 
sure. And they take a great deal of preparation and a great 
deal of follow up. But that is happening. And we are also 
emphasizing that cancer drugs are important. I believe that 
they get as good a treatment as any compound can. They also can 
get special consideration for fast track approval and also for 
accelerated approval. The company has to ask for that. In terms 
of fast track, we determine if their request is present, they 
make the request and if we can find some plausibility of 
approval and usefulness for an unmet medical need, they get 
top-of-the-line coverage, and also top-of-the-queue coverage.
    Mr. Stearns. So they simply have to just ask for fast 
track.
    Mr. Crawford. They have to ask and then we have to evaluate 
whether or not it truly is for an unmet medical need. And if 
there is plausibility of its usefulness and approval. But if 
it--and if they don't ask, you know, we sometimes can suggest 
that they might ask.
    Mr. Stearns. I guess there's a question whether the FDA 
spelled out the consequences of a single agent study results to 
ImClone. If the agency asks the company to conduct a study in 
support of an application, how can the agency communicate 
clearly to the company what will happen in the event of certain 
results?
    Mr. Crawford. Well, that's the creative tension that we 
have with the manufacturer. We tell them what they have to do, 
sometimes they disagree. They can--you know, it's a free 
country. They can go ahead and do whatever they want to do. And 
they're not obligated to follow FDA's advice. In most cases, 
companies do. But there is a give and take. I don't want to, 
you know, confuse anyone on that notion. We could be wrong. The 
company could say, well, why don't we do it this way. Why don't 
we do this trial, why don't we do this study in animals or 
whatever. And FDA can be convinced that that is the proper way 
to go.
    Mr. Stearns. Yeah. So in conclusion, you basically agree 
that the idea that the FDA should have periodic face-to-face 
meetings with the companies during the review process.
    Mr. Crawford. I do.
    Mr. Stearns. And do you think they should be spelled out in 
a little bit more detail. Or do you think----
    Mr. Crawford. This new package that we're putting together 
called good review practices----
    Mr. Stearns. Because every reviewer is different, you know. 
This reviewer could have this idea, this reviewer could have 
this idea and so I mean, do we need a consistent policy where 
we say this is what should be done so that the companies know.
    Mr. Crawford. We do and we're doing that. We're going to 
put it out for public comment by the end of this year. 
Consistency among reviews, as you have pointed out, is one of 
the great management challenges at FDA.
    Mr. Stearns. Okay. I thank the chairman.
    Mr. Greenwood. The Chair thanks the gentleman from Florida. 
The gentlelady from Colorado is recognized for 10 minutes.
    Ms. DeGette. Thank you, Mr. Chairman. Dr. Crawford, in our 
last hearing on this whole issue, we talked a lot about the 
fast track drug approval process that the FDA's been using for 
certain drugs for a while, and then which Congress codified and 
expanded on in 1997 and what the standards are for approval of 
drugs under that process and how it differs from the regular 
approval process. And I guess I would like for you to talk for 
a minute about how the FDA is viewing the fast track approval 
process and how it's working and how--how it's working 
differently from the regular drug approval process.
    Mr. Crawford. The regular drug approval process is best 
described as a first-come/first-served process. What fast track 
does is it enables compounds of special promise to get to the 
top of the queue. And I think everyone would agree that it is a 
necessary and useful procedure and policy, and the codification 
of that was welcomed.
    Ms. DeGette. And in general, we all--and I supported it 
too. Our thinking was with fast track, is that it would be 
particularly useful for drugs used for diseases, like in this 
case, the Erbitux, which was to be used for colorectal cancer, 
where there are not very many options for the patients who have 
this type of cancer; is that accurate?
    Mr. Crawford. That is accurate, yes.
    Ms. DeGette. But is it your sense that because it's used 
for these types of drugs, that the clinical trial standards 
should be different from those used in the regular FDA approval 
process?
    Mr. Crawford. No.
    Ms. DeGette. Okay. So your sense is then--and is this a 
view shared throughout the FDA?
    Mr. Crawford. Yes. It's FDA policy.
    Ms. DeGette. Okay. Because we kind of got the sense in our 
last hearing that because Erbitux was part of a fast track drug 
approval process, that the clinical trial standards would be, 
you know, fudged around the edges a little bit because it was 
an experimental drug being used for a serious disease that 
doesn't have very many options.
    Mr. Crawford. Well, the time saving is in expeditious 
review, not in shortening of the studies.
    Ms. DeGette. Right. I mean, what we learned in our last 
hearing was that for Erbitux, for example, the FDA approved a 
clinical trial process that actually had a much smaller sample 
size than under the normal process. Were you aware of that?
    Mr. Crawford. The sample size is, in effect, negotiated. 
The company proposes what the studies will look like and FDA 
interacts with them and has--is not directly related to fast 
track.
    Ms. DeGette. Were you aware that the clinical trials had 
already been completed by the time Erbitux was put on the fast 
track approval process?
    Mr. Crawford. I wasn't involved in the review. I can check 
that out for you. And I wasn't even in the agency.
    Ms. DeGette. I'm pretty sure, from our last hearing, that 
that was the case. So what you're saying is at least from your 
perspective, during this negotiation process between the FDA 
and the developers of the drugs, they shouldn't be allowing for 
smaller sample sizes just because the drug is going to be 
subject to a fast track process?
    Mr. Crawford. Well, the standard is whatever they do has to 
be statistically significant. In other words, you have to be 
able to induce from the trial that there is an improvement. And 
that--that's not necessarily referable to the numbers of 
patients that are in the trial. It's referable to what the data 
needs are.
    Ms. DeGette. I understand what you're saying. But what we 
heard in the last hearing was when they went back, I mean--and 
this is sort of what happened in this case. When the FDA 
reviewers went back and looked at the original studies, they 
realized not only was the sample size smaller than in a normal 
study, but also that the individuals involved in those clinical 
trials a lot of times, didn't fully meet the requirements of 
the study. Were you aware of that?
    Mr. Crawford. I wasn't here then and I was not a reviewer. 
I can look that up for you.
    Ms. DeGette. Okay. You have not become aware of that since 
then?
    Mr. Crawford. No.
    Ms. DeGette. But it would be your testimony that fudging 
like that, allowing a smaller-than-normal sample size, allowing 
within that sample size folks who maybe weren't completely 
qualified to be in the clinical trial, that would not be 
contemplated by the FDA fast track approval process.
    Mr. Crawford. My testimony is that fudging is not allowed.
    Ms. DeGette. Good. And I think that's really important 
because one thing we are trying to investigate in this 
committee is how all of this happened. And one thing that some 
have said is that part of the problem was communication between 
both CBER, CDER and who should be responsible for, you know, 
for undertaking these studies. And so I guess my question would 
be--I know the FDA announced in early September it would 
transfer the review of certain therapeutic biologies from CBER 
to CDER which has more experience. And my question is, how do 
you think that this will improve the communication process and 
maybe even the approval process.
    Mr. Crawford. Well, we haven't worked out the 
implementation details of that. These should be ready very 
soon, however, and I can submit that for the record. The idea 
is that if you consolidate similar review functions within one 
unit, then you should get more efficiency. And so it's a move 
toward efficiency.
    Ms. DeGette. Would it also improve the scientific accuracy?
    Mr. Crawford. Well, the Center for Biologic Evaluation and 
Research is a highly respected organization, and there is no 
supposition on my part or anyone else's part that they didn't 
do a first-rate job. But if you're doing essentially the same 
thing at two different centers, you ought to be able to get it 
done more efficiently, not more scientifically but more 
efficiently if you consolidate it in one other center. To some 
extent, although the decision to consolidate has been made, 
exactly what will be consolidated is still being considered.
    Ms. DeGette. And how long will that take to decide?
    Mr. Crawford. It'll be done by the end of this year, and 
should be done the first--the things we can share with you 
about our conclusions of this implementation group will be 
within a matter of a very few weeks.
    Ms. DeGette. Mr. Chairman, I'd ask that we submit--we 
supplement the record with that answer.
    Mr. Greenwood. Without objection, we will.
    [The following was received for the record:]

    The CBER/CDER Product Consolidation Working Group (the 
Group) discussed Phase 1 of the implementation plan relating to 
the scope of products to be consolidated. The Group's October 
28, 2002, memorandum is set forth in Enclosure A. [Enclosure A 
appears at the end of the hearing.]

    Ms. DeGette. Thanks. Okay. I have one last question which I 
intend to talk to the board about as well. We're concerned on 
this committee a lot about conflicts of interest in medical 
research. There are institutional conflicts of interests, 
principal investigator conflicts, and the question we have is 
is this affecting the integrity of medical research? And in 
this instance, it's particularly troubling because Dr. 
Mendelsohn, who's the inventor of Erbitux, not only also sits 
on the ImClone boards of directors, but also heads the M.D. 
Anderson Cancer Center in Houston, which is the same cancer 
center that serves as a clinical trial site for Erbitux.
    And the problem that we have, and that I have, is that M.D. 
Anderson failed to inform patients that were participating in 
clinical trials that Dr. Mendelsohn stood to make $6 million 
from the drugs' success. So my question is, in 2001, the GAO 
called on HHS, including the FDA, to promulgate new regulations 
to issue guidance to address institutional conflicts of 
interest. By the way, this is something I'm working on in 
general in a clinical trial bill that I'm working on.
    What the GAO said was that institutional financial 
interests may color an institution's review, approval or 
monitoring of research conducted under its auspices or its 
allocation of equipment facilities and staff for research. And 
then just a few weeks ago, the American Association of Medical 
Colleges issued its report on institutional conflicts of 
interest and recommended full disclosure in situations like 
that that faced M.D. Anderson. So my question is, what is HHS, 
and most specifically, FDA, doing to address institutional 
conflicts of interest?
    Mr. Crawford. The Department of Health and Human Services 
has, at the departmental level, an organization called the 
Office of Human Research Protection, and they're dealing with 
this and some other items. Let me--if I could confer for just a 
moment.
    Ms. DeGette. Thank you.
    Mr. Crawford. Yeah. They're looking at conflict of interest 
in a very broad way, and I think--I have met with that group 
several times since I've been at FDA. And the specific issue 
that you're mentioning, that is someone being connected either 
on the board or an officer with a clinical center that's doing 
the investigation, will be encompassed in what they're 
considering. But what I need to do is to get the minutes of our 
meetings and submit that as part of the record.
    I also would--with your permission, I also will get a 
report from that office. They don't report to FDA. They 
rather--we'd rather report to them. So if that's okay, I'll 
make sure that their deliberations are made part of the record.
    [The following was received for the record:]

    The Department has been considering the issue of the effect of 
financial interests on human subject protection for several years. In 
August 2000, the Department sponsored a conference on this subject. FDA 
had an integral role in the planning and conduct of that meeting, which 
led the Department to issue for public comment a draft interim guidance 
entitled, ``Financial Relationships in Clinical Research: Issues for 
Institutions, Clinical Investigators, and IRBs to Consider when Dealing 
with Issues of Financial Interests and Human Subject Protection.'' This 
document was available to the public on January 10, 2001. Following the 
issuance of the draft interim guidance, a number of other public and 
private organizations began to examine these issues, leading in some 
cases to the publication of reports or policies. The public bodies that 
have addressed financial interests in research include the National 
Bioethics Advisory Commission, the HHS Office of Inspector General, and 
the General Accounting Office. Private organizations that are examining 
these issues include the Association of American Universities, the 
Association of American Medical Colleges; the American Medical 
Association; and the American Society of Gene Therapy. Also, on 
September 30, 2002, the National Institutes of Health sponsored a 
workshop at which issues Related to institutions were discussed. FDA 
and the Department continue to work together to address conflicts of 
interest in research and the protection of human subjects.


    Ms. DeGette. Yeah. Again, what kind of timeframe are they 
looking at as they look at promulgation of ethical standards?
    Mr. Crawford. They--I don't set their timeframes. But my 
sense is that there's great urgency about it.
    Ms. DeGette. That would be my sense, too. Are you concerned 
about this issue?
    Mr. Crawford. I am.
    Ms. DeGette. And can you tell me why you're concerned about 
it?
    Mr. Crawford. Well, I think there are several--there a 
couple of ways to look at these kind of things. One is actual 
conflicts of interest and perceived conflicts of interest. And 
full disclosure is what I've always been in favor of. I was 
editor of a journal before I took this job. And we required the 
listing of on every publication and everything of whether or 
not a person did have conflicts of interest. They could self-
declare, and we also could challenge.
    And in the center I directed at Georgetown University, we 
did the same kind of thing. So I am--you know, I'm on record as 
favoring full disclosure of conflicts of interest and possible 
conflicts of interest.
    And I think there has to be oversight of that. I think you 
can't depend on the investigator themselves.
    Ms. DeGette. And that would help the FDA in reviewing 
applications as well if the clinical trials were being 
undertaken at some place where there was a board member or 
someone who had a financial interest?
    Mr. Crawford. Absolutely. I fully agree.
    Ms. DeGette. Thank you, Mr. Chairman. I yield back.
    Mr. Greenwood. The Chair thanks the gentlelady. Mr. 
Crawford in your response to a question I asked earlier about 
Erbitux particularly and its status, I believe you said that it 
was still at the Center for Biologics which is doing the 
review; is that correct?
    Mr. Crawford. I'll have to check where it is. That is 
correct, yes.
    Mr. Greenwood. The question then, is it--is this 
application going to be transitioned over to the new combined 
center or to the pharmaceutical center?
    Mr. Crawford. My decision on that has not been fully 
reached. We have--those that are under review at the present 
time, I would have--I would want to make sure that they did not 
leave the unit that is being--doing the review. I think it is 
important to note that the entire unit would transfer under one 
scenario to the Center for Drug Evaluation and Research, so 
there'd be no disruption.
    Mr. Greenwood. Well, who has signatory authority on 
oncology products at CDER now?
    Mr. Crawford. The director of the division of oncology.
    Mr. Greenwood. Is that Richard Pazdur?
    Mr. Crawford. It is.
    Mr. Greenwood. And who is going to have signatory authority 
on oncology products after the transfer.
    Mr. Crawford. It would be him.
    Mr. Greenwood. So, what issues does FDA have to resolve 
first before implementing this reorganization? What do you have 
to do?
    Mr. Crawford. What we did was to put together a task force 
of personnel from both centers to hear about what categories of 
compounds should be transferred and what special considerations 
so that we don't delay the process, would come to the fore. 
Basically, it's to be sure that we don't lose efficiency by 
trying to get more efficiency.
    Mr. Greenwood. So why don't you just briefly outline what 
you think the advantages will be of this reorganization.
    Mr. Crawford. The advantage will be that in the Center for 
Drug Evaluation and Research, there is expertise and also a 
unit that reviews drugs that are very similar to these 
therapeutic biologics. And so since they already have the unit 
set up and since it's functioning, if you put these in there, 
you would--you should get more efficiency because you have a 
critical mass. When you have review units you have to have 
statisticians. You have to have pathologists, biochemists and 
so forth. And so what we're trying to do in FDA and have been 
for some time is not have to recreate this critical mass of 
expertise in order to get the job of review done. And when that 
has been done correctly, we have experienced efficiencies.
    Mr. Greenwood. Back to this question of communication with 
the sponsors, communications back and forth between FDA and the 
sponsors, the question I have really is do you think it should 
be the policy that the sponsor--if the sponsors wants a face-
to-face meeting, that that ought to be the sponsors' right? In 
other words, that it's not simply at the subjective decision of 
a particular reviewer as to when and how frequently those 
meetings should occur.
    But it seems to me that we still don't have the policy and 
I haven't heard you describe yet this morning a policy in which 
that would be the rule.
    Mr. Crawford. The policy is being developed and we, as I 
mentioned, we are going to submit that to the committee as well 
as ask for public comment. It is my feeling and it is FDA 
policy that the sponsors do have the right to have these 
meetings. Of course, they have to be scheduled correctly. You 
have to make sure that you have the right people at the 
meeting, both from the company's side. They can't just--there 
was a time actually when I was first at FDA in the 1970's, when 
sponsors of the center I directed at that time could just, as 
we put it, fall in off the street and come by and see you and 
those meetings were better described as lobbying meetings than 
scientific interchange meetings.
    So we've come a long way since then. There has to be some 
order in the process. But meeting with the reviewers is the 
right that the companies have and should expect to exercise.
    Mr. Greenwood. Okay. And that sounds like the right policy 
to me. The Chair recognizes the gentleman from Michigan, Mr. 
Stupak for 10 minutes. And let me announce so that everyone 
knows what's going on. I know you have scheduling issues. At 
the conclusion of Mr. Stupak's time, oh and Mr. Whitfield is 
here. And if he has questions at the conclusion we will break 
until at least 1 for lunch and then we'll take panel two.
    Mr. Stupak.
    Mr. Stupak. Thank you, Mr. Chairman. I apologize. I missed 
most of this hearing. I've been over in the Senate and I 
appreciate the chairman's indulgence, and hopefully none of my 
questions are redundant.
    Dr. Crawford, you said in your statement that it is not the 
FDA's responsibility to correct false and misleading statements 
to the public by a drug sponsor. Rather, you state it's the 
SEC's responsibility to do this. Do you, or have you 
communicated your concerns with the SEC?
    Mr. Crawford. Yes. In preparation for this hearing, I asked 
of our Office of Chief Counsel to give me an understanding of 
how frequent and how productive our communication was with the 
Securities and Exchange Commission and on the productivity 
scale, it's reported to me that it is very productive, that 
these are actually two executive branch agencies that interact 
well with each other. Their frequency of contact is daily on 
both sides. They initiate contact with FDA on subject matter 
areas, and we initiate them also. So it's working.
    Mr. Stupak. But what about specifically on false, 
misleading statements where the SEC should step in? And has 
those communications been since the last hearing, which was, I 
believe, in June?
    Mr. Crawford. Yes. We've had those kinds of communications 
with them. I can give you some statement of how many, if you 
would like for the record.
    Mr. Stupak. Well, at these communications have you come up 
with any kind of solution on how you're going to resolve this 
situation?
    Mr. Crawford. We have. We have--we're developing a document 
called the Good Review Practices Document, which does address 
this issue and we're--we're going to put it out for--we're 
going to supply it to the committee and also going to put it 
out for public comment. It's in--fairly far along in 
development, and we'll have that done by the end of the year. 
And it will address this so as to routinize these kinds of 
interchanges. It will also routinize other things, like how 
reviewers interact with the sponsoring drug and biologics firms 
likewise.
    Mr. Stupak. Okay. You also stated, I believe, in your 
statement that the FDA currently does have authority to correct 
misstatements. What kind of situation would lead to the FDA to 
step in or take an active role in correcting misstatements? In 
other words, what would it take for the FDA to step in? I mean, 
here we had a drug that was called the miracle drug in Business 
Week, I believe, 60 Minutes. In fact, I think in the June 
testimony, some of the FDA people said they were appalled at 
some of the statements being made, but yet they said and did 
nothing. So what does it take?
    Mr. Crawford. You mean, in the pre-approval timeframe 
before it's on the market?
    Mr. Stupak. Sure.
    Mr. Crawford. What we can do, obviously SEC reference is 
one thing. But FDA also has authority to do the following 
things, and we have done these in instances in the past and up 
to the present. And that is, we are--we send to a company 
that's making egregious claims in the pre-approval era period 
what's called an untitled letter. And in those letters, we 
indicate what we find unacceptable about the issuances that 
they're putting out, and we also call upon them to cease and 
desist doing that. If the untitled letter does not bring 
relief, then we go, at some stage, to what's called a warning 
letter. And the warning letter informs them that their behavior 
is unacceptable and could result in the suspension of the 
review process for the product that's under consideration.
    Mr. Stupak. In the matter before us, Erbitux, did anyone 
send an untitled letter?
    Mr. Crawford. I was not at the agency at that time. But let 
me check. I'm--we're not aware of one.
    Mr. Stupak. So in this case, basically, despite the claims 
and people were appalled from the FDA, nothing was really done 
on this one then, right?
    Mr. Crawford. We're not aware of that being done, no.
    Mr. Stupak. Okay. When you do these untitled letters, with 
a cease and desist order or statement, whatever you want to 
call it in the untitled letter, do you inform the public of it?
    Mr. Crawford. Those are available under the Freedom of 
Information Act. We don't normally do that.
    Mr. Stupak. But the people would have no way of knowing.
    Mr. Crawford. We do not suppress that information.
    Mr. Stupak. Sure, if someone asked for it.
    Mr. Crawford. Asked for it.
    Mr. Stupak. But the public probably didn't know to ask for 
it until today.
    Mr. Crawford. I'm informed that our new policy that has 
been developed is that we post them on the Web site. Now, we 
don't tell people though that they're on the Web site. You have 
to look on the Web site.
    Mr. Stupak. So when you post it on the Web site, you don't 
put out a press release or anything like that?
    Mr. Crawford. No.
    Mr. Stupak. Okay. And again, posting on the Web site is 
that post June 2002, after our last hearing?
    Mr. Crawford. Actually, we're trying to go electronic and I 
think that--that's been done since about 1996.
    Mr. Stupak. Okay. You indicate that after the untitled 
letter, and it wasn't done in this case, but in other cases 
that's been done, and then there's a warning letter. And then 
if necessary, you can spend time to review the application; is 
that correct?
    Mr. Crawford. That is correct.
    Mr. Stupak. Have you ever done that? Not you, but FDA?
    Mr. Crawford. No. That's never been done. I assume that's 
because they have gotten the correction they sought.
    Mr. Stupak. Well, it's--I'm just concerned, it's a little 
bit like studies, you know, the FDA asks for studies and if 
they don't get the studies, they can always pull the drug from 
the market. And one of the hearings we had here earlier this 
year, when I asked Ms. Woodcock if that's ever been done, she 
said no. I'm concerned that the enforcement of the FDA in cases 
like this is always after the fact, and then it's not very 
vigorous, even when it is.
    I'm trying to find what parameters or what criteria would 
you use where you'd actually step in. I still am bemused by the 
fact that the FDA is probably the only regulatory agency we 
have in the Federal Government that doesn't have subpoena power 
to get the studies that manufacturers do, but never submit to 
you, or if you ask for further raw data in support of the study 
submitted, you don't get it, in Serzone and a couple of other 
drugs that I know of.
    So I'm a little suspicious, or I shouldn't say suspicious, 
but really don't believe the FDA does much in light of 
enforcement in these areas. So I'm trying to find out what 
criteria would you use before you begin some type of 
enforcement, other than they didn't follow through on the cease 
and desist order.
    Mr. Crawford. Yes. What I described is a chain of events 
where we would be seeking correction of a firm's course and if 
we didn't get that, then we would go as far as we needed to go 
in order to try to get the correction. Firms generally will--
you know, acquiesce to what FDA's requests are at some point. 
Sometimes it takes quite a bit of coercion.
    Mr. Stupak. Sure. I realize you're fairly new to the FDA, 
and I think you're saying last night you've been there three or 
four times, and then out of the FDA, right?
    Mr. Crawford. Right. Yes, sir.
    Mr. Stupak. Do you believe the FDA should have subpoena 
power to be able to obtain studies and raw data from these drug 
manufacturers if there's a question as to the validity of a 
study?
    Mr. Crawford. Let me check if we've asked for that. We 
apparently have not sought that, at least recently. And one of 
the reasons is that we do have authority to require this 
information. And if they do not submit the information, then we 
can suspend the review of the product. And if it is a product 
that's already on the market, we can suspend the marketing of 
that product.
    Mr. Stupak. Sure. But the FDA has never done it. That's my 
point. Counsel's wrinkling their nose back there. If you know 
of some drug, you have actually pulled it because of that, I'd 
really like to know because they didn't submit it. Take 
Serzone, take Accutane. I can go down a couple of more if you 
want.
    Mr. Crawford. What we'll do is do a review of that and 
submit for the record if we ever have and then if we have, 
which ones we have.
    Mr. Stupak. Sure. I'd like to see that. I think the answer 
is no, but if you have any. Mr. Chairman with that I'd yield 
back. Thank you.
    [The following was received for the record:]

