[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]



           NIH: MOVING RESEARCH FROM THE BENCH TO THE BEDSIDE

=======================================================================

                                HEARING

                               before the

                         SUBCOMMITTEE ON HEALTH

                                 of the

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                             JULY 10, 2003

                               __________

                           Serial No. 108-38

                               __________

       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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                            WASHINGTON : 2003
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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                      Ranking Member
FRED UPTON, Michigan                 HENRY A. WAXMAN, California
CLIFF STEARNS, Florida               EDWARD J. MARKEY, Massachusetts
PAUL E. GILLMOR, Ohio                RALPH M. HALL, Texas
JAMES C. GREENWOOD, Pennsylvania     RICK BOUCHER, Virginia
CHRISTOPHER COX, California          EDOLPHUS TOWNS, New York
NATHAN DEAL, Georgia                 FRANK PALLONE, Jr., New Jersey
RICHARD BURR, North Carolina         SHERROD BROWN, Ohio
  Vice Chairman                      BART GORDON, Tennessee
ED WHITFIELD, Kentucky               PETER DEUTSCH, Florida
CHARLIE NORWOOD, Georgia             BOBBY L. RUSH, Illinois
BARBARA CUBIN, Wyoming               ANNA G. ESHOO, California
JOHN SHIMKUS, Illinois               BART STUPAK, Michigan
HEATHER WILSON, New Mexico           ELIOT L. ENGEL, New York
JOHN B. SHADEGG, Arizona             ALBERT R. WYNN, Maryland
CHARLES W. ``CHIP'' PICKERING,       GENE GREEN, Texas
Mississippi                          KAREN McCARTHY, Missouri
VITO FOSSELLA, New York              TED STRICKLAND, Ohio
ROY BLUNT, Missouri                  DIANA DeGETTE, Colorado
STEVE BUYER, Indiana                 LOIS CAPPS, California
GEORGE RADANOVICH, California        MICHAEL F. DOYLE, Pennsylvania
CHARLES F. BASS, New Hampshire       CHRISTOPHER JOHN, Louisiana
JOSEPH R. PITTS, Pennsylvania        JIM DAVIS, Florida
MARY BONO, California                THOMAS H. ALLEN, Maine
GREG WALDEN, Oregon                  JANICE D. SCHAKOWSKY, Illinois
LEE TERRY, Nebraska                  HILDA L. SOLIS, California
ERNIE FLETCHER, Kentucky
MIKE FERGUSON, New Jersey
MIKE ROGERS, Michigan
DARRELL E. ISSA, California
C.L. ``BUTCH'' OTTER, Idaho

                   Dan R. Brouillette, Staff Director

                   James D. Barnette, General Counsel

      Reid P.F. Stuntz, Minority Staff Director and Chief Counsel

                                 ______

                         Subcommittee on Health

                  MICHAEL BILIRAKIS, Florida, Chairman

JOE BARTON, Texas                    SHERROD BROWN, Ohio
FRED UPTON, Michigan                   Ranking Member
JAMES C. GREENWOOD, Pennsylvania     HENRY A. WAXMAN, California
NATHAN DEAL, Georgia                 RALPH M. HALL, Texas
RICHARD BURR, North Carolina         EDOLPHUS TOWNS, New York
ED WHITFIELD, Kentucky               FRANK PALLONE, Jr., New Jersey
CHARLIE NORWOOD, Georgia             ANNA G. ESHOO, California
  Vice Chairman                      BART STUPAK, Michigan
BARBARA CUBIN, Wyoming               ELIOT L. ENGEL, New York
HEATHER WILSON, New Mexico           GENE GREEN, Texas
JOHN B. SHADEGG, Arizona             TED STRICKLAND, Ohio
CHARLES W. ``CHIP'' PICKERING,       LOIS CAPPS, California
Mississippi                          BART GORDON, Tennessee
STEVE BUYER, Indiana                 DIANA DeGETTE, Colorado
JOSEPH R. PITTS, Pennsylvania        CHRISTOPHER JOHN, Louisiana
ERNIE FLETCHER, Kentucky             JOHN D. DINGELL, Michigan,
MIKE FERGUSON, New Jersey              (Ex Officio)
MIKE ROGERS, Michigan
W.J. ``BILLY'' TAUZIN, Louisiana
  (Ex Officio)

                                  (ii)