    CBER has revoked approved license applications when it subsequently 
discovered that the original applications contained false or misleading 
information. For example, the establishment and product licenses issued 
to Sclavo, S.p.A. (U.S. license 0238), were revoked after an inspection 
identified significant differences between the manufacturing methods 
used to manufacture product and those described in the license 
application. The product licenses revoked included Diphtheria and 
Tetanus Toxoids and Pertussis Vaccine Adsorbed, Tuberculin Purified 
Protein Derivative and Cholera Vaccine. See 58 Fed. Reg. 66,380 
(December 20, 1993). CBER has also accepted the withdrawal of pending 
applications once substantive review has been deferred due to the 
presence of untrue statements in the application. For example, CBER 
accepted the withdrawal of pending license applications for two 
monoclonal antibody products.
    FDA has repeatedly taken action to withdraw approval of new drug 
applications (NDAs), abbreviated applications (ANDAs), abbreviated 
antibiotic drug applications (AADAs), and new animal drug applications 
(NADAs) where sponsors failed to provide complete and truthful 
information to the Agency before or after marketing approval. In 1976, 
FDA initiated an action to withdraw approval of NDA 17-581 for Naprosyn 
(naproxen) Tablets on the ground that the sponsor had misstated or 
omitted material facts from the application. Specifically, FDA found 
that, because of such misstatements and omissions, a study report 
submitted as part of the NDA was ``uninterpretable in documenting the 
lack of chronic toxic effects or carcinogenic potential of the drug.'' 
FDA found that the untrue statements ``vitiate[d] the earlier 
conclusions reached by the Agency regarding long term safety of 
Naprosyn. See FDA, Naprosyn Tablets: Opportunity for Hearing on 
Proposal To Withdraw Approval of New Drug Application, 41 Fed. Reg. 
45,605 (October 15, 1976). Between 1989 and 1995, FDA initiated 
proceedings to withdraw approval of certain and AADAs after it 
discovered untrue statements in batch and stability test records and 
bioequivalence studies (see Enclosure B). FDA has also initiated 
proceedings to withdraw approval of many NDAs, AADAs, ANDAs, and NADAs 
on the ground that the sponsor had failed to submit required annual 
reports or periodic reports as required by FDA regulations. See 58 Fed. 
Reg. 25,653 (April 27, 1993) (3 NADAs); 58 Fed. Reg. 33,445 (June 17, 
1993) (one NADA); 58 Fed. Reg. 34,814 (June 29, 1993) (24 NADAs); 61 
Fed. Reg. 9,999 (March 12, 1996) (41 NDAs); 61 Fed. Reg. 10,768 (March 
15, 1996) (3 AADAs, 14 ANDAs); 61 Fed. Reg. 59,100 (November 20, 1996) 
(1 NADA); 62 Fed. Reg. 37,063 (July 10, 1997) (4 NDAs); 63 Fed. Reg. 
29,233 (May 28, 1998) (2 NADAs); and 65 Fed. Reg. 16,397 (March 28, 
2000) (158 ANDAs).
                              enclosure b
ANDA 71-737; Triamterene/HCTZ Capsules; AADA 61-471; Tetracycline 
Hydrochloride 500 mg Capsules; AADA 62-159; Cephalexin 250 mg and 500 
mg Capsules; AADA 62-227; Doxycycline Hyclate 100 mg Capsules; AADA 62-
779; Cephalexin for Oral Suspension, 125 mg/5 mL; AADA 62-780; 
Doxycycline Hyclate 50 mg Capsules; AADA 62-781; Cephalexin for Oral 
Suspension, 250 mg/5 mL; AADA 62-813; Cephradine 250 mg and 500 mg 
Capsules; AADA 62-863; Cephalexin 250 mg, 500 mg, and 1,000 mg Tablets; 
AADA 62-910; Clindamycin HCI 75 mg and 150 mg Capsules; ANDA 71-360; 
Triamterene 75 mg/Hydrochlorothiazide 50 mg Tablets; ANDA 71-531; 
Indomethacin ER 75 mg Capsules; ANDA 71-564; Orphenadrine Compound 
Tablets, Single Strength; ANDA 71-565; Orphenadrine Compound Tablets, 
Double Strength; ANDA 71-684; Meclofenamate 100 mg Capsules; ANDA 71-
710; Meclofenamate 50 mg Capsules; ANDA 71-711; Indomethacin 25 mg 
Capsules; ANDA 71-712; Indomethacin 50 mg Capsules; ANDA 71-832; 
Trimipramine 25 mg Capsules; ANDA 71-833; Trimipramine 50 mg Capsules; 
ANDA 71-834; Trimiprarnine 100 mg Capsules; ANDA 71-901; Baclofen 10 mg 
Tablets; ANDA 71-902; Baclofen 20 mg Tablets; ANDA 72-167; Desipramine 
Hydrochloride 10 mg Tablets; ANDA 72-179; Mefenamic Acid 250 mg 
Capsules; ANDA 72-254; Desipramine Hydrochloride 150 mg Tablets; ANDA 
71-642; Orphengesic Tables (25 mg orphenadrine citrate, 770 mg aspirin, 
60 mg caffeine); ANDA 71-643; Orphengesic Forte Tables (50 mg 
orphenadrine citrate, 770 mg aspirin, 60 mg caffeine); ANDA 72-337; 
Triarnterene 75 mg and HCTZ 50 mg Tablets; ANDA 71-845; Triamterene 50 
mg and HCTZ 25 mg Capsules; AADA 62-779; Cephalexin for Oral Suspension 
125 mg/5 mL; AADA 62-781; Cephalexin for Oral Suspension 250 mg/5 mL; 
AADA 62-813; Cephradine 250 mg and 500 mg Capsules; AADA 62-863; 
Cephalexin 250 mg, 500 mg, and 1,000 mg Tablets; ANDA 71-684; 
Meclofenamate 100 mg Capsules; ANDA 71-710; Meclofenamate 50 mg 
Capsules; ANDA 70-642; Diazepam 2 mg; ANDA 70-643; Diazepam 5 mg; ANDA 
70-644; Diazepam 10 mg; ANDA 70-421; Verapamil Hydrochloride Tablets, 
80 mg; ANDA 70-422; Verapamil Hydrochloride Tablets, 120 mg; ANDA 71-
020; Disopyramide Phosphate Capsules, 100 mg; ANDA 71-021; Disopyramide 
Phosphate Capsules, 150 mg; ANDA 71-558; Perphenazine and Amitriptyline 
HCI Tablets, 4 mg/50 mg; ANDA 71-661; Oxazepam Capsules, 10 mg; ANDA 
71-662; Oxazepam Capsules, 15 mg; ANDA 71-663; Oxazepam Capsules, 30 
mg; ANDA 89-700; Perphenazine Tablets, 8 mg; ANDA 70-400; Meclofenamate 
sodium 50 mg capsules; ANDA 70-401; Meclofenamate sodium 100 mg 
capsules; ANDA 88-711; Phenytoin sodium extended release capsules 100 
mg; ANDA 62-392; Doxycycline hyclate tablets 100 mg; ANDA 88-207; 
Ergoloid mesylates tablets 1.0 mg; ANDA 70-727; Lorazepam Tablets, 0.5 
milligram (mg); ANDA 70-728; Lorazepam Tablets, 1 mg; ANDA 70-729; 
Lorazepam Tablets, 2 mg; ANDA 70-881; Clonidine Hydrochloride Tablets, 
0.1 mg; ANDA 70-882; Clonidine Hydrochloride Tablets, 0.2 mg; ANDA 70-
883; Clonidine Hydrochloride Tablets, 0.3 mg; ANDA 89-387; Prednisone 
Tablets, 5 mg; ANDA 89-388; Prednisone Tablets, 10 mg; ANDA 89-389; 
Prednisone Tablets, 20 mg; ANDA 62-047; Erythromycin ethylsuccinate 
oral suspension, 200 and 400 mg; ANDA 71-929; Disopyramide phosphate 
extended release capsules, 100 mg; AADA 86-538; Nitroglycerin extended 
release capsules, 2.5 mg.
    See 54 Fed. Reg. 35,535 (August 29, 1989); 54 Fed. Reg. 40,740 
(October 3, 1989); 54 Fed. Reg. 42,367 (October 16, 1989); 54 Fed. Reg. 
48,026 (November 20, 1989); 55 Fed. Reg. 8,995; 55 Fed. Reg. 9,360 
(March 13, 1990); 55 Fed. Reg. 21,103 (May 22, 1990); 55 Fed. Reg. 
25,712 (June 22, 1990); 55 Fed. Reg. 46,245 (November 2, 1990); 55 Fed. 
Reg. 47,542 (November 14, 1990); 55 Fed. Reg. 47,919 (November 16, 
1990); 56 Fed. Reg. 2,528 (January 23, 1991); 60 Fed. Reg. 32,982 (June 
26, 1995).

    Mr. Greenwood. The Chair thanks the gentleman. One final 
question and then we're going to break. Mr. Whitfield did you 
have questions?
    Mr. Whitfield. Mr. Chairman, I just have one brief 
question. I was just curious. Of the applications that are 
submitted for accelerated approval or fast track designation, 
what percent of those meet the criteria would you say for fast 
track?
    Mr. Crawford. We will check that and provide it for the 
record. We believe it to be 60 to 80 percent of requests.
    [The following was received for the record:]

    Fast track programs are designed to facilitate the 
development and expedite the review of new drugs that intended 
to treat serious or life-threatening conditions and demonstrate 
the potential to address unmet medical needs. Fast track 
emphasizes the critical nature of close early communication 
between FDA and sponsors. Procedures such as pre-
Investigational New Drug (IND) and end of Phase 1 meetings are 
methods used to improve the efficiency of pre-clinical and 
clinical development. The fast-track process focuses on efforts 
by FDA and sponsors to reach early agreement on the design of 
the major clinical efficacy studies that will be needed to 
support approval. Fast track policies are primarily designed to 
expedite drug development during the IND stage. Approval under 
subpart H (accelerated approval) (Title 21, Code of Federal 
Regulations Part 314, Subpart H) allows for marketing approval 
of an NDA based on an effect on a surrogate endpoint along with 
well-controlled post-marketing studies. A drug developed under 
fast track may also qualify for accelerated approval.
    CDER has received 172 requests for fast track designation 
since it was implemented in 1998. One hundred seventeen fast-
track designations were granted. Forty-three fast-track 
designations were denied. Twelve fast-track designations are 
still pending, Based on these statistics, 73 percent met the 
criteria for fast-track designation.
    Since 1978, CBER has granted 51 requests for fast-track 
designation and has denied 38 requests. Two applications are 
still pending. Based on these statistics, 56 percent met the 
criteria for fast-track designation.

    Mr. Whitfield. Okay. Mr. Chairman that's all that I wanted 
to ask. Thank you for being with us today, Dr. Crawford.
    Mr. Crawford. Thank you very much.
    Mr. Greenwood.  The Chair thanks the gentleman. And 
finally, thinking about the Erbitux case and this line of 
questioning that we've been engaged in with the pre-approval 
marketing and so forth, in general, I think what we're trying 
to resolve here is if you have a promising drug, of course you 
want to create interest in investors and want to attract 
capital so that you can develop the drug. And of course that 
can be utilized the way it should work and it can be misused so 
that you actually attract investment for a product that--whose 
potential you're exaggerating.
    And so the--obviously we think that the FDA has a role 
here. But we also realize that if you look at the Erbitux case, 
a lot of the--what some have called hyping, a lot of the 
promotion of the drug and its potential benefits occurred even 
before the application was submitted to the FDA. So we have 
this whole other period of time in which I suppose there's 
nothing at all we can do except caveat emptor. The investors 
will have to make their own decisions based on the personnel of 
the company and so forth as to whether they're going to believe 
these claims. That's basically a statement. I don't know if you 
choose to respond.
    Mr. Crawford. I don't believe we have any authority with 
that.
    Mr. Greenwood. Yeah. And we probably shouldn't. All right. 
Well we thank you for testifying. This committee will recess 
now until 1.
    [Brief recess.]
    Mr. Greenwood. The committee will come the order, and as we 
do so, I welcome our next panel. And I will introduce them. We 
have Dr.--or rather Robert Goldhammer, chairman of the board of 
ImClone Systems. Welcome. Good afternoon. I say to all of you I 
apologize for delay, and there will be more because we have 
votes before us yet.
    Mr. Goldhammer is chairman of the board of ImClone Systems. 
Paul Kopperl is a member of the board of directors of ImClone 
Systems. Welcome, sir. John Mendelsohn is the member of the 
board of directors also. Good to have you with us, Dr. 
Mendelsohn. Harlan Waksal, Dr. Waksal, good to have you back. 
Thank you for coming again. John Landes is the senior vice 
president for legal at ImClone Systems. Welcome, sir. And 
Katherine Vaczy, am I pronouncing that correct? Vaczy, vice 
president of the legal department at ImClone Systems.
    We thank all of you for being here. You probably have been 
informed by our staff that this is an investigative hearing, 
and when we hold investigative hearings, it is our practice to 
take testimony under oath. And I would ask if any of you have 
any objections to providing your testimony under oath?
    Seeing no such objections, I then advise you that pursuant 
to the rules of this committee and the rules of the House of 
Representatives, that you are each entitled to be represented 
by counsel, and let me start with Mr. Goldhammer, are you 
represented by counsel today, sir?
    Mr. Goldhammer. Yes.
    Mr. Greenwood. Would you pull your microphone right up 
close to your mouth and make sure the button is on. It is 
flexible so you can--you can bend it up toward you so you don't 
have to bend down. Now push the button again. Try it again. It 
still isn't on. All right. We'll get somebody to help you 
there.
    Mr. Goldhammer. Oh, wrong button.
    Mr. Greenwood. Do whatever Dr. Waksal does. He has been 
here before.
    If you would identify your counsel.
    Mr. Goldhammer. Yes. Charles Cobb.
    Mr. Greenwood. Very well. Mr. Cobb, good to have you with 
us.
    Mr. Kopperl, are you advised by counsel as well?
    Mr. Kopperl. Yes, sir. It's Mr. Cobb.
    Mr. Greenwood. Oh, same person. And Dr. Mendelsohn.
    Mr. Mendelsohn. Same person.
    Mr. Greenwood. Dr. Waksal.
    Dr. Waksal. Chip Lowenson.
    Mr. Greenwood. Chip, would you identify yourself. Okay. 
Very good.
    Mr. Landes.
    Mr. Landes. Yes. David Meister.
    Mr. Greenwood. Who is there. Okay. And Ms. Vaczy.
    Ms. Vaczy. Eric Heikel.
    Mr. Greenwood. Who is there. Very well.
    In that case, if you would stand and raise your right hand, 
I'll administer the oath.
    [Witnesses sworn.]
    Mr. Greenwood. You are under oath, and we will--Okay. Mr. 
Goldhammer, do you have an opening statement that you'd like to 
make?
    Mr. Goldhammer. I do, sir.
    Mr. Greenwood. Okay. Then please do. You're recognized for 
5 minutes, and, again, if you would--if you can adjust that 
microphone so it is right where you want it.

   TESTIMONY OF ROBERT F. GOLDHAMMER, CHAIRMAN OF THE BOARD, 
IMCLONE SYSTEMS, INC.; PAUL B. KOPPERL, MEMBER OF THE BOARD OF 
 DIRECTORS, IMCLONE SYSTEMS, INC., JOHN MENDELSOHN, MEMBER OF 
   THE BOARD OF DIRECTORS, IMCLONE SYSTEMS, INC.; AND HARLAN 
    WAKSAL, CHIEF EXECUTIVE OFFICER, IMCLONE SYSTEMS, INC., 
   ACCOMPANIED BY JOHN LANDES, SENIOR VICE PRESIDENT, LEGAL, 
  IMCLONE SYSTEMS, INC., AND CATHERINE VACZY, VICE PRESIDENT, 
                  LEGAL, IMCLONE SYSTEMS, INC.

    Mr. Goldhammer. Thank you. Mr. Chairman and members of the 
subcommittee, good afternoon. My name is Robert Goldhammer. I 
joined ImClone Systems board of directors in October 1984, and 
I've been chairman since February 1991. Over the past 18 years, 
I've been privileged to witness the dramatic growth of a small 
startup company to the viable company ImClone represents today. 
The company was founded by Dr. Samuel Waksal and his brother 
Dr. Harlan Waksal in the early 1980's.
    For the first 5 years the company sought to find its niche 
in establishing an appropriate scientific and business model 
for the company. To build ImClone, the Waksals assembled a 
distinguished scientific advisory board, and with the help of 
that board, the company began to focus on the treatment of 
cancers. In 1991, the company went to the public market on the 
basis of its potential as a young innovative biotechnology 
company with some promise.
    A little more than a year ago, the company stood on the 
verge of a breakthrough. It had negotiated a strategic alliance 
with the Bristol-Myers Squibb Company that would facilitate its 
ability to bring hope in the form of Erbitux to hundreds of 
thousands of cancer patients. And it was in the process of 
seeking approval of Erbitux from the FDA.
    While the subcommittee's primary interest is in that 
approval process, no doubt some of your questions today will 
center around ImClone's former president and CEO, Sam Waksal.
    Let me say two things about this subject, if I might. 
First, despite the misconduct that has come to light, Sam 
Waksal was indispensable to this company, and an integral part 
of its success over those years. Sam Waksal was the one who 
recognized the potential of Erbitux early on, and it was he who 
was instrumental in building ImClone and in creating 
significant value for its shareholders and patients over a long 
period of time.
    Second, as soon as allegations of wrongdoing by Sam Waksal 
began to surface in early 2002, the company's board acted 
quickly to address most of these issues.
    We put in process a place to have outside legal counsel 
investigate the allegations of misconduct and report back to 
it. We debated the issues surrounding Sam Waksal vigorously, 
decided to about after, not before, a thorough investigation 
had taken place.
    Today, despite the challenges of these recent months, 
ImClone remains a vibrant company that is working with its 
partners to give people hope and save lives.
    We continue to believe that Erbitux will become an 
important treatment for cancer patients, and the company has an 
exciting pipeline of other products showing significant 
promise.
    This board has met literally dozens of times this year in 
an effort to make sure that we in the company's management team 
are doing all we can and should be doing to get through these 
difficult times. Paul Kopperl on my left, the chairman of 
ImClone's audit committee, will discuss some of the significant 
governance changes the board initiated over the past 9 months.
    Importantly, shortly after receiving the refusal to file 
letter from the FDA at the end of 2001, we quickly formed a 
committee of outside directors and retained legal counsel to 
address the serious issues facing the company. Above all, we 
have not led all of this controversy surrounding Sam Waksal to 
deflect any focus from our mission to get Erbitux back on 
track.
    Dr. John Mendelsohn, a fellow board member and coinventor 
of Erbitux, will speak to it in more detail talking about this 
important drug.
    Thank you for the opportunity to be here today. I'd be 
pleased to answer questions you may have. Thank you.
    [The prepared statement of Robert F. Goldhammer follows:]
  Prepared Statement of Robert F. Goldhammer, Chairman of the Board, 
                         ImClone Systems, Inc.
    Mr. Chairman and members of the Subcommittee, good afternoon.
    My name is Robert Goldhammer. I joined the ImClone Systems Board of 
Directors in October 1984 and have been Chairman since February 1991.
    Over the past eighteen years, I have been privileged to witness the 
dramatic growth of a small start-up to the viable company ImClone 
represents today.
    The Company was founded by Dr. Samuel Waksal and his brother, Dr. 
Harlan Waksal, in the early 1980s. For the first five years, the 
Company sought to find its niche in establishing an appropriate 
scientific and business model.
    To build the Company, the Waksals assembled a distinguished 
Scientific Advisory Board, and with the help of that board, the Company 
began to focus on the treatment of cancer. In 1991, the Company went to 
the public market on the basis of its potential as a young, innovative 
scientific biotechnology company with great promise.
    A little more than a year ago, the Company stood on the verge of a 
breakthrough. It had negotiated a strategic alliance with Bristol-Myers 
Squibb Company that would facilitate its ability to bring hope in the 
form of Erbitux to hundreds of thousands of cancer patients. And it was 
in the process of seeking approval of Erbitux from the FDA.
    While the Subcommittee's primary interest is in that approval 
process, no doubt some of your questions today will center around 
ImClone's former President and CEO, Sam Waksal.
    Let me say two things about this subject. First, despite the 
misconduct that has come to light, Sam Waksal was indispensable to this 
Company and an integral part of its success over the years. Sam Waksal 
was the one who recognized the potential of Erbitux, and it was he who 
was instrumental in building ImClone and in creating significant value 
for its shareholders and patients over the long term.
    Second, as soon as allegations of wrongdoing by Sam Waksal began to 
surface in early 2002, the Company's Board acted quickly to address 
these issues. We put a process in place to have its outside legal 
counsel investigate the allegations of misconduct and report back to 
it. We debated the issues surrounding Sam Waksal vigorously, and 
decided to act after, not before, a thorough investigation had taken 
place.
    Today, despite the challenges of these recent months, ImClone 
remains a vibrant company that is working with its partners to give 
people hope and save lives. We continue to believe that Erbitux will 
become an important treatment for cancer patients, and the Company has 
an exciting pipeline of other products showing significant promise.
    This Board has met literally dozens of times this year in an effort 
to make sure that we and the Company's management team are doing all we 
can and should be doing to get through these difficult times.
    Paul Kopperl, Chairman of ImClone's Audit Committee, will discuss 
some of the significant corporate governance changes the Board 
initiated over the past nine months. Importantly, shortly after 
receiving the refusal-to-file letter from the FDA at the end of 2001, 
we quickly formed a committee of outside directors and retained 
separate legal counsel to address the serious issues facing the 
Company.
    Above all, we have not allowed all of the controversy surrounding 
Sam Waksal to deflect focus from our mission to get Erbitux back on 
track. Dr. John Mendelsohn, a fellow Board member and a co-inventor of 
Erbitux, will speak to you in more detail concerning this important 
drug.
    Thank you for the opportunity to be here today. I will be pleased 
to answer any questions you may have for me.

    Mr. Greenwood. We thank you, Mr. Goldhammer.
    Mr. Kopperl, do you have an opening statement?
    Mr. Kopperl. I do, sir.
    Mr. Greenwood. Please proceed.

                  TESTIMONY OF PAUL B. KOPPERL

    Mr. Kopperl. Good afternoon. My name is Paul Kopperl. I 
chair the audit committee of ImClone Systems board of 
directors. On a personal note, Mr. Chairman, I'd like you and 
the committee to be aware that I have had my own personal 
battle with cancer, which is why I regard the success of 
Erbitux and the company as a critically important mission.
    Since joining ImClone's board in December 1993, I have 
sought to ensure that the company has had sound corporate 
governance, policies in place and functioning. Over the years, 
we have reevaluated these policies and improved them when and 
if appropriate. The goal was and is to have them be current 
best practices.
    Let me mention some recent examples. In the fall of 2001, 
the audit committee reviewed the composition of the board's 
executive committee and recommended that it be comprised of a 
majority of outside directors. Accordingly, in November 2001, 
the board added two additional--two outside directors to our 
executive committee.
    In addition, during this year, the board has rigorously 
reviewed many of its previous corporate governance policies and 
implemented new ones where we thought improvements could be 
made. Although I do not have sufficient time to describe them 
in detail this afternoon, I would like to present you with a 
brief overview, if I may, of the significant steps that the 
board has taken to improve corporate governance at ImClone.
    In April of this year, the board adopted new enhancements 
to its securities law compliance and insider trading policies. 
As a result, the company now has 16 officers who must file 
reports of their transaction under section 16 of the Securities 
and Exchange Act.
    The board has also put in place a strict process to be 
followed before the company may enter into any related party 
transactions, and in an abundance of caution and even to avoid 
any appearance of impropriety, we terminated the consulting 
agreements between the company and two of the scientific 
members of the board. And these were the only directors with 
such consulting contracts.
    But we didn't stop there. The company recently hired a 
highly qualified full-time vice president to perform an 
internal audit function reporting directly to the audit 
committee.
    Finally, the full board at our next meeting in November 
will be acting on a recommendation by one of our board 
committees to adopt a code of conduct for the entire board, a 
code of conduct for officers and employees and specific 
charters for those board committees, such as the compensation 
committee that do not now have it.
    As Mr. Goldhammer explained, when the board learned of 
allegations of wrongdoing by the company's then-chief executive 
officer Sam Waksal, the board took these allegations very 
seriously and took appropriate action.
    After a deliberate and thorough process, including 
investigations by outside counsel and a careful weighing of the 
relevant facts as we knew them, the board concluded in May 2002 
that it was in the best interest of the company for Sam Waksal 
to step down. On May 22, 2002, he did resign.
    In August, the company filed a lawsuit against Sam Waksal 
to recover the money paid him in his separation agreement, 
because we believe he failed to cooperate with Federal 
investigations into his conduct. In this regard, it should be 
emphasized that as you know, no company policy, however strong, 
can prevent an officer or other employee from engaging in 
personal wrongdoing if that person chooses to evade company 
rules and engage in wrongful and perhaps illegal behavior.
    In closing, let me say that this board has faith in Erbitux 
and faith in ImClone. That faith, Mr. Chairman, is why each of 
us continues to serve and why we continue to maintain 
substantial holdings of its common stock. The goal of this 
board has been, and remains to guide ImClone into the future 
and ensure that we continue to fulfill our duties to the 
company's shareholders, to the patients afflicted by this dread 
disease and to the public. And I thank you for this 
opportunity.
    [The prepared statement of Paul B. Kopperl follows:]
Prepared Statement of Paul B. Kopperl, Chair, Audit Committee, ImClone 
                             Systems, Inc.
    Good afternoon. My name is Paul Kopperl. I chair the Audit 
Committee of ImClone Systems' Board of Directors. I also wish to 
mention, Mr. Chairman, that I have had my own personal battle with 
cancer--which is why I regard the success of Erbitux and the Company as 
a personal mission.
    Since joining ImClone's Board in December 1993, I have sought to 
ensure that the Company had sound corporate governance policies in 
place and functioning. Over the years, we have reevaluated these 
policies so that they remained current best practices.
    Let me mention some recent examples: In the Fall of 2001, the Audit 
Committee reviewed the composition of the Board's Executive Committee 
and recommended that it be comprised of a majority of outside 
directors. Accordingly, in November 2001, the Board added two 
additional outside directors to the Executive Committee.
    In addition, during this year, the Board has rigorously reviewed 
many of its previous corporate governance policies and implemented new 
ones where we thought improvements could be made. Although I do not 
have sufficient time to describe them all in detail to you now, I would 
like to present with you a brief overview of the significant steps the 
Board has taken to improve corporate governance at ImClone.
    In April of this year, the Board adopted new enhancements to its 
securities laws compliance and insider trading policies. As a result, 
the Company now has 16 officers who must file reports of their 
transactions under section 16 of the Securities and Exchange Act. The 
Board has also put in place a strict process to be followed before the 
Company may enter into any related-party transaction. And in an 
abundance of caution, and to avoid even any appearance of impropriety, 
we terminated the consulting agreements between the Company and the 
three scientific members of the Board of Directors.
    But we didn't stop there. The Company recently hired a highly 
qualified full-time Vice-President to perform an internal audit 
function reporting to the Audit Committee. Finally, the full Board will 
soon be acting on a recommendation by one of the Board committees to 
adopt a code of conduct for the Board, a code of conduct for officers 
and employees, and specific charters for those Board committees that do 
not currently have them.
    As Mr. Goldhammer explained, when the Board learned of allegations 
of wrongdoing by the Company's then-CEO, Sam Waksal, the Board took 
them seriously and took appropriate action. After a deliberate and 
thorough process, including investigations by outside counsel, and a 
careful weighing of the relevant facts, as we knew them, the Board 
concluded in May 2002 that it was in the best interest of the Company 
for Sam Waksal to step down. On May 22, 2002, he resigned. In August, 
the Company filed a lawsuit against him to recover the money paid him 
in his separation agreement because we believe he breached that 
agreement by failing to cooperate with federal investigations into his 
conduct. In this regard, it bears mention that no Company policy--
however strong--can prevent an officer or other employee from engaging 
in personal wrongdoing if that person chooses to evade company rules 
and engage in wrongful, and perhaps illegal behavior.
    In closing, let me say that this Board has faith in Erbitux and 
faith in ImClone. We are bullish on the company, which is why each of 
us continues to serve and maintain substantial holdings in its stock.
    The goal of this Board has been and remains to guide ImClone into 
the future and ensure that we continue to fulfill our duties to the 
Company's shareholders, to the patients afflicted by this dread 
disease, and to the public. Thank you.

    Mr. Greenwood. We thank you, Mr. Kopperl.
    And let me add, if I may, that it is because this committee 
is so intent on seeing that Erbitux, if it does have the 
potential that many believe it does, is approved and that we 
have an expeditious means of getting all innovative cancer 
products approved so that they can get to the patients, that is 
our objective. That is our goal, and that's what this is all 
about.
    Thank you, sir.
    Dr. Mendelsohn, you're recognized for your opening 
statement.

                  TESTIMONY OF JOHN MENDELSOHN

    Mr. Mendelsohn. Thank you. Good afternoon, Mr. Chairman, 
and members of the subcommittee. My name is John Mendelsohn, 
and I'm here today as a member of the board of directors of 
ImClone Systems, Incorporated. I am currently the President of 
and a professor at the M.D. Anderson Cancer Center at the 
University of Texas. I have also had leadership roles in the 
Department of Medicine at Memorial Sloan-Kettering Cancer 
Center, and the University of California, San Diego.
    For more than 30 years, I have worked at these institutions 
to create and expand cancer programs that have made important 
contributions to the Nation's efforts to understand and conquer 
cancer, and for 30 years, I served as principal investigator in 
laboratory research at these institutions studying the 
regulation of cell growth.
    Cells have a molecular engine that doesn't run until you 
turn it on by putting a key, a growth factor molecule, into the 
ignition, a growth factor receptor on the cell surface.
    In the early 1980's, I working with collaborators, produced 
monoclonal antibody 225, now known as Erbitux. Our research was 
built on the then-novel concept that by targeting especially 
terminal growth factor receptors, we could inhibit a tumor's 
growth by blocking a molecular signalling pathway.
    Today, this concept is well accepted and is the basis for 
Herceptin and Iressa, in addition to Erbitux.
    In 1992, I was asked to join ImClone's scientific advisory 
board to consult with the company on a regular basis about the 
scientific basis behind monoclonal antibody C225 and worked 
with ImClone to help move the drug through the clinical trial 
process. In 1998, I joined ImClone's board of directors.
    As someone who has devoted his life to cancer research, I 
can't stress enough just how critical ImClone has been to the 
development of this revolutionary cancer drug. Until ImClone 
licensed C225 in 1993, no other company had taken a serious 
interest in developing this treatment. Sam Waksal was one of 
the few scientists who not only understood the molecular basis 
of treatment with C225, but developed and executed a plan to 
transform it from a molecule in the lab into a powerful and 
innovative cancer treatment. Under Sam Waksal's leadership, 
ImClone raised money for the drug's research and development, 
guided the drug through completion of phase II studies of its 
efficacy and made it the centerpiece of a major collaboration 
with one of the word's leading pharmaceutical companies.
    Sam Waksal's personal failures should not detract from what 
is really important, that Erbitux shows great promise. Although 
questions rightfully abound about why the FDA did not accept 
the Erbitux BLA for filing, each study that has been conducted 
strongly suggests that Erbitux is an active anticancer agent in 
end-stage colon cancer.
    As the subcommittee may know, the vast majority of patients 
diagnosed with colorectal cancer are resistant to chemotherapy. 
Our laboratory research shows that Erbitux, when used in 
combination with other agents, represents a promising treatment 
to help overcome this resistance in order to shrink tumors and 
perhaps extend life.
    The 9923 study was specifically designed to test this 
important hypothesis. The accelerated approval process which 
Congress enacted was designed to make certain that drugs which 
address an unmet medical need in a devastating disease can 
become available to patients more rapidly based on the results 
of a phase II study. The question posed in a phase II trial is 
whether of new drug is worthy of further development. The 
Erbitux phase II trials had positive results.
    I am disappointed that Erbitux will not be available for 
patients who need it as soon as we had originally hoped.
    I joined and continue to work with ImClone, because I 
believe its scientists have the vision, the desire and the 
capability to get this new treatment to patients.
    My personal goal remains to do everything in my power to 
bring Erbitux through the approval process and to patients with 
cancer.
    Thank you very much.
    [The prepared statement of John Mendelsohn follows:]
  Prepared Statement of John Mendelsohn, Board of Directors, ImClone 
                             Systems, Inc.
    My name is John Mendelsohn and I am here today as a member of the 
Board of Directors of ImClone Systems Incorporated.
    I am currently the president of, and a professor at, the MD 
Anderson Cancer Center at the University of Texas. I have also had 
leadership roles in the Department of Medicine at Memorial Sloan-
Kettering Cancer Center and the University of California, San Diego. 
For more than 30 years, I have worked at these institutions to create 
and expand cancer programs that have made important contributions to 
the nation's efforts to understand and conquer cancer. And for 30 years 
I served as principal investigator in laboratory research at these 
institutions studying the regulation of cell growth.
    Cells have a molecular engine that doesn't run until you turn it on 
by putting a key (a Growth Factor molecule) into the ignition (a Growth 
Factor receptor on the cell surface). In the early 1980s, I, working 
with collaborators, produced monoclonal antibody 225, now known as 
Erbitux. Our research was built on the then novel concept that by 
targeting Epidermal Growth Factor receptors, we could inhibit a tumor's 
growth by blocking a molecular signaling pathway. Today, this concept 
is well accepted and is the basis for Herceptin and Iressa, in addition 
to Erbitux.
    In 1992, I was asked to join ImClone's Scientific Advisory Board to 
consult with the company on a regular basis about the scientific basis 
behind monoclonal antibody C225, and worked with ImClone to help move 
the drug through the clinical trial process. In 1998, I joined 
ImClone's Board of Directors.
    As someone who has devoted his life to cancer research, I can't 
stress enough just how critical ImClone has been to the development of 
this revolutionary cancer drug.
    Until ImClone licensed C225 in 1993, no other company had taken a 
serious interest in developing this treatment. Sam Waksal was one of 
the few scientists who not only understood the molecular basis of 
treatment with C225, but developed and executed a plan to transform it 
from a molecule in the lab into a powerful and innovative cancer 
treatment. Under Sam Waksal's leadership, ImClone raised money for the 
drug's research and development, guided the drug through completion of 
Phase II studies of its efficacy, and made it the centerpiece of a 
major collaboration with one of world's leading pharmaceutical 
companies.
    Sam Waksal's personal failings should not detract from what is 
really important--that Erbitux shows great promise. Although questions 
rightfully abound about why the FDA did not accept the Erbitux BLA for 
filing, each study that has been conducted strongly suggests that 
Erbitux is an active anti-cancer agent in end stage colon cancer.
    As the Subcommittee may know, the vast majority of patients 
diagnosed with colorectal cancer are resistant to chemotherapy. Our 
laboratory research shows that Erbitux, when used in combination with 
other agents, represents a promising treatment to help overcome this 
resistance in order to shrink tumors, and perhaps extend life. The 9923 
study was specifically designed to test this important hypothesis.
    The accelerated approval process, which Congress enacted, was 
designed to make certain that drugs which address an unmet medical need 
in a devastating disease can become available to patients more rapidly 
based on the results of a Phase II study. The question posed in a Phase 
II trial is whether a new drug is worthy of further development. The 
Erbitux Phase II trials had positive results.
    I am disappointed that Erbitux will not be available for patients 
who need it as soon as we had originally hoped. I joined and continue 
to work with ImClone because I believe its scientists have the vision, 
the desire and the capability to get this new treatment to patients. My 
personal goal remains to do everything in my power to bring Erbitux 
through the approval process and to patients with cancer. Thank you.

    Mr. Greenwood. Thank you. And, again, we wish you success 
with them.
    Dr. Waksal.

                   TESTIMONY OF HARLAN WAKSAL

    Mr. Waksal. Mr. Chairman, and members of the subcommittee, 
I am Harlan Waksal. I am the chief executive officer and 
president of ImClone Systems. I became the CEO of ImClone just 
over a hundred days ago. This has been a challenging time for 
the company, and I've worked hard, everyone, everyone at the 
company has worked hard to keep focused on the most important 
objective, bringing to market a promising new anticancer drug, 
Erbitux.
    Independent clinical studies performed at the Nation's 
finest medical institutions demonstrated that Erbitux holds 
promise for treating patients with advanced cancer.
    Shortly after I became CEO, ImClone's cofounder, my brother 
Sam, was arrested and charged with a number of offenses. Our 
company is fully cooperating with investigations being 
conducted by a variety of investigative bodies and agencies. 
Yet even as we deal with these challenges, we've turned a new 
page. I am here to report today that we have made progress on a 
number of fronts. So let me review briefly our efforts on three 
vital areas: Corporate governance, management reform and 
clinical testing.
    First corporate governance. ImClone has put in place 
procedures that comply with the recently enacted Sarbanes-Oxley 
law. We put in place new measures that will strengthen further 
our existing internal controls. We have, No. 1, enacted a new 
rigorous insider trading policy. No. 2, greatly increased the 
number of officers who are required to file reports about their 
securities trading. And No. 3, ended all consulting 
arrangements with directors.
    In short, we are moving forward in a way that should 
rebuild the confidence of investors, regulators, the oncology 
community and the public.
    Second, management reform. While I take pride in our 
company's achievements in its early years, we have made some 
changes in the past hundred days to reflect our company's new 
direction. Although the legal staff has served us well in the 
past, even before I became CEO, we set in motion the 
strengthening of the Office of the General Counsel. I am 
working closely with our new chief legal counsel as we adapt 
our controls as the company grows. We have also created a new 
position, vice president for internal audit. We recently hired 
a highly qualified individual to serve in this important role.
    In addition, we've added experienced and depth to the 
regulatory and clinical affairs departments. We are working 
closer than ever with our experienced partners at Bristol-Myers 
Squibb and with America KGAA from Germany to gain the benefit 
of their expertise and resources.
    Third, clinical testing. Erbitux is currently being tested 
in several clinical trials around the country and around the 
world. Based on the regulatory approach we have developed with 
our partners and continue to discuss with the FDA, we are 
moving forward with our clinical development plans. In 
connection with these plans--with this program that we've put 
in place, we plan to treat several thousand patients in various 
clinical trials of Erbitux in a number of different cancer 
types.
    And finally, as part of our colorectal clinical development 
program, we will be reinitiating a compassionate use program 
for colorectal cancer patients who do not qualify for those 
other clinical trials that are being put in place.
    The broad scope of our clinical development plans confirms 
our success in manufacturing Erbitux for use in clinical 
trials, our commitment to cancer patients and our belief and 
our partner's belief in this drug. And beyond Erbitux, we have 
a number of other drugs in our development pipeline.
    ImClone's immediate mission is clear, to gain regulatory 
approval for and bring to market a promising new anticancer 
drug, Erbitux.
    Our company is working hard to put the controversies of the 
past behind us and to focus our time, our energy and resources 
on the task at hand, helping patients who otherwise have little 
hope.
    I look forward to answering any questions you have today, 
sir.
    [The prepared statement of Harlan Waksal follows:]
 Prepared Statement of Harlan Waksal, CEO, ImClone Systems Incorporated
    Mr. Chairman and Members of the Subcommittee, I am Harlan Waksal. I 
am the Chief Executive Officer and President of ImClone Systems 
Incorporated.
    I became CEO of ImClone just over 100 days ago. This has been a 
challenging time for ImClone. I have worked hard--everyone at the 
company has worked hard--to keep focused on our most important 
objective: bringing to market a promising new anti-cancer drug, 
Erbitux. Independent clinical studies performed at the nation's finest 
medical institutions demonstrate that Erbitux holds promise for 
treating patients with advanced cancer.
    Shortly after I became CEO, ImClone's co-founder--my brother Sam--
was arrested and charged with a number of offenses. Our company is 
fully cooperating with the investigations being conducted by a variety 
of investigative bodies and agencies. Yet even as we deal with these 
challenges, we have turned a new page. I am here to report today that 
we have made progress on a number of fronts.
    So let me review today, quickly, our efforts in three vital areas: 
corporate governance, management reform, and clinical testing.
    First, corporate governance. ImClone has put in place procedures to 
comply with the recently enacted Sarbanes-Oxley law. We have put in 
place new measures that will strengthen further our existing internal 
controls. We have: (1) enacted a new, rigorous insider trading policy; 
(2) greatly increased the number of officers who are required to file 
reports about their securities trading; and (3) ended all consulting 
arrangements with directors. In short, we are moving forward in a way 
that should rebuild the confidence of investors, regulators, the 
oncology community, and the public.
    Second, management reform. While I take pride in our company's 
achievements in its early years, we have made some changes in the past 
100 days to reflect our company's new direction. Although the legal 
staff has served us well in the past, even before I became CEO we set 
in motion the strengthening of the Office of the General Counsel. I am 
working closely with our new chief legal counsel as we adapt our 
controls as the company grows.
    We have also created a new position--Vice President for Internal 
Audit. We recently hired a highly qualified individual to serve in this 
important role. In addition, we have added experience and depth to our 
regulatory and clinical affairs departments. We are also working closer 
than ever with our experienced partners at Bristol-Myers Squibb and 
Merck KGAA to gain the benefit of their expertise and resources.
    Third, clinical testing. Erbitux is currently being tested in 
several clinical trials around the country and around the world. Based 
on the regulatory approach that we developed with our partners and 
continue to discuss with the FDA, we are moving forward with our 
clinical development program for Erbitux. In connection with this 
program, we plan to treat several thousand patients in various clinical 
trials of Erbitux in a number of different cancer types.
    And finally, as part of our colorectal clinical development 
program, we will be re-initiating a compassionate use program for 
colorectal cancer patients who do not qualify for the clinical trials. 
The broad scope of our clinical development plans confirms our success 
in manufacturing Erbitux for use in clinical trials, our commitment to 
cancer patients, and our belief--and our partners' belief--in this 
drug. And beyond Erbitux, we have a number of other drugs in our 
development pipeline.
    ImClone's immediate mission is clear: to gain regulatory approval 
for, and bring to market, a promising cancer drug, Erbitux. Our company 
is working hard to put the controversies of the past behind us, and to 
focus our time, energy, and resources on the task at hand: helping 
patients who otherwise have little hope.

    Mr. Greenwood. Thank you, Dr. Waksal.
    Mr. Landes.

                  TESTIMONY OF JOHN B. LANDES

    Mr. Landes. Thank you, Chairman Greenwood, and members of 
the subcommittee. My name is John Landes. I have worked for 
ImClone Systems for more than 18 years. For most of that time, 
I was general counsel and corporate secretary. As general 
counsel, I was head of the company's legal department. I also 
worked several years in the area of business development. I 
joined ImClone in its beginning in 1984. During my time at 
ImClone, I have watched it grow from a three-person research 
organization into a cutting-edge biotechnology company. For its 
first 7 years, ImClone was a privately owned business. It 
became a publicly traded company in 1991. It has grown from 3 
employees to approximately 400. Most of whom are scientists.
    The role of my department is to handle legal matters for 
all operating units of the company. While ImClone grew, its 
need for legal advice constantly evolved. As a result, my 
department has had to keep abreast of a variety of legal issues 
facing the company, from real estate to technology transfer, to 
employment, for example.
    At each step along the way, under my supervision, our small 
department has worked very hard to provide management with 
accurate and well-grounded legal advice and service as the 
company has pursued its goal of producing a pipeline of 
therapeutic products for patients with cancer.
    Because we have always been a small health department, our 
lawyers have worked closely with and relied upon several 
respected outside law firms to assist us with matters requiring 
particular expertise, such as security law matters, drawing 
upon specialists at outside law firms is a common practice, 
among in-house counsel, and it has been very useful to those of 
us at ImClone.
    Although the people in my department are not scientists, 
our overriding goal is to help ImClone develop treatments for 
cancer. As one of its original employees, I am very proud of 
what ImClone has accomplished. I remain committed to helping 
the company reach its goal. With that, I welcome the 
opportunity to answer any questions that you may have.
    [The prepared statement of John B. Landes follows:]
   Prepared Statement of John Landes, Senior Vice President, Legal, 
                         ImClone Systems, Inc.
    Thank you Chairman Greenwood and members of the subcommittee.
    My name is John Landes. I have worked for ImClone systems for more 
than 18 years. For most of that time, I was general counsel and 
corporate secretary. As general counsel, I was head of the company's 
legal department. I also worked several years in the area of business 
development.
    I joined ImClone at its beginning, in 1984.
    During my time at ImClone, I have watched it grow from a three-
person research organization into a cutting-edge biotechnology company. 
For its first seven years, ImClone was a privately owned business. It 
became a publicly traded company in 1991. It has grown from three 
employees to approximately 400, most of whom are scientists.
    The role of my department is to handle legal matters for all 
operating units at the company. While ImClone grew, its need for legal 
advice constantly evolved. As a result, my department has had to keep 
abreast of a variety of legal issues facing the company, from real 
estate to technology transfer to employment. At each step along the 
way--under my supervision--our small department has worked very hard to 
provide management with accurate and well-grounded legal advice and 
service, as the company has pursued its goal of producing a pipeline of 
therapeutic products for patients with cancer.
    Because we have always been a small legal department, our lawyers 
have worked closely with--and relied upon--several respected outside 
law firms to assist us with matters requiring particular expertise, 
such as securities law matters. Drawing upon specialists at outside law 
firms is a common practice among in-house counsel, and it has been very 
useful to those of us at ImClone.
    Although the people in my department are not scientists, our 
overriding goal is to help ImClone develop a treatment for cancer. As 
one of its original employees, I am very proud of what ImClone has 
accomplished. I remain committed to helping the company reach its goal.
    With that, I welcome the opportunity to answer any questions you 
may have.

    Mr. Greenwood. Thank you, Mr. Landes.
    Ms. Vaczy.

                  TESTIMONY OF CATHERINE VACZY

    Ms. Vaczy. Good afternoon, Mr. Chairman, members of the 
subcommittee. My name is Catherine Vaczy. I'm the vice 
president legal and associate general counsel of ImClone 
Systems, Incorporated.
    Much has been said about our small company over the last 
several months, and I am pleased to be here today to tell you 
about ImClone Systems from my perspective. I came to ImClone in 
1997 as the second attorney in the ImClone legal department 
which today employs six lawyers. I hope that working in a 
biotechnology company would offer me a more intimate and 
satisfying experience than being on the outside looking in as I 
had done for several years as an associate in the corporate law 
department of a law firm. ImClone did not disappoint me. I was 
quickly won over by the warmth of this small company, the 
important work it is pursuing and the stories of how it had 
persevered through hard times.
    In 1999, we were encouraged in our work when the company's 
development staged anticancer therapeutic Erbitux showed 
promise in early stage clinical trials.
    Continuing the development process to hopefully make 
Erbitux available to cancer patients became the priority of our 
small company, but to do this, we had to grow and grow 
dramatically. The number of employees at ImClone nearly doubled 
on an annual basis in each of the next 3 years. This tremendous 
growth offered a whole host of difficult challenges that were 
as basic as where to put all of these people and as complex as 
how to adapt our policies, procedures and controls to this 
ever-changing landscape.
    In addressing these challenges, I was heartened by the 
importance of our task and the competence, dedication and 
determination of my peers. I think that on a whole, we have 
succeeded very well. We constantly review all of our policies 
to try to ensure that they are as effective and efficient as 
possible. We consult with outside counsel and other advisers, 
and we belong to trade associations and attend conferences to 
stay abreast of changing laws and trends. We do this not 
because we have failed in the past, but because we want to be 
even better in everything we do.
    Regarding trading company securities by officers and 
employees, we believe we have always had in place an 
appropriate insider trading policy. Throughout my time with the 
company, we repeatedly reviewed our insider trading policy with 
outside counsel at preeminent law firms advising us, and were 
always assured that the policy was appropriate.
    We also repeatedly considered whether the number of our 
officers who filed in courts of their ImClone stock 
transactions with the FCC was appropriate, and we repeatedly 
reviewed that question explicitly with our outside counsel, 
again preeminent in this field.
    And we were always assured, in no uncertain terms, that the 
determination was appropriate.
    To conclude, I think it is important that everyone remember 
that ImClone is a real company with real people working hard to 
achieve real results. I am proud to be a part of this effort. 
Thank you.
    [The prepared statement of Catherine Vaczy follows:]
   Prepared Statement of Catherine Vaczy, Vice President, Legal and 
            Associate General Counsel, ImClone Systems, Inc.
    Good afternoon, Mr. Chairman, members of the Subcommittee. My name 
is Catherine Vaczy. I am the Vice President, Legal and Associate 
General Counsel of ImClone Systems Incorporated. Much has been said 
about our small company over the last several months and I am pleased 
to be here today to tell you about ImClone Systems from my perspective.
    I came to ImClone in 1997 as the second attorney in the ImClone 
Legal Department, which today employs six lawyers. I hoped that working 
in a biotechnology company would offer me a more intimate and 
satisfying experience than being on the outside looking in as I had 
done for several years as an associate in the corporate law department 
of a law firm.
    ImClone did not disappoint me. I was quickly won over by the warmth 
of this small company, the important work it was pursuing and the 
stories of how it had persevered through hard times. In 1999, we were 
encouraged in our work when the Company's development stage anti-cancer 
therapeutic, ERBITUX, showed promise in early stage clinical trials. 
Continuing the development process to hopefully make Erbitux available 
to cancer patients became the priority of our small company. But to do 
this, we had to grow, and grow dramatically. The number of employees at 
ImClone nearly doubled on an annual basis in each of the next three 
years.
    This tremendous growth offered a whole host of difficult challenges 
that were as basic as where to put all of these people and as complex 
as how to adapt our policies, procedures and controls to this ever 
changing landscape.
    In addressing these challenges, I was heartened by the importance 
of our task and the competence, dedication and determination of my 
peers. I think that, on a whole, we have succeeded very well.
    We constantly review all of our policies to try to ensure they are 
as effective and efficient as possible. We consult with outside counsel 
and other advisors and we belong to trade associations and attend 
conferences to stay abreast of changing rules and trends. We do this 
not because we have failed in the past but because we want to be even 
better in everything we do.
    Regarding trading in company securities by officers and employees, 
we believe we have always had in place an appropriate insider trading 
policy. Throughout my time with the company, we repeatedly reviewed our 
insider trading policy with outside counsel at preeminent law firms 
advising us, and we were always assured that the policy was 
appropriate. We also repeatedly considered whether the number of our 
officers who filed reports of their ImClone stock transactions with the 
SEC was appropriate, and we repeatedly reviewed that question 
explicitly with our outside counsel--again, preeminent in this field, 
and we were always assured in no uncertain terms that the determination 
was appropriate.
    To conclude, I think it is important that everyone remember that 
ImClone is a real company, with real people working to achieve real 
results. I am proud to be a part of this effort.
    Thank you.

    Mr. Greenwood. Thank you, Ms. Vaczy.
    And the Chair recognizes himself for 10 minutes for 
questioning, and I'll start with you, Ms. Vaczy. You might want 
to bend that microphone and pull it over a little closer.
    Before I do that, I would ask unanimous consent to place 
the document binder into the record. And without objection, it 
shall be done.
    Ms. Vaczy, I'd like to ask you about an issuers letter 
requested by the Bank of America in January 2002 for warrants 
owned by Sam Waksal. First, so I'm clear, an issuer's letter is 
a request to a company to, in effect, certify that a person 
owns certain financial instruments in the company such as in 
this case warrants. Is that correct? Is that your 
understanding?
    Ms. Vaczy. Yes. It is a representation of the company, yes.
    Mr. Greenwood. Okay. In January of this year, can you tell 
me why Bank of America came to you for an issuers letter 
related to Sam Waksal?
    Ms. Vaczy. You're referring to one that they requested from 
me as opposed to one that I--a copy of one that I received from 
them? Could I perhaps see the one that we're discussing?
    Mr. Greenwood. It's Tab 26 in your binder there.
    Ms. Vaczy. Well, this doesn't appear to be an issuer's 
letter in Tab 26. It is a letter to Dr. Waksal, Sam Waksal and 
Dr. Harlan Waksal.
    I'm familiar with an issuers letter. This does not appear--
--
    Mr. Greenwood. All right. We'll try to correct that. But 
the question is--well, let me ask you this. Did Bank of America 
this January ask you for an issuers letter, or did you have 
discussion with a bank about an issuer's letter to certify that 
it had something to do with Mr. Waksal?
    Ms. Vaczy. Yes. I did.
    Mr. Greenwood. Why don't you tell us what that was.
    Ms. Vaczy. I had discussions with counsel to Bank of 
America on Dr. Sam Waksal's behalf around the middle of January 
2002. Those discussions revolved around Dr. Sam Waksal moving a 
loan to Bank of America, that he had at another financial 
institution, and in connection with that, he was pledging 
securities of ImClone as collateral. And the bank was 
requesting an issuer's letter from the company to certify as to 
certain matters regarding a securities----
    Mr. Greenwood. Okay. And did the Bank of America then give 
you or provide you the letter in Tab 26? Oh, wait a minute. I'm 
told the problem is that it's Tab 10.
    Ms. Vaczy. Yes, they did.
    Mr. Greenwood. Okay. And what is the significance of this 
type of document?
    Ms. Vaczy. Of this particular document or in general?
    Mr. Greenwood. Yes.
    Ms. Vaczy. In my conversations with Bank of America in 
January 2002 with the counsel to Bank of America, the counsel 
advised me of a warrant that had been pledged to them and sent 
to me this letter to demonstrate that they, in fact, had that 
pledge.
    Mr. Greenwood. Mr. Landes, if you would take a look at that 
letter as well, and at the bottom of the document is a 
signature that reads John Landes. Is that your signature?
    Mr. Landes. No, it's not.
    Mr. Greenwood. Okay. When did you first see the document 
with your forged signature on it?
    Mr. Landes. I saw this document on January 14, 2002.
    Mr. Greenwood. Okay. You met with Sam Waksal about the 
document. Right?
    Mr. Landes. Yes, I did.
    Mr. Greenwood. And did Sam Waksal deny that he signed your 
signature to that document?
    Mr. Landes. No, he did not.
    Mr. Greenwood. Did you report this to the Federal 
authorities?
    Mr. Landes. No, I did not.
    Mr. Greenwood. Was the board notified about the forgery to 
Bank of America?
    Mr. Landes. Yes, it was.
    Mr. Greenwood. Okay. Let me then address some questions to 
the members of the board, Mr. Goldhammer, Mendelsohn and 
Kopperl. Were you aware of this letter?
    Mr. Kopperl. Yes.
    Mr. Greenwood. And Mr. Goldhammer, when did you become 
aware of this allegation of forgery?
    Mr. Goldhammer. Early----
    Mr. Greenwood. Take the microphone, please.
    Mr. Goldhammer. I'm sorry. The first part of February, I 
think.
    Mr. Greenwood. Okay. And Mr. Kopperl.
    Mr. Kopperl. It was early February.
    Mr. Greenwood. Dr. Mendelsohn.
    Mr. Mendelsohn. As I remember, it was in February.
    Mr. Greenwood. Okay. Why wasn't Sam Waksal fired 
immediately?
    Mr. Goldhammer. All of the loans--the forgery issue--as 
soon as we found out about it, we immediately formed a special 
committee of the board and hire outside counsel to investigate 
this allegation and do it as quickly as possible.
    Mr. Greenwood. What did you learn from that investigation?
    Mr. Goldhammer. I'm sorry?
    Mr. Greenwood. What did you learn from that investigation?
    Mr. Goldhammer. We never really learned in that--the 
investigation was not complete by the time Sam was asked to 
resign.
    Mr. Greenwood. Okay. But you knew before you had initiated 
your investigation----
    Mr. Goldhammer. Yes.
    Mr. Greenwood. [continuing] that Mr. Landes said this is 
not my signature, it's forged, and Mr. Waksal didn't deny that; 
is that correct?
    Mr. Goldhammer. Yes, sir.
    Mr. Greenwood. Mr. Landes, let me go back to you. This 
wasn't the first time that Sam Waksal had forged your 
signature. Isn't that correct?
    Mr. Landes. There was a previous occasion that I was 
familiar with in which he had signed my name to a document.
    Mr. Greenwood. Can you tell us about that? Is that the 1991 
case where he signed for you and Harlan Waksal on a stock 
certificate? Listen.
    Mr. Landes. Yes. I learned in 1991 that in 1986 that Sam 
had attempted to convey some of his own shares through an 
ImClone stock certificate, shares that he owned, and this I 
learned in 1991 and did obtain a copy of the stock certificate.
    Mr. Greenwood. The records show that Dr. Sam Waksal issued 
an ImClone stock certificate with those--these forged 
signatures and received payment for this of $90,000. Do you 
know what Sam Waksal did with the $90,000?
    Mr. Landes. No, I don't, Mr. Chairman.
    Mr. Greenwood. When did you learn of this forgery?
    Mr. Landes. I learned of this in 1991.
    Mr. Greenwood. Okay. And if you look at Tab 2, I think that 
will demonstrate your knowledge in 1991.
    To whom did you report these acts of forgery by Sam Waksal, 
and when?
    Mr. Landes. Well, I immediately had a conversation with 
Sam, a number of conversations with him, to learn what the 
circumstances were, and what I learned was that Sam did not 
understand how one conveyed one's own shares. I told him that 
this was clearly not how one did this. So my discussions were--
--
    Mr. Greenwood. So he thought that the appropriate way to do 
it was through forgery?
    Mr. Landes. No, Mr. Chairman. I think he did not--he did 
not recognize how shares were to be conveyed if you owned them, 
but I believed that he--this was a good-faith misunderstanding 
or lack of knowledge on his part which I just----
    Mr. Greenwood. I'm trying to understand how one could have 
a lack of knowledge about a technical financial matter that 
would result in one's forging another person's name on a 
document.
    Mr. Landes. Mr. Chairman, we were a very small company at 
the time. We, in fact, were probably less than a year old, 
1986, I think we were just beginning.
    Mr. Greenwood. So when did you report that incident to the 
board of directors?
    Mr. Landes. At that time I did not report it to the board 
of directors, because as I say, my understanding was that this 
was really a misunderstanding on Sam's part which we discussed 
at length.
    Mr. Greenwood. My children know better than that, Mr. 
Landes.
    Did Sam ask you not to report it to anyone?
    Mr. Landes. No, he did not.
    Mr. Greenwood. Okay. So you made that decision on your own?
    Mr. Landes. I did.
    Mr. Greenwood. Okay. Let me return to the members of the 
board of directors. When did the board also learn that Sam 
Waksal had forged signatures on an ImClone stock certificate? 
Dr. Goldhammer--Mr. Goldhammer.
    Mr. Goldhammer. Just recently, a couple of weeks.
    Mr. Greenwood. Just a couple weeks ago. Do you think that 
was a result of our investigation?
    Mr. Goldhammer. I don't know. I don't know.
    Mr. Greenwood. How did you learn 2 weeks ago?
    Mr. Goldhammer. It came up in--March 21. March 21 is when 
we learned--when I learned.
    Mr. Greenwood. Okay. Apart from these two forgeries, the 
board learned of certain other improprieties or questionable 
business practices by Sam Waksal, but similarly chose to look 
the other way. Please tell me if I'm incorrect in any respect. 
On February 22, 2002, the press reported that Sam Waksal had 
made illegal short-swing profits on ImClone stock and disgorged 
$486,000 to ImClone.
    Did you see this article, and were you ever aware of these 
allegations before this article was published? Do you want to 
see the article? It's Tab 31.
    Mr. Goldhammer. Would you repeat the question, please? I 
think I should remember.
    Mr. Greenwood. On February 22 of this year, the press 
reported that Sam Waksal had made illegal short-swing profits 
on ImClone stock and had disgorged $486,000 to ImClone. So the 
question is, were you aware of that in February of this year? 
Any of the members of the board recall learning about that when 
this was reported to the press in February?
    Mr. Kopperl. We did learn about it at approximately this 
time, Mr. Chairman, and we took appropriate action, which was 
to have, in the first instance, counsel investigate the 
relevant facts, and then the company demanded that Dr.--that 
Sam Waksal repay the short-term profits.
    Mr. Greenwood. Okay. My time is rapidly expiring, but Dr. 
Waksal, when did you know about this--first learn about this 
10-year-old forgery?
    Mr. Waksal. You're talking about the stock certificate? I 
learned about 2 weeks ago.
    Mr. Greenwood. Okay. Well, my time is expired. The Chair 
recognizes the gentleman from Florida to inquire for 10 
minutes.
    Mr. Deutsch. Thank you, Mr. Chairman. Mr. Kopperl, your 
testimony really begs the question, why have you been a member 
of the board since 1993, as in your words, sought to ensure 
that the company has sound corporate governance policies in 
place and functioning, over the entire time were no such sound 
policies put in place until the scandal broke?
    Mr. Kopperl. I beg your pardon. I didn't catch the last 
part of that.
    Mr. Deutsch. The policies that you articulated in your 
testimony, why were they just put into place only since the 
scandal broke? Why were those policies not in place previously?
    Mr. Kopperl. As the chairman of the audit committee, part 
of my responsibility was, as your question indicates, to make 
sure that ImClone had appropriate procedures in place. When I 
joined the board of directors, there were procedures in place, 
and in the main those procedures worked okay. We continually 
review them, and to the extent that we deemed that improvements 
could be made, we made improvements as the company continued to 
grow and evolve.
    So there were governance policies in place about short-
swing profits, about insider trading and so on.
    Mr. Deutsch. Specifically you had a policy or you had an 
executive committee composed of Sam Waksal, Harlan Waksal and 
Bob Goldhammer. Was it a good policy to have only those 
individuals required to report stock transactions?
    Mr. Kopperl. To report stock transactions?
    Mr. Deutsch. That's correct. That was your policy that only 
those three individuals had to report stock transactions.
    Mr. Kopperl. Plus the--plus all the directors, sir.
    Mr. Deutsch. That's correct. But you've changed that policy 
now.
    Mr. Kopperl. We have changed the policy.
    Mr. Deutsch. So was the original policy appropriate, or was 
it inappropriate?
    Mr. Kopperl. As I think you heard Ms. Vaczy say that this 
policy was frequently reviewed--I think ``frequently'' is her 
word. Frequently reviewed with outside counsel, and it was 
determined by them that it was adequate.
    Mr. Deutsch. What about the policy permitting Sam to borrow 
hundreds of thousands of dollars at a whim from the company? 
Was that a policy that was an appropriate policy?
    Mr. Kopperl. Sir, those were--we have always had a 
procedure in place about loans, and we--loans were fully 
disclosed. The loans were repaid in full, and the loans at 
least for the past--ever since 1994 or 5 have borne interest at 
an attractive rate to the company, in fact. So all the money 
that Sam Waksal may have borrowed was repaid in full, every 
last penny of it.
    Mr. Deutsch. So it was an appropriate policy at the time?
    Mr. Kopperl. The policy worked. I felt it was appropriate. 
I think my colleagues felt it was appropriate.
    Mr. Deutsch. What about the policy in terms of payments to 
Sam and Harlan Waksal over $1 million plus stock when the 
company had not made a penny at that point in time? Was that 
appropriate reimbursement schedule?
    Mr. Kopperl. Well, those--you're talking about their 
bonuses?
    Mr. Deutsch. Well, not just the bonuses but the salaries as 
well.
    Mr. Kopperl. Salaries and bonuses. Well, the salaries were 
reviewed by the compensation committee, as were bonuses, and 
the achievements that Sam and Harlan had made in growing the 
company, which became increasingly complex as time went on, 
these bonuses--salaries and bonuses were reviewed in detail and 
were considered to be acceptable.
    Mr. Deutsch. Did you approve the deal to move up the 
vesting of shares by Sam Waksal?
    Mr. Kopperl. Yes. The board of directors approved it, as 
did the stockholders.
    Mr. Deutsch. And that occurred--when that occurred, so they 
could purchase those stock options and tender them to Bristol? 
Was that correct? Was that the purpose of it? Right. I mean, 
the loans of over $100 million.
    All right. What were the loans that were available, the 
loans that were approved at that point, the corporate loans?
    Mr. Kopperl. I'm sorry, Mr. Deutsch. Forgive me. Are we 
talking about stock options or about loans?
    Mr. Deutsch. Well, no. Let's talk about the loans.
    Mr. Kopperl. Okay. Thank you. In July, I think it was, of 
2001. Isn't that the----
    Mr. Deutsch. That's correct.
    Mr. Kopperl. The board considered the possibility of making 
loans to all the directors and decided--determined that this 
would not--that this would be an appropriate thing to do. We 
also considered the possibility of extending loans to employees 
and determined that that would not be--because of the 
confidentiality of negotiations that were going on at the time, 
that that would not be an appropriate thing to do.
    Mr. Deutsch. Besides Harlan and Sam Waksal, was anyone else 
allowed to borrow money from the company to acquire shares?
    Mr. Kopperl. The directors were, yes, sir.
    Mr. Deutsch. I'm sorry?
    Mr. Kopperl. The directors were.
    Mr. Goldhammer. Board of directors.
    Mr. Kopperl. The board of directors were given that 
opportunity.
    Mr. Deutsch. Now, the board supported Sam Waksal in the 
support with Bristol last winter--and again, I guess I've 
gotten sort of bits and pieces from the chairman's questioning. 
At that point you did not know that he had forged loan 
documents? When Bristol basically had a--wanted to get rid of 
Sam last winter, were you aware at that point in time that he 
had forged documents?
    Mr. Kopperl. I believe that the board was advised by our--
I'm sorry. Let me start again. I believe that the special 
committee of the board, which excluded Sam Waksal and Harlan 
Waksal, that the board was apprised of a possible--I repeat, 
possible signature forgery issue in early February, and I think 
that within a few days, they--we took--we took this seriously. 
We asked our counsel, our outside counsel, to investigate 
thoroughly and to do so as quickly as would be practicable and 
report back to the board.
    A few days and--I can't tell you exactly, but I would think 
within a matter of a week or so, the--we received a letter from 
Peter Dolan, the CEO of Bristol-Myers Squibb, making demands on 
ImClone and proposing to renegotiate the agreements that--the 
agreements that existed between Bristol-Myers and ImClone.
    Mr. Deutsch. Were you aware that Sam Waksal was under 
investigation by the SEC for insider trading and was also under 
investigation by this committee at that time?
    Mr. Kopperl. I believe so.
    Mr. Deutsch. So you--obviously you supported his position 
in terms of Bristol's request. Why then and not now? I mean, 
now you've changed that position. What happened? I mean, is he 
still entitled--you know, he hasn't been proven guilty. 
Shouldn't--I mean, should he still be leading the company 
today?
    Mr. Goldhammer.
    Mr. Goldhammer. The counsel, the counsel sadly was taking a 
long period of time to come up with this forgery question. At 
that time, Sam was delivered a Wells Notice and that became----
    Mr. Deutsch. I'm sorry. He delivered----
    Mr. Goldhammer. I believe at that time, right at that 
time----
    Mr. Deutsch. The Wells letter?
    Mr. Goldhammer. Yes.
    Mr. Deutsch. Yeah.
    Mr. Kopperl. May I add something to that, Mr. Deutsch?
    Mr. Deutsch. Yes.
    Mr. Kopperl. The company adopted a thorough process to 
investigate the allegations against Sam Waksal as they arose. 
And this was a continuing review in late January, February, 
March, April and into May. And the Wells Notice that Sam Waksal 
received from the SEC was the--all along during that time, we 
decided on balance for the good of the company and particularly 
the personnel, that we would, if possible, like to retain Sam's 
services. But the Wells Notice was the final straw and in, I 
think it was May 22 or 21, we requested Sam's resignation, and 
he resigned, I think, on May 22.
    Ms. DeGette. Will the gentleman yield?
    Mr. Deutsch. My time has expired.
    Ms. DeGette. I'd ask unanimous consent that the gentleman 
be given an additional minute so I can follow up on his 
question.
    Mr. Greenwood. Without objection.
    Ms. DeGette. All right. Will the gentleman yield?
    Mr. Deutsch. I would be happy to.
    Ms. DeGette. I guess I don't understand, Mr. Kopperl, why 
it would take all those months for an outside counsel to 
investigate what would seem to me to be a very simple issue of 
a forged issuer's letter.
    Do you have any insight into that?
    Mr. Kopperl. Well, as I mentioned, ma'am, it was within a 
few days after the special committee of the board received the 
information about the alleged forgery that we were hit by the 
demand--not just a proposal, but a demand by Bristol-Myers 
Squibb to renegotiate the arrangements between the two 
companies. And that took approximately 6 weeks to----
    Ms. DeGette. Okay. But you got a demand from Bristol-Myers 
Squibb. But in the meantime, you have this forged signature 
right in front of you.
    Why would that take so long to investigate and take action? 
It seems to me pretty clear-cut.
    Mr. Deutsch. And if I can reclaim my time for a second. I 
mean, did you ask Sam Waksal if he forged the signature?
    Mr. Kopperl. We turned it over to our special counsel, sir.
    Mr. Deutsch. And I assume--did they ask him that question?
    Mr. Kopperl. I don't know what their process was.
    Mr. Deutsch. I mean, wouldn't that have been an appropriate 
question to ask?
    Mr. Kopperl. Very possibly.
    Mr. Deutsch. I mean, very possibly it would be appropriate? 
You can't say, yes or no? That's the most ridiculous answer 
I've heard in a very long time here, and we've had everyone. 
We've had Enron--I mean, we've had WorldCom and that's up 
there.
    I mean, ``very possibly.'' Your CEO, the head of the 
company, forged a document. This is wacky. I mean, this is 
wacky. A guy's forging documents and you keep him in charge of 
the company, and you're outside directors.
    I mean, that's the whole issue that we're dealing with 
here, and the best you can come up with, maybe they might have 
asked him?
    Did you look the guy in the eye and say, ``Did you forge 
it?''
    Mr. Kopperl. I respect your opinion, sir, you know, 
clearly, but I would like to say that we turned the matter over 
to a very prominent law firm in New York City and said 
investigate and come back to us with the results and 
conclusions of your investigation. And that's what we did.
    Mr. Deutsch. And how long was that investigation for? How 
long was the investigation? I mean, what was the timeframe?
    Mr. Kopperl. Well, the investigation, as I recall, had not 
been completed by the time we asked Sam Waksal to step down, at 
which point it became moot.
    Mr. Greenwood. The time of the gentleman has expired.
    The gentleman from Florida is recognized for 10 minutes.
    Mr. Stearns. Thank you, Mr. Chairman. And I'd like to turn 
to part of the insider trading that's concerning the blackout 
period.
    At Tab 19, your policy reads, ``There will be periods of 
time when it is clear that material, nonpublic information is 
known by several employees, officers and directors of the 
company. An example would be the making of a seminal discovery 
in the company's science, or significant results in one of its 
clinical trials, or the pending announcement of an important 
strategic alliance for the company.''
    I'd also like to refer you to December 18, 2001, Tab 20, e-
mail from Mr. Gallagher, a member of your legal department in 
which he writes, quote, ``On Tuesday, December 18, 2001, Cathy 
Vaczy reminded me in a conversation that I'm subject to the 
insider trader policy of the company. She further informed me 
that select members of senior management have been aware that 
the FDA may not accept our BLA, biological licensing 
application, filing.''
    Ms. Vaczy, when did ImClone initiate its blackout period 
prior to the FDA announcement on December 28?
    Ms. Vaczy. We put a company-wide blackout----
    Mr. Stearns. Can you put that microphone right on.
    Ms. Vaczy. We put a company-wide blackout in effect on 
December 21.
    Mr. Stearns. Okay. Is it true that the FDA contacted 
ImClone on December 12?
    Ms. Vaczy. I understand there was a conversation on 
December 12 with Dr. Lily Lee, our Vice President of Regulatory 
Affairs, and perhaps some other individuals.
    Mr. Stearns. Okay. When they made the contact with him, 
were you aware what they said to him about Erbitux?
    Ms. Vaczy. What I learned from this conversation on the 
12th, through discussions with other select members of----
    Mr. Stearns. Did you talk to him directly yourself?
    Ms. Vaczy. It's a woman, Dr. Lily Lee.
    Mr. Stearns. Okay. Did you talk to her?
    Ms. Vaczy. I don't recall that I spoke to her directly 
myself.
     Mr. Stearns. But that would be a big deal. If the FDA 
called her and talked to her about Erbitux, wouldn't that be a 
big deal?
    Ms. Vaczy. I don't think so. My understanding is, Lily was 
in contact with them virtually daily. But I think----
    Mr. Stearns. So you think this was a routine call----
    Ms. Vaczy. Well, I think many calls were routine. However, 
this call on the 12th, we did, based on Lily's report to senior 
management, she stated that this was the first time she had 
spoken to the FDA where she felt their tone had changed, and 
she became concerned.
    Mr. Stearns. Well, based upon this call on December 12, 
when do you think, in your mind, senior management were told 
about the FDA's decision, impending decision?
    When, in your best estimate were they aware?
    Ms. Vaczy. Oh, well, we--we certainly were not told until 
December 28 of the FDA's final determination. During the month 
of December there was really an evolution of certain 
communications.
    Mr. Stearns. No. But I mean, when were they aware that they 
might, the FDA might not accept the findings of ImClone? When 
were they aware of that date?
    Ms. Vaczy. Well, we formally knew on the 28th.
    Mr. Stearns. No. No. We all know the formal. But what we're 
trying to do is trying to understand if there's insider 
trading.
    Ms. Vaczy. Right.
    Well, I would like to say that on the 12th. And I believe 
that executives from our company have testified to this before 
in front of this committee that the 12th was important to us, 
because that was the----
    Mr. Stearns. Tip off?
    Ms. Vaczy. No.
    Mr. Stearns. No.
    Ms. Vaczy. It was a time at which the--Dr. Lee reported to 
management, it's the first time she had any thought that 
perhaps there was a problem. She referred to it as a ``change 
of tone.''.
    Mr. Waksal. Congressman, if I could help out in this, if 
possible.
    Mr. Stearns. Okay.
    Mr. Waksal. I testified at the last hearing, and Dr. Lee 
was here as well, that around December 12, December 13, we had 
had a number of conversations internally and with the FDA, and 
the tone had changed in the discussions we had with them.
    In prior conversations, they were continuing to give us 
guidance as to how we could go ahead and remedy what we 
considered the documentation issues surrounding the filed BLA. 
December 12 we no longer got that guidance. They said wait, and 
we'll get back to you. There was no tipping of any type to us.
    But we became concerned, and it was a very small group of 
individuals who were involved with this. This was not 
disseminated to management as a whole as the letter in that 
file indicates. It was a very small, select group of senior 
executives that were aware of what was taking place with the 
FDA.
    Mr. Stearns. Would Charles Dunn be one of those senior 
executives that knew?
    Mr. Waksal. He would not be.
    Mr. Stearns. Okay. Would Lisa Cammy.
    Mr. Waksal. Lisa Cammy, she would not be the head of human 
resources, no.
    Mr. Stearns. Would Tom Gallagher?
    Mr. Waksal. No. As the memo points out, Tom was not part of 
that group that knew.
    Mr. Stearns. Would Daniel Hicklin.
    Mr. Waksal. He would not.
    Mr. Stearns. Okay. And would Nikhil Mehta.
    Mr. Waksal. He would not.
    Mr. Stearns. Well, it says here he was a member of the 
regulatory affairs committee.
    Mr. Waksal. He was involved with the manufacturing 
component of the submission. Lily Lee was the person who was 
working and interacted with the FDA; and to my knowledge, he 
had no information regarding the interaction with the FDA.
    Mr. Stearns. I respect what you're saying, but I'm reading 
from a list of people who suddenly, on December 14 started 
unloading a lot of shares, the people I mentioned.
    December 14, December 13, December 14, December 14, 
December 17, December 11, all these people suddenly ImClone 
officer stocks sales start to be out the door--4,500 shares, 
3,500 shares, 5,000 shares, 32,212 shares, 20,000 shares for 
Thomas Gallagher on December 14, 5,000,--no, excuse me, 5,000 
on December 17.
    You just--I'm just telling you, looking at this and hearing 
what Ms. Vaczy says, that not knowing, I would have a hard 
time--why did all these senior people, these aren't general 
managers, these aren't drafting managers; these are VP of 
manufacturing, VP of system facilities, VP of intellectual 
property, regulatory affairs. I mean, these were senior people, 
looking at their titles.
    And these are not small. They're not selling 100 shares. 
Some of them are as high as, you know, 32,212. Why would all 
these senior people suddenly, after December 12, start moving 
out and selling all this? Is this all coincidental, in your 
opinion?
    Mr. Waksal. Yes, it is. And I if could comment for a 
moment, if you look back over the sales that take place from 
employees in a company and our company, over the course of the 
many months, on average, there were around 20, 21 employees, 
per month that would exercise and/or sell stock.
    Mr. Stearns. In senior management?
    Mr. Waksal. Across the board, sir. Some in senior 
management and otherwise. There were certainly many people in 
senior management as well, but these individuals that you're 
speaking about--and I just want to go back to the memo from Tom 
Gallagher; it is very clear in his memo that it was a select 
group, and I have to emphasize that, a small and select group 
of individuals.
    Mr. Stearns. So these people that I mention are all a 
select group?
    Mr. Waksal. They are a group of individuals who, in fact, 
were not part of the individuals that had any knowledge 
regarding the interactions with the FDA, to my knowledge.
    Mr. Stearns. Well, it's just, you know, we have on December 
12 contact from the FDA to senior management; and then we 
have--on December 18 we have some more communication. And then 
we have on December 21 your e-mail, which is asking for a 
blackout. And this--let me just read your e-mail.
    ``As many of you know, the FDA is required to tell us by 
the end of next week whether the filing of the BLA for Erbitux 
has been accepted and whether the file will be granted 
expedited review. Given the importance of this news, we believe 
employees should not trade ImClone stock until we receive 
definitized information from the FDA and a press release is 
issued.''
    ``Accordingly, we have put into effect a company-wide 
blackout on trading in ImClone stock, as described in Section 
IV (D) of ImClone's insider trading policy.''
    So, I see before this blackout a lot of senior people 
selling thousands of shares of stock, and the FDA contact on 
December 12; and your argument is that the contact on December 
12 was routine and that these individuals, these senior people, 
were not inside the close group that you considered the higher 
management, but these were--from their titles, seem to be 
higher management. And yet they were all selling a large amount 
of stock prior to the blackout that was instructed on December 
21.
    And so I'm just finding that a little bit difficult. So I 
think----
    Mr. Waksal. If I could just comment, sir?
    Mr. Fletcher. Briefly.
    Mr. Waksal. I believe that whenever a company's stock goes 
up as high as ours was going up and it took place several times 
during the course of that year, on all of those occasions 
individuals took the opportunity to sell some of their shares 
or to exercise stock.
    And I have to say, we went through an investigation, looked 
into whether or not there was any sense of insider trading; and 
the conclusion that we reached, based on the inquiries, was 
that these trades were not based on inside information. They 
were not based on nonpublic, material information, and they 
were done for personal, individual reasons.
    And I have to say today that that memo that you point to 
speaks very clearly about the gentleman, Tom Gallagher, and 
others not knowing about what was taking place in this BLA 
process.
    Mr. Fletcher [presiding]. The gentleman's time has expired.
    Recognize Ms. DeGette for 10 minutes.
    Ms. DeGette. Thank you, Mr. Chairman.
    Mr. Goldhammer, you've been the chairman of the ImClone 
board since 1991. Would that be correct?
    Mr. Goldhammer. Yes.
    Ms. DeGette. I think you're going to need a microphone, and 
now you'll need to turn it on.
    Mr. Goldhammer. Hello.
    Ms. DeGette. That's great.
    Mr. Goldhammer. Yes, ma'am.
    Ms. DeGette. Okay. And in the period that we're talking 
about here, up until last spring, you and Dr. Sam Waksal and 
Dr. Harlan Waksal were the three members of the executive 
committee of the board of ImClone, right?
    Mr. Goldhammer. Yes.
    Ms. DeGette. How long were the three of you the members of 
the executive committee?
    Mr. Goldhammer. Since the company was founded.
    Ms. DeGette. And that was when?
    Mr. Goldhammer. 1984.
    Ms. DeGette. Okay. So for that whole period of time it was 
just you three who were the executive committee, right?
    Mr. Goldhammer. Yes.
    Ms. DeGette. And so you were all charged with making all of 
the decisions between board meetings, as executive committees 
do, right?
    Mr. Goldhammer. Yes.
    Ms. DeGette. Now, throughout the period--really, throughout 
the 1990's, Dr. Sam Waksal had a number of loans from the 
company. I think we already talked about that a little bit, 
right?
    Mr. Goldhammer. Yes.
    Ms. DeGette. If you'll look at Tab 63 in your binder, it 
kind of summarizes the loans, and it says on October 1, 1992, 
there was a promissory note from Sam Waksal for $257,000 plus 
10 percent interest; April 1, 1993, $367,000 bearing 10 percent 
interest--that consolidated the other loan--then on March 22, 
1995, $157,000, roughly, bearing 8 percent interest.
    And it goes on like that, January 1998, another loan, 
$130,000; and then December 21, 2000, $282,000, roughly; and 
then in July 2001, right before the Bristol-Myers deal, Sam 
Waksal took $18,178,750 in payment for the exercise price 
associated with the exercise of stock options and warrants, 
right?
    Are you following that? Is this a pretty accurate summary 
of the loans that Dr. Waksal received from the company?
    Mr. Goldhammer. I think so.
    Ms. DeGette. Now, all throughout this period of the 1990's 
I think you and also Mr. Landes and others said this company 
was a small biotech company, but trying to grow, right?
    Mr. Goldhammer. Yes.
    Ms. DeGette. And I assume that capital was always tight in 
the company, as it always is with small, growing companies, 
right?
    Mr. Goldhammer. Yes.
    Ms. DeGette. But if you make these loans, even though 
they're paid back eventually, while the loans are outstanding, 
that's capital the company doesn't have at that time, isn't it?
    Mr. Goldhammer. Yes.
    Ms. DeGette. Okay. Now, let's talk for a minute about this 
$18 million loan at the same time Dr. Waksal, Dr. Harlan 
Waksal, took a loan for $17 million, the promissory note for 
$17 million, also for the exercise price for the stock options, 
correct?
    Mr. Goldhammer. Right.
    Ms. DeGette. And----
    Mr. Goldhammer. That's the last one.
    Ms. DeGette. I'm sorry?
    Mr. Goldhammer. I had to go to another page. The answer to 
that is yes.
    Ms. DeGette. All right.
    Now, there were three people who exercised stock options 
from that transaction. The two Dr. Waksals and you, right?
    Mr. Goldhammer. Right.
    Ms. DeGette. And there were only three people that 
exercised stock options, right?
    Mr. Goldhammer. I think there were four.
    Ms. DeGette. Four? Who was the fourth?
    Mr. Goldhammer. Oh, exercised options.
    Mr. Waksal. There were many people who were exercising 
options.
    Ms. DeGette. I'm sorry. Who borrowed money?
    Mr. Waksal. There was a fourth person who borrowed money, 
as well, I believe.
    Ms. DeGette. And who was that?
    Mr. Waksal. Dr. Arnie Levine.
    Ms. DeGette. Okay. But three of the four people who 
borrowed money to exercise the options were the three members 
of the executive committee of the board of directors, weren't 
they, Mr. Goldhammer?
    Mr. Goldhammer. Yes, they were.
    Ms. DeGette. Okay. Now, there was a great concern about 
some of Dr. Sam Waksal's spending habits throughout the period 
of--well, throughout the 1990's. Would that be fair to say?
    Mr. Goldhammer. I would say that's fair.
    Ms. DeGette. And why would you say that Mr. Goldhammer?
    Mr. Goldhammer. Well, because in the beginning, as you say, 
it's a small company----
    Ms. DeGette. Uh-huh.
    Mr. Goldhammer. [continuing] started off with about 20 
people. Even through the middle of the 1980's, late 1980's, we 
only had 50 or 60 people; so it was a small company.
    Ms. DeGette. Right. And you're worried about people--the 
board is worried about people--about keeping costs under 
control, right?
    Mr. Goldhammer. Yes.
    Ms. DeGette. If you could take a look--and, Mr. Kopperl, 
it'll probably be good for you to take a look--at Tab Number 5, 
which is the minutes of the audit committee meeting held on 
February 12, 1998, which was several years ago. Take a look at 
that second page.
    I was particularly interested in Number 6 because, over the 
years, I've dealt with a lot of corporations; and I've got to 
be honest, I've never seen a document like this where the audit 
committee of the board of directors has got to tell the CEO 
that, for example, they can only charge $50 to $100 of wine per 
bottle, or that they can't buy sporting tickets except 
exceptional circumstances, or that under ``Lodging''--clearly 
Motel 6 is neither necessary or appropriate; however, five-star 
European hotels, such as the Crillon, and occupying a suite are 
inappropriate unless a significant discount can be obtained.
    Have you ever seen a corporate travel policy that goes into 
these specifics, Mr. Kopperl?
    Mr. Kopperl. I have not.
    Ms. DeGette. And what was the purpose of enacting such a 
policy?
    Mr. Kopperl. I'm glad you asked that.
    Ms. DeGette. I am too.
    Mr. Kopperl. We, ever since I joined the board, have had an 
expense account procedure. The--beginning in 1994, this 
procedure was codified in a lengthy--I'll call it ``booklet,'' 
a document that explained what the procedures were for expenses 
to be reimbursed. And this ``booklet,'' if you will, is still 
valid today.
    Ms. DeGette. And when was the booklet promulgated?
    Mr. Kopperl. In 1994.
    Ms. DeGette. Okay.
    Mr. Kopperl. Okay?
    Ms. DeGette. But this document----
    Mr. Kopperl. I'll come right to that if you just give me 
one more moment.
    Ms. DeGette. Yeah.
    Mr. Kopperl. Beginning in probably 1996 or -7, I was asked 
by the board or by the other--I was, anyway, by the other 
members of the audit committee to review Dr. Waksal's, Sam 
Waksal's expense account.
    In 1996, we instituted a very important change, and that 
was that all charges that Sam Waksal ran up on his American 
Express credit card, which I think was the only credit card, 
corporate credit card had to be paid by Sam Waksal personally. 
So if he wanted anything, if he wanted the company to pay 
anything, he had to come to the company and ask for 
reimbursement.
    Ms. DeGette. Right.
    Mr. Kopperl. It was not that the company was paying the 
bill and then going to Sam Waksal and asking for reimbursement.
    Ms. DeGette. You need to summarize fast, because I don't 
have a lot of time.
    Mr. Kopperl. So there were a lot of expenses for which he 
asked us to reimburse him, and we--and we went through our 
financial department, which lumped expenses into three 
different categories: clearly business expenditures, clearly 
personal expenditures and those that needed to be discussed.
    I was the guy who was supposed to review those, all of 
those, and I decided in late January 1998 that this was taking 
far too much of my time and that we had to come up with a 
better--a better system, and that's why you have this.
    Ms. DeGette. Okay, great. Thanks.
    But see, here's the thing: The 1992 loan for $275,000 was 
for personal expenses run up on the credit card. Then you have 
the 1994 policy, then you have this audit committee meeting in 
1998. It's like you guys kept doing stuff, but it never 
changed.
    And I just have one final kind of comment, and you can 
respond, any of you, Mr. Goldhammer, if you want. Here you have 
a forgery which Mr. Landes, a lawyer, says, well, it's because 
he didn't understand a procedure. I never knew a standard 
procedure to be a forgery.
    In 1991, then you have a whole systematic taking out of 
money and loans, abuse of credit card charges on the corporate 
credit card for almost a 10-year period. Then you have another 
forgery. Then you have insider trading around Christmas of last 
year, which I haven't even gotten to ask about. And it still 
takes the board almost 6 months to fire the guy, and he's only 
fired 2 weeks before criminal charges are brought.
    I am--I'm just--I'm stunned, and I'll yield back the 
balance of my time.
    Mr. Greenwood. The Chair thanks the gentlelady and 
recognizes the gentleman from Kentucky for 10 minutes to 
inquire. And before doing so, I would note that I believe there 
will be two votes here, so at the end of Mr. Fletcher's 
questioning, we'll probably recess until 3:30.
    Mr. Fletcher. Thank you, Mr. Chairman.
    My concern--I wasn't here for all of the testimony. I've 
certainly read through and reviewed some of it. I wanted to 
address the concerns I've got about looking--during this period 
of time particularly when the studies were going on, there 
seemed to be a lot of promotion going on about the 
effectiveness of Erbitux and what it was going to do in the 
treatment of colon cancer particularly.
    At the same time, we have this scientific advisory board 
and a lot of publicity goes out of certainly the distinguished 
members of that board. And let me ask, I know--Dr. Mendelsohn, 
I believe, is a member of that board. Is that correct?
    Mr. Mendelsohn. Yes, that's correct.
    Mr. Fletcher. And certainly you have a very distinguished 
record as being, I guess in your testimony, President of and 
Professor at the M.D. Anderson Cancer Center at the University 
of Texas, so you probably have a lot of experience, if not 
personally, at least from a management standpoint, of 
overseeing cancer trials, protocols, I assume.
    Are those done at M.D. Anderson cancer center?
    Mr. Mendelsohn. Yes, they are.
    Mr. Fletcher. Let me ask you, as a member of that 
scientific advisory board from 1997 to 2001--is that right?
    Mr. Mendelsohn. And earlier, yes.
    Mr. Fletcher. Okay. Who were some of the other members on 
that board?
    Mr. Mendelsohn. Dr. Zvi Fuchs, Dr. Tom Deuel, Dr. Tom 
Shenk, Dr. Arnold Levine and myself, and for a while, Dr. Fred 
Sparling and Dr. Gerald Keusch, K-e-u-s-c-h.
    Mr. Fletcher. It would seem to be a very distinguished 
group and people well known in the oncology and immunology 
communities; is that a fair assessment?
    Mr. Mendelsohn. Yes.
    Mr. Fletcher. Let me ask you why the advisory board was 
established.
    Mr. Mendelsohn. The scientific advisory board, when I 
joined it in 1992, had the main function of reviewing the 
research that was going on at ImClone because they were doing 
research, studying not only Erbitux.
    Well, they weren't even studying Erbitux; they didn't have 
it. They were studying a variety of approaches to treating 
cancer, and they were also looking at licensing opportunities 
to bring in compounds. And we would review the research that 
others were doing that the company might license, and we would 
review the company's laboratory research program.
    Mr. Fletcher. Let me ask you during the period--I mentioned 
1997 to 2000, did that--the scientific advisory board meet 
during that period of time?
    Mr. Mendelsohn. Up until around 1996 or 1997, it met as a 
group regularly. After 1997, the company's emphasis shifted 
more toward two or three products that they were actually 
bringing into clinical trials, and the scientific advisory 
board was consulted with individually or in groups of two or 
three, as needed.
    Mr. Fletcher. So--it did not meet as a group of six or 
seven?
    Mr. Mendelsohn. No. It did not.
    Mr. Fletcher. Let me ask you, because during--you know, the 
problems I see here and as we had the previous hearing on this 
was that we've got some very distinguished and able members on 
the board, on the scientific advisory board as well, and yet 
all the time we had a flawed protocol. We had protocol that 
wasn't being followed even in the trials at some very 
distinguished centers.
    Were any of those trials being done at M.D. Anderson?
    Mr. Mendelsohn. The registration trials on colon cancer 
were not being done at M.D. Anderson, but other trials were 
done at M.D. Anderson.
    Mr. Fletcher. Let me ask you, it seems rather odd to me 
that you've got a scientific advisory board that is really made 
up of some very distinguished members and yet, and I assume 
their responsibility, somewhat, was to oversee the scientific 
side of these protocols that were going on. And yet they were 
so flawed and yet the whole time when the scientific advisory 
board was not meeting, not overseeing the protocols--or at 
least if they were, they were doing an ineffective job--you 
have the company and the board still promoting this product as 
being very promising in the future.
    Mr. Mendelsohn. You've asked a number of questions.
    First of all, the scientific advisory board members that I 
named were nearly all Ph.D.s and were much more focused on the 
preclinical work than the clinical work.
    The protocol was not reviewed by that board for flaws at 
all. It was not the business of that scientific advisory board 
to review the protocol.
    Mr. Waksal. Congressman, if I could interrupt for a 
moment----
    Mr. Fletcher. Yes?
    Mr. Waksal. A couple of points.
    First, the statement made that the protocol was obviously 
flawed: The company, the investigators who were working on that 
protocol did not feel, and I don't believe--feel today that 
that protocol was flawed.
    Second, the promotional aspects of using our SAB for 
promotional reasons that had not been done by the company: I 
think it's--it is not a fair characterization to state that the 
company was out promoting a flawed protocol or a flawed effort. 
What we were doing was, we were working to move this drug 
forward through clinical studies, and I believe we were doing 
so in an appropriate way.
    Mr. Fletcher. Let me interrupt you just a minute, Dr. 
Waksal, because I----
    Mr. Waksal. Please.
    Mr. Fletcher. I want to make sure--you're saying that you 
felt like ImClone during this period of the trials of Erbitux 
was practicing sound science during the process of getting FDA 
approval, or at least to the extent that you were working on 
the phase II studies.
    Mr. Waksal. Well, let me emphasize that. I strongly believe 
we were doing sound science and appropriate science the entire 
time we were working and moving this process forward. 
Absolutely.
    Mr. Fletcher. Well, let me say, when we spoke to the parent 
company, and the way they oversee protocols, and when we--you 
were here in the previous hearing; we talked. There was 
apparently very little oversight. There was a great deal of 
information put out on how promising this drug was.
    Mr. Waksal. I'm sorry, sir. What information was put out 
that was inappropriate on how promising the drug was?
    Mr. Fletcher. Well, I think, given the fact that the 
emphasis seemed to be more on the marketing of Erbitux than it 
was on overseeing the trials----
    Mr. Waksal. I don't believe that's the case. I believe we 
were working very hard.
    We're a very small company, very small company that used 
clinical research organizations, individuals with great 
knowledge in this area, to oversee these studies and protocols; 
and we worked closely with them to move it forward.
    Mr. Fletcher. I think clearly from what the FDA presented 
and how the protocols were not followed, and from the last 
hearing we had where the oversight, I think, maybe it's due--
because of a small company or whatever, but it certainly came 
far short of what was necessary to ensure it.
    And yet we have--even here, someone has suggested that, you 
know, the board maybe should--the scientific advisory board 
should meet.
    Let me read this:
    ``Dear Sam and Harlan:
    ``I'm sorry there's been some turbulence and possible 
misunderstandings relating to the final approval of C225, 
Erbitux. I know this must be distressing for everybody since 
many outsiders apparently are suffering from a lapse in 
confidence in the company as a result of various public 
statements and disclosures. I suggest that your scientific 
advisory board could help if you were to bring us together to 
review the situation in some detail.
    ``I realize that I am not a cancer investigator, but I 
think the board could be very useful at this particular time 
and I suggest that you do bring us together again for this 
purpose.''
    Do you recall this letter?
    Mr. Waksal. Yes it's from Dr. Fred Sparling. It was very 
kind of him to reach out to us.
    Mr. Fletcher. That's correct. And yet, was his advice 
followed?
    Mr. Waksal. Well, his advice was that we pull together the 
scientific advisory board.
    We have much greater depth with a great deal of other 
clinical advisors, that have expertise in this area, that we 
worked with to start to address the issues and concerns.
    Now clearly, sir, one of the problems we had with our 
clinical study was that we had faulty documentation. That is 
something that I talked about at the last hearing, something 
that I regret took place and something we are still working to 
make sure is in place and corrected.
    Regarding the advice we were receiving, we had great 
expertise from the oncology community, from individuals with 
great expertise, from all of these centers, 25-plus centers, 
who were working with us to make sure that our protocols were 
well defined and moving forward appropriately.
    Mr. Fletcher. Let me just say that we have some letters 
from Dr. Sparling saying that basically he ended up resigning, 
I believe because of the lack of response that he received; or 
at least, I think he felt like the scientific advisory board 
was not being taken seriously in the role, and he eventually 
resigned.
    Let me ask Dr. Mendelsohn something. I mean, there's a 
tremendous expertise on this board, and I grant that. And, to 
me, it's amazing that with this expertise, you've got such a 
promising drug--which still seems promising to me, from the 
literature--and yet, at the same time, you seem to have a 
company that has more emphasized the marketing and being 
concerned about that than making sure that the science was done 
well.
    You have mentioned that there was problems with the data 
collection. There were patients that were taking it in the 
protocol that did not meet the design of the protocols or the 
standards of the protocol. Those are the very basic elements of 
research. And folks like yourself that have been in this 
business a long time know that throws out all of the research 
and makes it really lack credibility.
    Mr. Mendelsohn. The protocol was developed with the advice 
of medical oncologists from some of the world's greatest 
institutions, 27 of which participated in carrying it out. 
There were numerous meetings. I went to those meetings to give 
background. I often attended meetings to give background and 
the scientific rationale for what we were doing; and then these 
various experts from many institutions around the country, that 
you're aware of because you've seen the list, would get 
together and work with the company.
    Then the company also brought in expert consultation from 
individuals who worked closely with it and developed a 
protocol. The protocol was managed through a----
    Mr. Fletcher. When did you first find that the protocol 
wasn't being followed as it was laid out, and when some of the 
data collection was inadequate?
    Mr. Greenwood. If the gentleman would yield for a moment. 
We have under 3 minutes to make this vote, two votes with 
regards to Iraq, so it's important that we get there.
    So I'm going to ask that we recess at this moment, and 
we'll return at 3.
    [Brief recess.]
    Mr. Greenwood. The subcommittee will come to order.
    Mr. Stupak.
    Mr. Stupak. Thank you, Mr. Chairman.
    Dr. Waksal, the questions that Mr. Fletcher asked and one 
that bothers a lot of us up here, we continue to hear you say, 
look, there is no problem with Erbitux, it is just some missed 
documents, missing documents, things like that. But yet it 
continues to be--in January 2002, the Cancer Letter to Trade 
Journals said--put down some of the reasons why the FDA did not 
approve your fast track authority there. And those are some 
very serious problems with the protocol and with your 
application. It is not just missing documents.
    And in fact, it really raised some very, very serious 
questions. And that is what all of us believe up here. You 
continue with this line that, well, it is just this or this 
missing. What do you base that on?
    Mr. Waksal. Well, first of all, let me say that I am not 
saying that there were not problems with the biologic license 
application. The question is, I keep saying there are no 
problems with Erbitux. Well, indeed there were problems with 
the application.
    Mr. Stupak. There is serious problems with your protocol.
    Mr. Waksal. Well, no, sir. There were problems with the 
excuse of a protocol. There were problems with the 
documentation.
    Mr. Stupak. High rates of patient ineligibility. There were 
so many waivers given. Even Bristol-Myers Squibb, who was your 
partner in this whole thing, their independent radiology review 
showed that strict scrutiny of the study data yield only a 
response of 12.5 percent, but yet you are promising 22 percent.
    Mr. Waksal. Well, that is not true, sir. I never promised 
22 percent. What we reported--what we reported was very clear. 
The scientists that were involved in the trial, the oncologists 
reported at their sites based upon----
    Mr. Stupak. Based upon studies which showed high rates of 
patient ineligibility and waivers given to patients. So the 
study that you relied upon with 22 percent wasn't--and you 
couldn't achieve it with all these waivers and high patient 
ineligibility.
    Mr. Waksal. Well, if I could comment. Again, with respect 
to response rate, the response rate at the independent sites 
and then subsequently done by an Independent Radiology Advisory 
Committee showed the response rate in the 19 to 20 percent 
range. Now, whenever you get that information, the next 
question is, were are all those patients eligible? Were all 
those appropriate? There were deviations. In every study, in 
every protocol there are deviations. We just----
    Mr. Stupak. Not at the rates we have seen here.
    Mr. Waksal. Well, while one could argue whether the rates 
here were higher than others, I have to state that every 
protocol, every study has protocol violations and deviations. 
Most importantly, the comment that only 12.5 percent response 
rate is, in my opinion, understating the real value of what was 
shown. It was in a worst-case scenario.
    Mr. Stupak. This is Bristol-Myers Squibb's study that says 
it is 12.5 percent.
    Mr. Waksal. Yes, 12.5 percent.
    Mr. Stupak. That is your partner in this whole thing who 
would want to see it to be a very successful drug and would not 
downplay the number.
    Mr. Waksal. They didn't downplay the number. As you 
remember, when they sat here, they said they didn't look at 
12.5 percent as a failure. They believed 12.5 percent was a 
very excellent response rate in this type of drug in this kind 
of patient population.
    Mr. Stupak. Well, not really. That is not what they said, 
because Erbitux was being used with other combination drugs, 
and you couldn't make a determination whether it was the 
Erbitux which was fighting the cancer or the combination of the 
other treatment.
    Mr. Waksal. Well, that is the real question that we are 
trying to identify right now. As you know, we did a single 
agent study. And with the single-agent study, we had a 10.5 
percent response rate. And that work is continuing to go 
forward.
    Mr. Stupak. If it is just missing data and improper 
documentation and not unusual numbers, in your estimation, have 
you ever rehabilitated this application to get it renewed again 
by the FDA?
    Mr. Waksal. Well, the world has changed.
    Mr. Stupak. Well, no. Yes or no. That is all.
    Mr. Waksal. Well, the answer is, yes, we are doing so. We 
are rehabilitating the study.
    Mr. Stupak. You haven't done it. So if it is just simple 
missing documentation, why is it taking so long?
    Mr. Waksal. Well, we have collected the documentation. And 
what we are doing right now, before going forward 
irresponsibly, to review anything without the guidance of the 
FDA, we have been in continued meetings with the FDA to get 
their appropriate guidance as to the right way to reevaluate 
the data and the documentation in this trial.
    Mr. Stupak. Who is your--who is ImClone's P R person that 
they get you all this free advertisement on 60 Minutes and USA 
Today?
    Mr. Waksal. Well, if I could just comment. The 60 Minute 
story was a very strong and negative story about ImClone. It 
was about compassionate use. And we did not participate in any 
way. And the other one that was mentioned was a Business Week 
article.
    Mr. Stupak. Sure. But my question is----
    Mr. Waksal. I have to say, the author is here today. And 
the company had no role at all in moving that forward.
    Mr. Stupak. I don't want you to stall on my time. My 
question was, who was your P R firm?
    Mr. Waksal. We do our own invested relations and PR 
internally.
    Mr. Stupak. So ImClone got the USA Today articles, the 
Business News articles, the 60 Minutes article?
    Mr. Waksal. Well, actually, it is the journalists that 
initiate those articles. We went ahead and cooperate with their 
journalism. We cooperate with newspapers, journalists, et 
cetera, while the stories are being done.
    Mr. Stupak. So the promotions we have seen are basically 
international ImClone putting forth their spin on their 
Erbitux.
    Mr. Waksal. Well, actually, I just said that that is not. 
The case the company hasn't put forward a spin at all on 
Erbitux. We have relied on data from reputable centers, from 
reputable studies to disclose what is taking place with this 
drug and how it is being used in patients.
    Mr. Stupak. Were you at the meeting when you sat down with 
the FDA before they granted you the fast track authority? Did 
you go to that meeting?
    Mr. Waksal. The meeting in August 2000?
    Mr. Stupak. Right.
    Mr. Waksal. Yes, I was.
    Mr. Stupak. And who was with you from ImClone?
    Mr. Waksal. We had a large group of people there. We had 
Dr. Mike Needle. There was a long list. And I don't have those 
names right in front of me, but I would be happy to provide 
them to you.
    Mr. Stupak. If you would, that would be great.
    Dr. Mendelsohn, how much time have you spent working on 
Erbitux?
    Mr. Mendelsohn. I have been studying Erbitux--I produced 
Erbitux in my laboratory in the early 1980's. And until the 
year about 1998, I was studying it in a laboratory that I ran 
or collaborated with.
    Mr. Stupak. Can you tell us when Erbitux first sought to 
find someone to manufacture it, to get it licensed and approved 
through the FDA?
    Mr. Mendelsohn. The first contact was in the middle to late 
1980's.
    Mr. Stupak. And so it has been well over 10 years in trying 
to get this drug manufactured?
    Mr. Mendelsohn. That is correct.
    Mr. Stupak. And why the difficulties in getting it?
    Mr. Mendelsohn. In the 1980's, the company that licensed 
Erbitux, which was C225, from the University of California 
was----
    Mr. Stupak. Was that Ely Lilly?
    Mr. Mendelsohn. That was originally Hybritech, which was 
bought out by Ely Lilly.
    Mr. Stupak. Okay.
    Mr. Mendelsohn. Just flashback to that period, no one 
believed that monoclonal antibodies were going to be that 
important. And the concept of blocking a growth factor 
receptor, which was our idea, was still very novel. Hybritech 
was bought by Ely Lilly. They had had a bad experience with 
another antibody, and decided not to pursue things further. And 
actually, the University did due diligence and got the license 
back from Ely Lilly. And at that point, ImClone took the 
license from the University of California with a more 
aggressive posture.
    Mr. Stupak. And you still have confidence in this drug?
    Mr. Mendelsohn. Yes, sir.
    Mr. Stupak. Can the application be rehabilitated, or is it 
going to take more time to get it in a position where it can be 
presented to the FDA?
    Mr. Mendelsohn. In my opinion, the application is ready to 
be rehabilitated. But I believe----
    Mr. Stupak. Did you work with Bristol-Myers Squibb this 
time, or did ImClone do it on its own again?
    Mr. Mendelsohn. Bristol-Myers Squibb and ImClone have 
collaborated closely on this. And I am very pleased about that.
    Mr. Stupak. All right.
    Ms. Vaczy.
    Ms. Vaczy. Yes.
    Mr. Stupak. I am looking at--Mr. Stearns had asked you some 
questions along these lines about your memo you did back, under 
Tab 21, on the companywide blackout for no trading for a week 
because you were expecting to hear something back from the BLA 
on Erbitux. Have you ever done one of these before for ImClone?
    Ms. Vaczy. A companywide blockout?
    Mr. Stupak. Tab 21.
    Ms. Vaczy. We have done blackouts before. Yes.
    Mr. Stupak. For ImClone?
    Ms. Vaczy. Yes.
    Mr. Stupak. Why did you do this one on December 21, 2001 at 
3:30 in the afternoon, which happens to be a Friday? Why would 
you do it?
    Ms. Vaczy. Well.
    Mr. Stupak. The week is over. The market is ready to close, 
close in about 22--34 minutes.
    Ms. Vaczy. December was a very busy time, and there was a 
lot going on. And the situation with the BLA was----
    Mr. Stupak. Can you turn on your mike or either pull it up 
a bit? I can hardly hear you.
    Ms. Vaczy. The situation with the BLA was evolving. And it 
was not until December 20 that we had a certain communication 
from the FDA that got us sufficiently concerned that we felt it 
was appropriate that no one within the company trade any 
longer.
    Mr. Stupak. Well, then were you aware that the stock trades 
that went on prior, between December 12 and 20 then that Mr. 
Stearns pointed out to you the list of?
    Ms. Vaczy. I am aware of them now. I would need to look at 
the list to say what I was aware of.
    Mr. Stupak. So you didn't know anything about it back then?
    Ms. Vaczy. I would need to see the list to know 
specifically what I knew at the time.
    Mr. Stupak. Well, it is Tab number 1 in your book there. It 
is on the second page. It gives some dates of all these sales. 
The third page has quite a few of them.
    The point being, as Mr. Stearns pointed out in his 
questioning, that there was a lot of people who moved a lot of 
stock between December 12 and December 21.
    Ms. Vaczy. Well, I think what--as Dr. Waksal had mentioned, 
we had previously submitted to the staff of the committee. It 
was by no means an unusual number of employees engaging in 
option exercises in sales in December than prior months. So we 
didn't consider it unusual activity. And the individuals, as we 
were discussing with the Tom Gallagher e-mail and his reference 
to only a select group of senior management having any 
information, none of those people are on this list.
    Mr. Stupak. Well, tell me, when did you issue another one 
of these blackout orders, companywide blackout orders for 
ImClone? Give me another time.
    Ms. Vaczy. Name a previous time?
    Mr. Stupak. Yeah.
    Ms. Vaczy. Well, I think just--could I give you sort of an 
explanation of how we have typically administered----
    Mr. Stupak. No. I just want to know another time when you 
have done it.
    Ms. Vaczy. Okay.
    Mr. Stupak. So I can go back and make comparisons between 
those who sold in and those who sold out.
    Ms. Vaczy. Okay. I know that one was issued companywide 
when the company entered into a license agreement with Mark 
Cage, E A A.
    Mr. Stupak. And when was that?
    Ms. Vaczy. That was--I believe it was December 1997.
    Mr. Greenwood. The time of the gentleman has expired.
    Mr. Stupak. Thank you, Mr. Chairman.
    Mr. Greenwood. The Chair recognizes himself for 10 minutes. 
And let me return to the board members, if I might.
    On March 26 of this year, the press reported that Sam 
Waksal had failed to report 50 stock transactions over a 10-
year period. The question is, did you see this article? And, 
were you aware of these allegations before the article was 
published? Any of the members of the board?
    Mr. Goldhammer. Well, I saw the article. I was unaware that 
he never filed a Form 3.
    Mr. Greenwood. Anything different from Mr. Kopperl or Dr. 
Mendelsohn?
    Mr. Kopperl. I also saw the article and was not aware. 
However, I would point out that the company had always had a 
procedure in place. All employees, officers, and directors were 
very aware that. And it worked.
    Mr. Greenwood. Except in these instances, to your 
knowledge? Dr. Mendelsohn.
    Mr. Mendelsohn. I don't remember when I was made aware of 
it, but it was around that time. But I don't remember whether 
it was through the company meetings or through the media.
    Mr. Greenwood. But you weren't aware of it at the time?
    Mr. Mendelsohn. Right.
    Mr. Greenwood. On March 20 of this year, Sam Waksal 
appeared before the Securities and Exchange Commission to give 
sworn deposition testimony, and invoked his fifth amendment 
privilege against self-incrimination. On the next day, March 
21, ImClone's independent directors recognized that Sam Waksal 
had a personal constitutional right to refuse to answer the 
SEC's questions, but decided it was not appropriate for the 
board to leave Sam Waksal in place as president and CEO in 
circumstances where he had refused to answer questions put to 
him by the SEC.
    The next day, on March 22, Sam Waksal reversed his decision 
on asserting his privilege, and wished to testify before the 
SEC. Is that your understanding of those facts, as I have set 
forth, correct?
    Mr. Mendelsohn. Yes.
    Mr. Greenwood. And as a result, Sam Waksal remained CEO of 
ImClone; is that correct?
    Mr. Mendelsohn. Yes.
    Mr. Greenwood. One of ImClone's directors, Richard Barth, 
dissented from the board's actions and resigned from the board 
on April 2, 2002, because he thought Sam Waksal should be 
replaced as CEO; is that correct?
    Mr. Goldhammer. Yes.
    Mr. Mendelsohn. I don't know why he resigned. But he 
certainly was----
    Mr. Greenwood. Okay.
    Mr. Mendelsohn. [continuing] making that statement.
    Mr. Greenwood. Perhaps you can turn to Tab 40 in your 
binder. That is just his letter of resignation. It doesn't go 
to his motive.
    Sam Waksal's personal financial problems resulted in 
ImClone issuing several promissory notes to extend loans to Dr. 
Waksal because of his use of corporate credit card for personal 
expenses. We have gone over some of that. That is correct. Is 
that right?
    Mr. Mendelsohn. Yes.
    Mr. Greenwood. Due to Sam Waksal's history of 
irresponsibility and using his corporate credit card, ImClone 
imposed special procedures to review Sam Waksal's expenses and 
determine what should be reimbursed. We have already discussed 
that as well.
    Mr. Mendelsohn. Yes.
    Mr. Greenwood. You agree with that? Given all of these 
problems that you knew about in April 2002, you still retained 
Sam Waksal as CEO, and you gave him a bonus of $415,000, which, 
had he been terminated as advocated by Richard Barth, ImClone 
would not have been obligated to pay; is that correct?
    Mr. Goldhammer. That was a payment for 2001. It was paid in 
2002, as this began to unravel.
    Mr. Greenwood. But what----
    Mr. Kopperl. Mr. Chairman, if I may. We had a contractual 
obligation to pay Sam Waksal a bonus. I think the sum actually 
was $450,000. But whatever it was. Prior to entering into the 
Bristol-Myers Squibb transaction, Bristol insisted that 
employment contracts be negotiated and put in place with Sam 
Waksal, Harlan Waksal, and two or three others. And it was 
under that, the terms of that agreement with Sam Waksal that 
the company was obligated to pay.
    Mr. Greenwood. And you feel that that obligation existed 
despite his conduct? You didn't feel that he had breached his 
end of the bargain?
    Mr. Kopperl. As of that time, our attorneys advised us that 
we should make the payment.
    Mr. Greenwood. All right. The April 15, 2002 issue of 
Fortune reported that an investigative report showed that Sam 
Waksal--quote: ``Sam Waksal seems to have developed a pattern 
of forming partnerships for real estate, restaurant, and small 
business ventures, and then borrowing money from these ventures 
and not paying it back.''
    Over the past 20 years, the report shows dozens of lawsuits 
and tax liens have been filed against Waksal by the IRS, New 
York State, American Express, banks, and brokers, arts 
galleries, contractors, and individuals. And if you want 
evidence of that, you can look at Tab 41. Did you see the 
article in April? And, were you aware of these allegations 
before the article was published?
    Mr. Kopperl. I had better look, because I don't know.
    Mr. Goldhammer. Before the--I mean, before this article was 
published?
    Mr. Greenwood. Right. Were you aware of any of this litany 
of problems that the CEO of your company had for 20 years, 
where he had dozens of lawsuits against him, tax liens filed by 
the IRS, New York State, American Express, banks and brokers, 
art galleries, contractors, and individuals. My question is, 
were you aware that he had this long history of financial 
irregularity?
    Mr. Goldhammer. Yes. I was aware that he had a lot of 
problems with his personal finances. I didn't know about every 
specific.
    Mr. Greenwood. Let me ask you this, Mr. Goldhammer. I have 
constituents in my district, and we all do, who lost money on 
ImClone, who bought ImClone stock because they believed it was 
a promising company. They lost a lot of money. Now, your job 
obviously as a member of the board of directors, as chairman of 
the board, was to protect them, to protect the value of their 
investment. And I am wondering how--given what you have just 
said, that you were aware that he had this long tortuous 
history of financial mismanagement, how did you see that 
keeping him on in his position as CEO of this company was 
consistent with your duty to protect the investors in the 
company?
    Mr. Goldhammer. Well, first of all, we talk about these 
loans that we gave him. We did not give him loans.
    Mr. Greenwood. That is not what I am talking about in this.
    Mr. Goldhammer. Okay. Waksal, in the last--Sam Waksal, in 
the last, I would say 2 years or so, the last couple years----
    Mr. Greenwood. Turn your microphone toward you.
    Mr. Goldhammer. In the last 1\1/2\, 2 years, that he seemed 
to be out of his financial problems. He wasn't coming to me to 
try to get loans to help him, you know, et cetera, et cetera. 
And I think it is because he was borrowing a lot of money from 
banks. I am guessing that. I don't know that. But I know his--
he had a lot of securities, and I know he would probably have 
no hesitation in borrowing money against it.
    Mr. Greenwood. But did you have moments as a member of this 
board where you thought to yourself, is this guy worthy of our 
trust as the CEO of this company, given his lifestyle? What--
did you have times where you worried about whether or not this 
company and its future and the fate of its--the patients 
waiting for its product, that he was the right guy for this 
job?
    Mr. Goldhammer. Yes, I have.
    Mr. Greenwood. And did you share that? Was that an opinion, 
as far as you know, that was held by other members of the board 
of directors?
    Mr. Goldhammer. I just can't answer that.
     Mr. Greenwood. Have you ever had discussions with any 
other board members where you guys would have a drink and say, 
I don't know about this guy. He is--really seems to be----
    Mr. Goldhammer. Not really.
    Mr. Greenwood. No? Mr. Kopperl, Dr. Mendelsohn, either one 
of you have such concerns?
    Mr. Kopperl. The board actively considered whether to 
continue Dr. Sam Waksal as the CEO, beginning----
    Mr. Greenwood. When was that?
    Mr. Kopperl. Beginning in January.
    Mr. Greenwood. Well, that was after all of this, after the 
insider trading issue and so forth. But I am talking about in 
all of the--the litany goes on and on about financial 
irregularities with Sam Waksal. And my question to you as a 
board member is, as you observed this behavior, this conduct, 
did you have moments as Dr.--as Mr. Goldhammer did, when you 
wondered whether he was--his judgment was sound enough to run 
this company and protect its investors?
    Mr. Kopperl. We--I speak for myself--regarded Sam Waksal as 
the visionary who started the company, and in particular, 
enabled Erbitux or C225 to be brought to ImClone and to develop 
that.
    Mr. Greenwood. So he was the company.
    Mr. Kopperl. So he wasn't--if you mean was he the whole 
company? No, he wasn't. But----
    Mr. Greenwood. Not literally.
    Mr. Kopperl. Of course. But I mean, we figured--we felt 
that he----
    Mr. Greenwood. Was he indispensable?
    Mr. Kopperl. That he was largely indispensable. And that 
also, because there were additional drugs in the pipeline.
    Mr. Greenwood. Let me ask a final question. On September 27 
of this year, an article from the Wall Street Journal entitled 
``Four Prestigious Labs Ousted Waksal for Questionable Work'' 
outlines a number of allegations about improper research 
practices by Sam Waksal at Stanford, the National Cancer 
Institute, Tufts, and Mt. Sinai. And that article is in Tab 58 
if you want to look at it. The question to the board: Were you 
aware of any of these allegations before the article was 
published?
    Mr. Kopperl. I was not, for one.
    Mr. Goldhammer. I was not.
    Mr. Greenwood. Mr. Goldhammer says no. Dr. Mendelsohn?
    Mr. Mendelsohn. A similar story appeared in Vanity Fair 
during the summer, which I read. So that was when I was first 
made aware of it.
    Mr. Greenwood. Did that cause you concern?
    Mr. Mendelsohn. Certainly.
    Mr. Greenwood. Did you act upon those concerns?
    Mr. Mendelsohn. He was no longer running the company.
    Mr. Greenwood. Okay. So it was----
    Mr. Mendelsohn. This past summer.
    Mr. Greenwood. It was this past summer?
    Mr. Mendelsohn. Right.
    Mr. Greenwood. That was the first you learned of any of 
this?
    Mr. Mendelsohn. That is correct.
    Mr. Greenwood. My time has expired. The Chair recognizes 
the gentleman from Florida.
    Mr. Deutsch. Thank you, Mr. Chairman.
    Dr. Mendelsohn, if I can actually follow up on what the 
chairman was just saying. You licensed Erbitux, ImClone, in 
1993 after joining their scientific advisory board in 1992. The 
article that the chairman referred to states again there are at 
least four institutions that Sam Waksal was asked to leave, 
Stanford, National Cancer Institute, Tufts, Mt. Sinai, in each 
case because of suspicion of dishonesty in his research.
    When you licensed your product or your invention or your 
research, did you do any kind of due diligence about Sam Waksal 
before agreeing to place the intensity, the--your idea in his 
hand?
    Mr. Mendelsohn. Congressman, let me explain that the patent 
for the invention was held by the University of California. I 
had absolutely nothing to do with the negotiation of the 
licensing. Dr. Waksal asked me who had the patent, and I told 
him. And I told him, you will have to contact the Patent Office 
at the University of California to negotiate. And the entire 
negotiation was done without my participation.
    Mr. Deutsch. So you are not aware of any kind of due 
diligence that they would have done?
    Mr. Mendelsohn. I am unaware of what they did. That is 
correct.
    Mr. Deutsch. I mean, would it have been appropriate for 
them to have done some type of due diligence?
    Mr. Mendelsohn. They may well have. I just don't know. I 
mean, I was no longer at the University of California at that 
time, and they controlled the patent.
    Mr. Deutsch. I mean, it sounds like this is, to some 
extent, your life's work. I mean, you have obviously a great 
deal of pride and personal time, and besides finances, invested 
in this.
    Mr. Mendelsohn. That is correct.
    Mr. Deutsch. And obviously, I think you are sincere in 
trying to get the product into use in America and throughout 
the world. Obviously, the company that--if it was licensed, it 
would be a key ingredient in that. I mean, were you concerned 
about what type of company you were licensing the product?
    Mr. Mendelsohn. Yes. I was certainly concerned. And, of 
course, the license had been held by a major pharmaceutical 
company that did not move the antibody forward. I had talked 
with a number of other pharmaceutical companies who were not 
interested in moving this idea forward. And, frankly, I was 
delighted when I met Dr. Sam Waksal that he quickly saw that 
this wasn't just immunotherapy with an antibody,but that we 
were attacking an oncogene product called the EGF receptor, 
which is relevant in large numbers of human cancers and might 
be an attractive thing to bring forward.
    So when he contacted the University of California, and I 
knew he was doing that, I was delighted that there was somebody 
who seemed to have the energy and the vision to try to bring 
this forward. It was a small startup company instead of a big 
drug company, but I had found no one else to do it.
    Mr. Deutsch. Dr. Mendelsohn, in the tendered offer by 
Bristol-Myers last year, you made $6.3 million off the sale of 
20 percent of your ImClone holding to Bristol.
    Mr. Mendelsohn. That is correct.
    Mr. Deutsch. That would put your total of ImClone holding 
at about $30 million at the time; is that correct?
    Mr. Mendelsohn. At the value of $70, that is correct. Yes.
    Mr. Deutsch. Why did you not feel that your interest in 
ImClone was not significant enough to inform the M.D. Anderson 
patients enrolled in the Erbitux trials of that potential 
conflict?
    Mr. Mendelsohn. Right. Well, let me say that I am very 
conscious of conflict of interest and potential conflict of 
interest. From the point of view of conflict of interest, I 
have never treated a patient with C225. And I--from the point 
of view of potential conflict of interest, whenever I have 
given scientific talks or written papers or had public 
meetings, I have always stated my holdings in the company and 
my membership on its scientific advisory committee and on its 
board.
    In November last year, before any of this happened, because 
of the concern I had about even a perception of conflict of 
interest, I instructed at M.D. Anderson that on all patient 
consent forms, my name be placed as a member of the board and 
holder of stock options at ImClone. This was done prior to the 
news article that has been referred to in these hearings from 
The Washington Post. And The Washington Post article 
acknowledges that in the article that I did do that.
    I have bent over backwards to support research with any 
product that blocks the EGF receptor. I was contacted by 
AstraZeneka at M.D. Anderson and asked, would you be willing to 
study ERISA. I put them in contact with the same doctors that 
there were studying Erbitux. And in point of fact, there have 
been more studies of patients on ERISA at M.D. Anderson than 
with Erbitux.
    So my goal is to get the patient the opportunity to have 
access to any drug that that particular patient and his or her 
physician feel has the best chance to help them.
    Mr. Deutsch. I guess the focus though, is really on the 
issue of informed or--informed potential conflict, and the fact 
that the M.D. Anderson policy on disclosure would have seemed 
to require that disclosure when it was not.
    Mr. Mendelsohn. No. There were no requirements that the 
president disclose. I added that to our policies voluntarily. 
It is being discussed thoroughly. In the past 2 weeks, the 
American Association of Medical Colleges has put out 
guidelines, which I am reading carefully. But I want to assure 
you that there was no policy at M.D. Anderson about this. When 
I came to M.D. Anderson, I put in a policy that no one who has 
a vested interest in experimental drug can treat a patient with 
that drug. That was novel then. This was something that I did 
on my own initiative at M.D. Anderson.
    Mr. Deutsch. So I guess the bottom line of your testimony 
to this point is that you felt there was no conflict in terms 
of the disclosure requirement on any outside standards?
    Mr. Mendelsohn. I believed that. But I also was concerned 
enough about the potential perception of conflict of interest 
that I added that. I regret that I didn't do that at the very 
beginning when all of this started. But I added that to our 
procedures at M.D. Anderson without prompting and of my own 
volition.
    Mr. Deutsch. One of the continuing trends or questions that 
we have asked and that has been going on is really the 
independence and diligence of outside directors which 
shareholders must rely upon to keep management honest and 
protect the interest of important corporate decisions.
    You serve or served on both the ImClone board and Enron, 
obviously two firms whose shareholders have taken a great deal 
of financial adverse effect, while very well compensated 
managers have been charged with crimes involving their 
fiduciary duty.
    Would you tell us that you feel whether you did your job 
successfully, or did the management of these firms--what 
happened? Did the system fail?
    Mr. Mendelsohn. We are here, I believe, to talk about 
ImClone, and I believe that I have fulfilled my duties and that 
management has fulfilled its duties. Management has admitted in 
front of this subcommittee that there were aspects of the way 
that the registration clinical trial was carried out, which 
could have been done better. And we are hoping to have this 
ratified by the FDA after we hear from them the final details. 
But the answer to your question is, yes, I believe I have 
fulfilled all my duties.
    Mr. Greenwood. Let me--while we await the return of other 
members, let me ask question of you, Dr. Waksal. I made 
reference to this article that was in the Wall Street Journal 
just a couple of weeks ago about, entitled ``Four Prestigious 
Labs Ousted Waksal for Questionable Work.''
    Were you aware of these allegations?
    Mr. Waksal. I was not.
    Mr. Greenwood. Okay. When you were a resident at Tufts New 
England Medical Center, did the chairman of the Department of 
Medicine, Sheldon Wolfe, complain to you about Sam Waksal, who 
was not a medical doctor, covering for you by seeing your 
patients at Tufts New England Medical Center?
    Mr. Waksal. No, he did not.
    Mr. Greenwood. You were not familiar with that allegation 
or concern at all?
    Mr. Waksal. Well, I know that I was not there at the time. 
I do know that Dr. Sam Waksal, not masquerading as Harland 
Waksal, did speak to a patient that had been under my care.
    Mr. Greenwood. Okay. Did ImClone have a succession plan for 
Sam Waksal? Address this to the board of directors.
    Mr. Goldhammer. We did not have a succession plan for Dr. 
Sam Waksal. Although, I personally thought that as the company 
got larger, that Sam would be inappropriate to have a large 
company because it just wasn't his style. He was wonderful with 
the young company, building a young company. The reason I had 
never really even thought serious about firing him along the 
way, A, because we never lost any money by any loans that we 
lent him or anything like that. He always paid it back. But he 
was the spirit for our young research group. And it is so 
important with a young company, you have just got to let them 
breathe. And he would do that and he would encourage them.
    Mr. Greenwood. Would you ever consider him in the future as 
having a role at ImClone as an employee, as a director, as an 
officer, as a consultant, knowing what you know?
    Mr. Goldhammer. I would consider having him a consulting 
something if he so desired. I doubt if he would do it.
    Mr. Greenwood. Okay.
    Mr. Goldhammer. He would be excellent.
    Mr. Greenwood. Even if he is convicted?
    Mr. Goldhammer. Oh, no, no, no. But he would be an 
excellent consultant, is what I meant.
    Mr. Greenwood. Would you, Mr. Goldhammer, describe the 
membership and purpose of the executive committee at ImClone.
    Mr. Goldhammer. Well, the membership today at ImClone is, 
the executive committee has three outside board members and 
Harlan.
    Mr. Greenwood. What was it last year?
    Mr. Goldhammer. Before we changed it, it was myself and 
Harlan. And while Sam was here, he was on it, although we 
didn't have any meetings.
    Mr. Greenwood. According to the bylaws of ImClone, which 
are in Tab 19 if you need to refer to them, actions by the 
executive committee must be ratified by the full board at the 
next meeting; is that right?
    Mr. Goldhammer. Yes.
    Mr. Greenwood. Were all actions by the executive committee 
agreed to among yourselves, Sam and Harlan Waksal put to the 
board for approval?
    Mr. Goldhammer. I believe so.
    Mr. Greenwood. You have acted as a director on the boards 
of Kidder, Peabody and Company, the Boston Stock Exchange, 
Eastern Line Corporation, and Community Connected, 
Incorporated. Was it ever the practice of the executive 
committees of those firms to act without eventual reporting and 
approval by the full boards?
    Mr. Goldhammer. No.
    Mr. Greenwood. Okay.
    Mr. Goldhammer. Some of the young ones don't really have an 
executive committee.
    Mr. Greenwood. But where there are executive committees, 
they always reported to the boards.
    And let me ask Mr. Kopperl and Mr. Mendelsohn, as members 
of the board, were you given minutes and documents of all 
meetings or decisions by the executive committee?
    Mr. Kopperl. I don't believe that we--I do not believe that 
we were given minutes of the executive committee meetings.
    Mr. Greenwood. Okay. Did you and the board ratify all 
actions of the executive committee?
    Mr. Kopperl. I do not recall specific instances, Mr. 
Greenwood. However----
    Mr. Greenwood. Let me give you some specific instances. In 
January 1998, a loan in the form of a promissory note to Sam 
Waksal in the amount of 100--nearly $130,000. Did you approve 
that?
    Mr. Kopperl. I do not recall.
    Mr. Greenwood. Okay. That is at Tab 4. In October 1998, a 
loan in the form of a promissory note to Sam Waksal in the 
amount of $100,000. That is in Tab 6.
    Mr. Kopperl. I do not recall whether the board ratified 
that. We would have to look at the minutes, obviously, of the 
board.
    Mr. Greenwood. Okay. And February 2001, a loan in the form 
of a promissory note to Sam Waksal in the amount of $282,200.
    Mr. Kopperl. That was indeed ratified by the board.
    Mr. Greenwood. That one was. Well, you are one for--you can 
remember one for four. In August 2001, an extension of the 
February loan of $282,200 to Sam Waksal for another 4 months. 
Were you aware of that?
    Mr. Kopperl. I am certainly aware of that. And indeed, the 
audit committee on October 10, 2001 took up the issue of the 
$282,200 loan and questioned the documentation of this loan. 
However, I would add that the loan was repaid in full with 
interest, I believe, on November--in mid November 2001.
    Mr. Greenwood. Okay. Dr. Mendelsohn, have you ever attended 
one of ImClone's EGFR, epidermal growth factory receptor 
summits?
    Mr. Mendelsohn. Yes.
    Mr. Greenwood. Where and when did you attend that?
    Mr. Mendelsohn. There were a number of them. Yes, I have 
attended a number of them, probably most that they had. So the 
answer would be yes. But I don't remember the locations.
    Mr. Greenwood. How about Cancun, Mexico in the winter of 
2000?
    Mr. Mendelsohn. Yes.
    Mr. Greenwood. Who paid for this program?
    Mr. Mendelsohn. ImClone.
    Mr. Greenwood. Mr. Landes, did you ever perform legal work 
for another company while at ImClone?
    Mr. Landes. There were such occasions, yes.
    Mr. Greenwood. What was the nature of this work?
    Mr. Landes. There was a company called Tribeca that--for 
which a license was given from the University of Chicago. I was 
involved in helping that company obtain that license. Very 
little time was spent, but it was within my expertise. And that 
was a company that I expected, and still may be the case, might 
have some scientific synergy between its work and that of 
ImClone.
    Mr. Greenwood. And who paid your fees for that service, 
that work?
    Mr. Landes. As I recall, I received--I did receive a small 
fee for that I believe from the Tribeca company. But again, 
that--I don't think that fee necessarily represented the 
compensation entirely for the work. Again, this was something 
that I believed would have potential synergy between----
    Mr. Greenwood. Is it fair to say that ImClone paid you to 
do that work?
    Mr. Landes. Mr. Chairman, I think it is possible that one 
could take that view, at least a portion of that. Yes.
    Mr. Greenwood. And Sam Waksal, that was Sam Waksal's 
company; correct?
    Mr. Landes. I don't really know the nature of the ownership 
of Tribeca. I knew that Sam was involved. And Sam had also 
again explained to me his concept, which I thought and still 
think was a valid one, that there would be synergies between a 
company like that, which was working in the area of herpes 
simplex infectious diseases and our work in cancer.
    Mr. Greenwood. Mr. Landes, who at ImClone cleared your 
carry forward sales transaction of $2.5 million worth of 
ImClone stock on December 6 of last year?
    Mr. Landes. That was cleared by Cathy Vaczy.
    Mr. Greenwood. Was she your subordinate?
    Mr. Landes. She worked in my department and I supervised 
the department. Yes.
    Mr. Greenwood. Did you see any problem with your support 
and it being able to clear your trade?
    Mr. Landes. I did not.
    Mr. Greenwood. If you made such a trade now, who would 
clear the trade?
    Mr. Landes. Now, it would be cleared by Daniel S. Lynch, 
who is the chief financial officer of ImClone.
    Mr. Greenwood. And why was the policy changed in that 
regard? Maybe I should ask Mr. Kopperl that question.
    Mr. Kopperl. I believe that it would be Mr. Saffron, who 
would approve or disapprove any such.
    Mr. Greenwood. Is he the CFO?
    Mr. Kopperl. No. He is senior vice president and general 
counsel.
    Mr. Greenwood. So why did you make that change?
    Mr. Kopperl. We made the change because in--I forget, was 
it February or March of this year--we determined that the 
insider trading procedures, which were in place and which 
everyone is aware of, needed to be strengthened. And this--
perhaps it was even later than that, Mr. Greenwood, because it 
may have been shortly before the Oxley-Sarbanes bill or law, 
that we determined that there would be a new, more rigid 
procedure followed.
    Mr. Greenwood. Ms. Vaczy, at the time, did you see any 
impropriety with you approving the transaction for your 
superior?
    Ms. Vaczy. I did not.
    Mr. Greenwood. Okay. And what is your understanding right 
now as to who would clear such a transaction under the current 
regime?
    Ms. Vaczy. Clear transaction by Mr. Landes?
    Mr. Greenwood. Right.
    Ms. Vaczy. It would be done by Mr. Lynch, who is our CFO. 
The structure under the revised policy are members of the legal 
department are approved by the CFO.
    Mr. Greenwood. So we just had a different answer from Mr. 
Kopperl. So----
    Mr. Kopperl. I defer to them, as to the legal department, 
sir.
    Mr. Greenwood. Okay.
    Dr. Waksal, who was Sonya Benahutta?
    Mr. Waksal. I believe she is a friend of Sam Waksal's.
    Mr. Greenwood. Okay. If you turn to Tab 60, according to a 
September 30, 2002, letter from Omelvani and Meyers, Sonya 
Benahutta was not an employee at ImClone, and yet ImClone has 
produced records of a cell phone paid by ImClone, but used by 
Ms. Benahutta in addition to e-mails have been produced showing 
Ms. Benahutta as being on the ImClone e-mail system. Can you 
explain why a non-employee at ImClone would have use of an 
ImClone cell phone and have access to internal ImClone e-mail?
    Mr. Waksal. I know nothing about this.
    Mr. Greenwood. Do you know--so you don't even know if it is 
still the case that that--that these things are happening?
    Mr. Waksal. I do know that it came to my attention that she 
had been on ImClone's e-mail system. It was brought to my 
attention by the systems people. And my understanding is that 
she was----
    Mr. Greenwood. When was that?
    Mr. Waksal. That was about I guess 3 or 4 weeks ago. And 
from what I understand, she is--and I can't--I really would 
have to get back with you, but I do not believe she is on the 
system. When it was brought to my attention, I expressed----
    Mr. Greenwood. Did she receive any other benefits or 
compensation from the company, that you were aware of?
    Mr. Waksal. She was not involved with ImClone Systems.
    Mr. Greenwood. But that was not exactly my question.
    Mr. Waksal. Not to my knowledge, sir.
    Mr. Greenwood. Thank you.
    The gentlelady from Colorado is recognized for 10 minutes.
    Ms. DeGette. Thank you, Mr. Chairman.
    Ms. Vaczy, when did ImClone begin to be aware that the FDA 
may--that there may have been some issues with the FDA removing 
Erbitux from consideration?
    Ms. Vaczy. As I said earlier, and I believe we discussed in 
the last hearing, it was December 12, Dr. Lee had a 
conversation with the FDA where minutes of that conversation 
reflect her concern regarding their change of tone.
    Ms. DeGette. And when did you become aware that the--was it 
around December 12 that you became aware of that issue?
    Ms. Vaczy. I attended a meeting on December 12, and I had 
heard about the meeting the evening of December 11 that we were 
going to discuss after the company's--the management operations 
meeting an issue relating to the BLA.
    Ms. DeGette. Now, at that point--do you know--do you know, 
were others at ImClone aware of FDA concerns before December 
12? Did anybody tell you about that?
    Ms. Vaczy. December 12 was the first contact that I am 
reporting, and it is not I who have the direct contact with the 
FDA. But per Dr. Lee, who was the main communicator, the 
conversation she had on December 12 was the first time she was 
concerned that there might be issues with the acceptance of the 
filing.
    Ms. DeGette. And you imposed a blackout period for the sale 
of ImClone stock by insiders on December 21 of that year; 
correct?
    Ms. Vaczy. Well, it was a blackout companywide. On the 18th 
of December, we started precluding members of management 
trading. But we also, during that interim, December 12 to 18, 
we relied on the fact that the select members of management 
that had knowledge could not proceed with any transaction 
without first being----
    Ms. DeGette. But there was no--do you have a written policy 
as of the December 18 of the blackout policy? Because just now 
today is the first I have ever heard of it as of that date.
    Ms. Vaczy. There was an e-mail on December 18 to members of 
management.
    Ms. DeGette. From you?
    Ms. Vaczy. Yes.
    Ms. DeGette. And what did it say?
    Ms. Vaczy. I think I have seen it----
    Ms. DeGette. Do you have a copy of it?
    Ms. Vaczy. I may have seen it in your exhibits, I believe, 
if I am not mistaken. But I don't recall.
    Ms. DeGette. Mr. Chairman, if we can ask permission for Ms. 
Vaczy to find that memo, I think that would be very helpful.
    Mr. Greenwood. Perhaps have you found it? Tab 21. Try Tab 
21.
    Ms. Vaczy. I may be mistaken.
    Ms. DeGette. Yeah. Because we don't have----
    Ms. Vaczy. But I can nonetheless speak to it.
    Okay. I am advised I was shown it during my interview where 
counsel is reminding me, and we are obtaining it now.
    Ms. DeGette. Okay. We have not been produced any evidence 
of a written blackout policy before December 21. So, Mr. 
Chairman, if that is the case, I would ask this witness to 
produce that policy for our committee.
    Ms. Vaczy. It has been suggested that I read the Bates 
ranges of two documents in front of me. HCEC-30479, and 78. 
Well, no, I am sorry, not 78. 79--and HCEC-30496. And I think 
maybe I am perhaps confusing you. On the 18th, an e-mail was 
sent to members of management reminding them that they were 
required to get preapproval of any transaction from the legal 
department under the insider trading policy.
    Ms. DeGette. So, in fact, you did not impose a blackout 
period on the 18th; you imposed it on the 21st?
    Ms. Vaczy. Well, no. If I can----
    Ms. DeGette. Well, really, that is true. On the 18th, you 
said if you want to sell your stock, you have got to get 
preapproval.
    Ms. Vaczy. Yes. But then we had, I think, perhaps three 
members of management who contacted us and we said no.
    Ms. DeGette. Oh. Who contacted you? And during what time 
period?
    Ms. Vaczy. There were members of management on the 18th who 
said would we be permitted to sell stock.
    Ms. DeGette. Who was that?
    Ms. Vaczy. Let us see. I recall one gentleman, Gary Palter, 
who is a member of our management.
    Ms. DeGette. Was he aware of the FDA concerns?
    Ms. Vaczy. He was not----
    Ms. DeGette. As of the 18th?
    Ms. Vaczy. To my knowledge, no, he was not in the group of 
members of management.
    Ms. DeGette. He just happened to ask you could he sell his 
stock?
    Ms. Vaczy. We would ask have to ask Gary, but I believe so.
    Ms. DeGette. Well, I am asking you what he asked you.
    Ms. Vaczy. He said would--and it is not in this e-mail, and 
I am just trying to recall.
    Ms. DeGette. Sometimes people have independent 
recollections, too, from e-mails. So that is what I am asking 
for.
    Ms. Vaczy. Okay. After sending the e-mail on the 18th, 
reminding management----
    Ms. DeGette. That they had to check with you?
    Ms. Vaczy. That is right.
    Ms. DeGette. Okay. Then he called you.
    Ms. Vaczy. Yes.
    Ms. DeGette. Who else called you?
    Ms. Vaczy. I don't--I don't recall.
    Ms. DeGette. You said three members.
    Ms. Vaczy. Yeah. I remember there were three people, but I 
don't remember necessarily who they were.
    Ms. DeGette. Okay. If you could look at Tab 19 in your 
notebook. That is the ImClone Systems, Incorporated Board of 
Directors Handbook. Are you familiar with that----
    Ms. Vaczy. I am.
    Ms. DeGette. [continuing] document?
    Ms. Vaczy. Yes, I am.
    Ms. DeGette. Okay. If you could look at page 21 of that 
document.
    Ms. Vaczy. Yes.
    Ms. DeGette. Okay. And D says: ``there will be periods of 
time when it is clear that material non-public information is 
known by several employees, officers, and directors of the 
company.'' And then it goes on to say there would be a blackout 
period when that happens. Are you familiar with that policy?
    Ms. Vaczy. I am.
    Ms. DeGette. Now, wouldn't it be the case that a blackout 
period should have been imposed from December 12 on, since at 
that time there was knowledge of material non-public 
information?
    Ms. Vaczy. Congressman, we looked at this very carefully 
during this entire period. And our feeling was, no, not until 
the communication on December 20 was it appropriate to put in 
place a companywide blackout.
    Ms. DeGette. Well, then why did you, on the 18th, tell 
people they couldn't sell their stock?
    Ms. Vaczy. It wasn't people in general. It was members of 
management.
    Ms. DeGette. Okay. Well, why did you tell members of 
management that if you feel you didn't have to impose the 
blackout period until the 20th of December?
    Ms. Vaczy. It was our feeling that management, being 
members of management, they are held to a higher standard. And 
we didn't feel it was appropriate at that time that management 
be trading.
    Ms. DeGette. But see, that is not what the company policy 
says. Is it? I mean, the company policy says whenever there is 
material non-public information, then everybody is in the 
blackout period.
    Ms. Vaczy. We didn't consider it to be material non-public 
information.
    Ms. DeGette. If you take a look--yeah. Who is ``we''? Who 
is ``we didn't consider it to be material''?
    Ms. Vaczy. Management of the company. We----
    Ms. DeGette. Who in management?
    Ms. Vaczy. We--it would be our management group, our COO or 
CEO or CFO.
    Ms. DeGette. Who did you discuss the decision with to 
impose--to send out the memo on the 18th and then to impose the 
blackout period?
    Ms. Vaczy. On each--in each of these situations, we were 
discussing this all along during this period with our outside 
counsel. And I recall, it was Harlan Waksal and Dan Lynch who--
and I believe Sam Waksal was involved in the 18th, and then on 
the 20th it was Dan lynch and Harlan Waksal who----
    Ms. DeGette. Who from your outside counsel did you discuss 
this with?
    Ms. Vaczy. We were discussing with our FDA counsel and with 
our securities counsel.
    Ms. DeGette. All right. If you will take a look at Exhibit 
1 in the notebook, ImClone officer stock sales. It looks to me 
like there were nine sales of stock between--eight sales of 
stock between the December 12 and December 21.
    Ms. Vaczy. Are you looking on the third page?
    Ms. DeGette. Well, I am going to go back to something else. 
I have been given the wrong number.
    I just want to ask you a question, Dr. Mendelsohn. You had 
told Mr. Deutsch that you recommended implementing a conflict 
of interest policy at M.D. Anderson. And I guess I just wanted 
to know when you recommended that.
    Mr. Mendelsohn. There have been a number of stages. Right 
after I came there, I recommended a new policy that anyone----
    Ms. DeGette. When was that?
    Mr. Mendelsohn. 1996.
    Ms. DeGette. Okay.
    Mr. Mendelsohn. So I think it went into effect in 1997, 
that anyone who had a potential financial interest in an 
investigational drug could not administrator that to a patient 
and could not be the principal investigator in a trial of it.
    Ms. DeGette. And I think that is great. But I also, see--
you probably know this. I am trying to do legislation. I have 
introduced legislation for even broader disclosure than that, 
because it seems to me someone like you who is a very, you 
know, fine scientist and really trying to do this, but anyone 
involved with the research institution that is doing clinical 
trials, patients should have informed consent of that conflict.
    Mr. Mendelsohn. Right. We--I agree with that statement, and 
in November 2001, prior to the article in the Washington Post 
and prior to the recent reports that have come out with 
recommendations, I instituted a policy at M.D. Anderson that my 
name would go on all clinical trials involving Erbitux.
    Ms. DeGette. And, in fact, in January 2001, prior to that, 
the Office for Human Research Protections recommended that you 
implement such a policy, correct?
    Mr. Mendelsohn. The Office of Human Research Protection--
the director of that office actually visited us at M.D. 
Anderson, and we discussed these issues.
    Ms. DeGette. Right.
    Mr. Mendelsohn. At that time it was recommended that we 
consider this kind of thing.
    Ms. DeGette. And that was after the Erbitux study was 
completed, right?
    Mr. Mendelsohn. That was after most of it had been 
completed.
    Which study are you referring to? Because the Erbitux study 
that was the study--that was the registration study, M.D. 
Anderson did not participate. We didn't participate in that 
study at all.
    Ms. DeGette. Right. I just have one last question for you.
    At the last hearing we--and I know some of the other 
members have touched on this a little bit, but at the last 
hearing we talked about the thousands of colorectal cancer 
patients who really had hope in Erbitux, and I guess I would 
just ask you if you could very briefly tell us, now that the 
FDA has taken the drug off of the fast-track approval list and 
all of these questions have been raised not just about the 
corporate improprieties, but also the research protocols and 
the clinical trials, my question to you is, what is ImClone 
doing to try to get that drug back on track with the research?
    Are you doing new trials, and what is your timeframe for 
that?
    Mr. Mendelsohn. I can give you some answers to that, and 
maybe Dr. Waksal can add.
    First of all, I believe we are still on the fast-track 
list, but they have not accepted our BLA, obviously. We are 
meeting with the FDA to try to find out exactly the criteria we 
should use, because we want to look at the data on that trial 
again. We believe that many of the issues that have been raised 
in the press are not relevant to that trial.
    Excellent investigators from many institutions stand by 
these data, and we want to have it reviewed in the way the FDA 
wants it, so it is reported and documented properly. Then 
ImClone is planning with its partner, Bristol, a large number 
of additional trials that are answering all the questions that 
have been raised, I believe. So we are very----
    Ms. DeGette. Quickly, what is your timeframe for all of 
this?
    Mr. Mendelsohn. It depends which trials the FDA accepts. It 
could be--it could be a year. It could be 2 or 3.
    Ms. DeGette. Thank you. Thank you, Mr. Chairman.
    Mr. Greenwood. The time of the gentlelady has expired.
    Just a couple questions for myself and then I am going to 
turn it over to Dr. Fletcher to close the hearing.
    Dr. Waksal, at Tab 24 you will see a letter dated September 
13, 2002, from O'Melveny & Myers to this committee, regarding 
the purchase of shredders in January 2002, an e-mail of January 
7 between Sam's assistant and your assistant and the purchase 
order, which you signed.
    The letter says that you played no role in the decision to 
purchase the shredders other than signing a routine purchase 
order, the contents of which you did not review.
    Is it your practice to sign purchase orders without 
reviewing their contents?
    Mr. Waksal. It is my practice to review contents of 
purchase orders unless those purchase orders don't strike me 
and don't hit my attention that strongly. This was a purchase 
order of a relatively low amount of money, but most 
importantly, aside from the fact that they are shredders, as I 
have sent into this committee and certified, I did not at any 
time destroy any documents, nor did I instruct anybody to 
destroy documents, nor am I aware of anyone in the company 
destroying documents that are subject to any investigations 
that are taking place, other than what has been attributed to 
Dr. Sam Waksal.
    Mr. Greenwood. When you said you review purchase orders, 
and you sometimes, when something strikes you as seeming--did 
you know that you signed an order to purchase shredders?
    Mr. Waksal. As I have said, and I am embarrassed to say 
this, I don't remember this purchase order, and I am very clear 
on how that appears.
    The purchase of shredders gives an impression that during 
this period of time that there may be some motivation to do so.
    I have to say, there were shredders at the company and in 
all of our facilities already only 100 yards away from my 
office, and as I said, no shredder was used by me or anybody 
under my direction or anyone in the company to destroy or 
affect any documents that were relevant to any investigation.
    Mr. Greenwood. According to Sam Waksal's message log, you 
received a phone call from an SEC investigator on January 3, 
2002. When did you first become aware that Sam had been called 
by the SEC?
    Mr. Waksal. I wasn't aware of that call, but I did know 
sometime around the 8th, around January 8, that indeed the SEC 
was making inquiries.
    Mr. Greenwood. Do you know now what inspired the 
preparation of a purchase order for shredders? Did you look 
back and say, whose idea was it to get shredders, and why, 
since you didn't see them--you say you didn't see that at the 
time?
    Mr. Waksal. Of course we have gone ahead and investigated 
this, and that is right--part of the documentation that was 
sent over to your office.
    Indeed, what was explained to me is that the administrative 
assistants were--felt that it would be good for them to have a 
shredder in a conference room close by their areas of work. It 
was in conjunction with routine practice, and it certainly 
wasn't anything extraordinary to them. At the time, the 
investigations were just early inquiries, and I don't believe 
there was any motive other than what, in their minds, was 
normal work activity.
    Mr. Greenwood. Just bear with us for a moment.
    Mr. Fletcher [presiding]. Again, I want to thank the 
chairman for conducting this hearing. I have got a few 
questions I would like to do in closing out.
    Let me ask, Dr. Mendelsohn, what is the incidence of colon 
cancer in the country at this time, or what do you expect it to 
be in the future?
    Mr. Mendelsohn. As I remember, well over 100,000 cases a 
year, and I expect it to go down, because if Americans all 
underwent colonoscopy, as recommended, the death rate would go 
down substantially; the incidence of disease would probably go 
up, we would pick it up early, but the death rate would go 
down.
    Mr. Fletcher. There are some that estimate that, you know, 
the incidence may double over the next 50 years. I am not sure 
how they----
    Mr. Mendelsohn. That is correct. It is very interesting. It 
is a demography issue. We are an aging population, so that even 
though the risk of dying from many cancers has gone down 
because they are just diagnosed earlier and the therapy is 
better, because there are so many more older people, the 
incidence of the disease is going up, and that will continue 
until 2025, as I understand it, when the baby boom gets 
finished.
    Mr. Fletcher. Probably most families, directly or 
indirectly, have been affected by colon cancer, and let me ask 
you, there's a reported 22 percent response, and these are the 
most complicated recalcitrant cancers that were tested. So 
would you say that the response rate to other cancers that were 
not so recalcitrant might be higher, or would you estimate 
that? Is there hope that that might be the case?
    Mr. Mendelsohn. There certainly is hope, and there's a hope 
that if we treated the colon cancer patients earlier with 
chemotherapy, not with a drug they had already shown resistance 
to, that we would get a better response, but this will all have 
to be tested in clinical trials.
    Mr. Fletcher. Let me ask you--and maybe I will ask Mr. 
Goldhammer this.
    What were y'all's calculations when you based the return on 
Erbitux of the projected rate of income, if you will, with the 
treatment of colon cancer, considering that the incidence, or 
rate, is going up because of the demographic changes that Dr. 
Mendelsohn described, as well as the possibility of using this 
not only in the recalcitrant cases, but earlier in the 
diagnosis of colon cancer?
    Did you y'all have numbers that you projected on the sales?
    Mr. Goldhammer. Yes, we did.
    Mr. Fletcher. Could you share those with us? What were your 
projected sales over the next 5 or 10 years?
    Mr. Goldhammer. I will do it roughly, but I might be able 
to send it to your office.
    Mr. Fletcher. Well, we would appreciate it if you would 
submit those, but can you give us a rough estimate?
    Mr. Goldhammer. Yeah. I think that we thought that year 1, 
for instance, we might have in a launch--$60 million or so in 
sales. We thought the next year would be $100 million and--
Harlan, help me a little bit.
    Mr. Waksal. If I can, our estimates ranged from $300 
million to $1 billion over the course of about a 5-year period 
of time.
    Mr. Fletcher. So tremendous potential financially, and 
obviously there has been a lot of money that was invested in 
developing the drug; and Dr. Mendelsohn, I know you were very 
early in developing C225.
    Let me get back to the science. Let me say from my 
standpoint, you know, the Justice Department can take care of 
some of the other things. I am concerned of the fact that we 
have a drug, I think, that is still very promising. There are 
people out there not getting that because of some mistakes 
made, or at least it appears that way to me.
    Here in Tab 35, dated March 25, 2002, the FDA in their 
presentation in the first--it starts, ``The following captures 
the discussion that occurred during the FDA's presentation.'' 
This was a meeting regarding ImClone, regarding the study--
refusal-to-file letter issued to their BLA for Erbitux.
    It says, ``The FDA clearly stated to ImClone that the 
reanalysis of the data from this study''--and it is CPO 29923--
``will not be sufficient to address the deficiencies in this 
application. This conclusion is based upon a determination that 
there are significant design and conduct flaws in the study 
that cannot be fully addressed by sending missing data. Data 
from an additional trial or trials that are adequate and well 
controlled are necessary.''
    And yet, in my last line of questioning, Dr. Waksal, you 
seemed to insist that it was sound science, that the study was 
good.
    Now, let me ask you. I only see three options here: Either 
you all or some of you there were asleep at the wheel and not 
realizing what was going on; two, you don't--either that or you 
don't recognize what sound science is; or three, the FDA 
doesn't recognize what sound science is. Because we have quite 
a contradiction here.
    I wonder if you could help me out. Which one of those is 
the situation in your conclusion?
    Mr. Waksal. I think it is D, none of the above.
    Mr. Fletcher. I thought it might be that.
    Mr. Waksal. Look, there is no question, as I reported at 
the last session--the last time I was here, 4 months ago; and 
hopefully I won't be back in another 4 months to talk about 
this.
    However, I think what is really important, as I described, 
the study that was performed had deficiencies, deficiencies 
that we are trying to fix. However, at this stage we have not 
said that once we fix the deficiencies of that trial, that that 
trial will now be sufficient to move forward.
    The world has changed. There have been a number of issues 
that have come up that we need to attend to, and we stated at 
the last meeting, at the last congressional hearing that I 
attended, that ImClone would be looking to use a clinical 
development program that is a multifaceted program, using 
studies that are being done in Europe as a potential for 
working with our trial for approval and other trials in the 
U.S., as well. So we are not relying on that study at this 
stage.
    Mr. Fletcher. Well, what I think is clear from that--and I 
think the acknowledgment there is that you had a study whose 
protocol was somewhat flawed, even though you said it was 
designed by some of the leading experts in the field. You had 
the conduct of the study flawed, even in some of the leading 
institutions. You mentioned that you are a small company and 
probably oversight was not there, and yet you had the 
potential, it looked like, of making $300 million to $1 
billion.
    You know, one of the things we learn in medicine is that 
the most dangerous people are the people that don't know what 
they don't know.
    Mr. Waksal. That is very true.
    Mr. Fletcher. And it disturbs me from that standpoint.
    Let me get back to Dr. Sparling's letter. He said in his 
last paragraph of his letter dated January 15, ``I know you are 
doing everything possible to get the drug filed and approved, 
and we are hoping this can be done as soon as possible for the 
sake of patients who need the drug.''
    And I commend Dr. Sparling, because I think his focus was 
appropriate.
    The last sentence of his first paragraph in a letter dated 
February 21, it says, ``I just do not believe I can be useful 
as a member of the SAB, the scientific advisory board, and the 
long-term inactivity of the SAB suggests the SAB is not useful 
to the company.''
    I will tell you, it has the appearance, the SAB, at least 
at this point--maybe early on, as Dr. Mendelsohn mentioned it 
was active, but--of being somewhat window dressing; and I don't 
know if there was a tremendous enthusiasm.
    But I want to get to one last question, and this----
    Mr. Waksal. If you don't mind, sir, if I can just address 
that. I think your point is a very important one.
    Did the company use appropriate experts to help us and help 
guide us as we went forward? And I have to say, we did indeed. 
Members of the scientific advisory board were helping us in 
science, in basic research. The work we are doing clinically 
was done with oncologists, experts in the field, who were 
helping us as we went forward, and they had very different, 
distinct roles.
    Mr. Fletcher. And I understand that. I have been involved 
in some clinical studies and know that following the protocol 
is critical. Otherwise everything else doesn't count, because 
it has no credibility.
    Dr. Waksal, let me ask you a question, and this is a 
different one. I want to ask you about a particular disturbing 
story that appeared in the press, which does make us question 
your motives in the development of Erbitux.
    At Tab 49 you might see--you will see an article from the 
Atlantic Constitution entitled ``Patients, a Low Priority for 
Drug Industry Leaders.'' It tells the story of Ruth Ann 
Santino, 51, a mother of two teenage sons and a woman fighting 
for her life against colorectal cancer, the target of ImClone's 
drug Erbitux.
    At the advice of her doctor, she vigorously pursued Erbitux 
to the exclusion of other possible therapies on a 
compassionate-use basis. The CBS program 60 Minutes produced a 
piece on the availability of Erbitux, and Mrs. Santino was 
interviewed for the story. The allegation of the piece, as we 
understand it, was that the distribution of the drug to cancer 
patients was arbitrary and unfair.
    I don't want to make any comment about the veracity of the 
allegations in the 60 Minute piece, but I do want to ask you 
about what you, Harlan Waksal, did in response to this program. 
Mrs. Santino's husband, Fred Santino, says that after the 60 
Minute show aired and 2 days before Mrs. Santino died, you 
called the Santino home, raising hopes that ImClone might throw 
a lifeline to this woman and family in distress, but instead 
took to task Mr. Santino, whose wife was dying next to him, for 
being unfair to ImClone on 60 Minutes.
    And to add insult to an unspeakable injury, you did not 
even ask about Mrs. Santino or offer her the use of the drug.
    First, let me ask you, did you make that phone call?
    Mr. Waksal. Yes, I did, but the call was not made to take 
issue with Mr. Santino. In fact, my call was made in a response 
to the fact that I wanted to correct some points on record. I 
wanted him to know that, indeed, we were doing nothing to 
single out his family, his wife or patients who could not get 
access to our drug, but that there was not drug available under 
a compassionate-use program.
    I didn't offer out hope. I offered what I believed was 
compassion and understanding that he was upset with the 
company, but I wanted him to know that the company was doing 
what we felt was right to get this drug approved and out there 
to patients like his wife.
    Mr. Fletcher. Did you offer the drug Erbitux to her? Did 
you have within the protocol of compassionate use, the power to 
offer that drug Erbitux?
    Mr. Waksal. One, I did not offer the drug.
    And second, the compassionate-use program had been stopped 
in January of that year. There was no compassionate-use 
program. There was no drug being used in compassionate-use 
studies other than patients already enrolled.
    Mr. Fletcher. Thank you. I think that concludes my 
questioning.
    I appreciate all of you being here, and we will adjourn the 
meeting.
    [Whereupon, at 4:16 p.m., the subcommittee was adjourned.]
    [Additional material submitted for the record follows:]



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