                            C O N T E N T S

                               __________
                                                                   Page

Testimony of:
    Barker, Anna D., Deputy Director for Strategic Scientific 
      Initiatives, National Cancer Institute, NIH................    17
    Gardner, Phyllis, Senior Associate Dean for Education and 
      Student Affairs, Stanford University.......................    46
    Lindberg, Donald A.B., Director, National Library of 
      Medicine, NIH..............................................     7
    Mullin, Theresa, Associate Commissioner, Office of Planning 
      and Evaluation, Food and Drug Administration...............    21
    Neighbour, Andrew, Associate Vice Chancellor for Research, 
      University of California Los Angeles.......................    53
    Rohrbaugh, Mark L., Director, Office of Technology Transfer, 
      Office of the Director, NIH................................    12
    Sigal, Ellen V., Chairperson, Friends of Cancer Research.....    67
    Soderstrom, Jonathan, Managing Director, Office of 
      Cooperative Research, Yale University......................    60
Additional material submitted for the record:
    Braun, Susan, President and CEO, The Susan G. Komen Breast 
      Cancer Foundation, prepared statement of...................    77

                                 (iii)

  

 
           NIH: MOVING RESEARCH FROM THE BENCH TO THE BEDSIDE

                              ----------                              


                        THURSDAY, JULY 10, 2003

                  House of Representatives,
                  Committee on Energy and Commerce,
                                    Subcommittee on Health,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10 a.m., in 
room 2123, Rayburn House Office Building, Hon. Michael 
Bilirakis (chairman) presiding.
    Members present: Representatives Bilirakis, Burr, 
Whitfield, Norwood, Wilson, Buyer, Brown, Eshoo, Stupak, Green, 
Strickland, Capps, and DeGette.
    Staff present: Cheryl Jaeger, majority professional staff; 
Jeremy Allen, health policy coordinator; Eugenia Edwards, 
legislative clerk; John Ford, minority counsel; and Jessica 
McNiece, minority staff assistant.
    Mr. Bilirakis. I call this hearing to order.
    I would like to start by thanking our witnesses for taking 
the time to join us today. Are our witnesses in the room? They 
may not be.
    I am sure that these two panels of experts will help 
members of the subcommittee better understand the dynamic and 
successful relationship between taxpayer-supported Federal 
research and private industry, and how this relationship 
ensures that Americans have access to cutting edge biomedical 
technology.
    I am going to hold for a minute or 2. Please take your 
seats as soon as you can.
    We have a journal vote coming up, and that is why we are 
trying to rush through these opening statements. So please help 
us out by getting settled.
    Can we shut those doors, please?
    As everyone here today is aware, we recently completed our 
effort to double the budget of the National Institutes of 
Health. I often say that while we are not famous for following 
through on our promises up here at Washington, this is one case 
where I think Congress really came through for the American 
people. However, it is our job to ensure that we get the most 
out of this massive investment of resources.
    Today's hearing is another in a series of hearings that 
will examine different aspects of NIH, and we will focus today 
on how private industry's partnership with the Federal 
Government helps move new discoveries from the bench to the 
bedside. After all, what good is the bench without it getting 
to the bedside?
    As we will no doubt discuss today, the 1980 Bayh-Dole Act 
laid the foundation for our current system of technology 
transfer. Prior to Bayh-Dole, the Federal Government held the 
patent rights to new technologies that were developed using 
Federal funds. This greatly discouraged private sector 
innovation and the translation of these discoveries into useful 
products.
    Bayh-Dole changed all of that by permitting entities such 
as universities and small businesses that develop new 
technologies using Federal funds to retain title to these 
technologies. In addition, Bayh-Dole allowed Federal agencies 
to license inventions that are developed through intramural 
research.
    While we will spend the majority of this hearing learning 
more about technology transfer and its role in speeding new 
therapies to patients, it is safe to say that Bayh-Dole created 
a highly successful model that helps fuel our research-driven 
biotechnology and pharmaceutical industries. As we will hear 
from our witnesses, the technology developed using Federal 
resources is often far from any potential commercial uses.
    Considering the substantial investment needed to turn these 
discoveries into therapies, it just makes sense for the Federal 
Government to partner with private entities willing to incur 
the necessary risk to bring new products to market.
    I am glad that we have a variety of perspectives on this 
important issue before us. I think that after today every 
member of the subcommittee will have a much better 
understanding of the relationship between the Federal 
Government, the research community, and the private sector.
    And, again, I would like to thank our witnesses for being 
with us today.
    And with that, I would now yield to the gentleman from Ohio 
for an opening statement, and we might be able to go through 
two or three opening statements, and then, of course, we will 
have to recess for the vote, and then return.
    Mr. Brown.
    Mr. Brown. Thank you, Mr. Chairman. I think Ms. Capps and 
Mr. Stupak both want to forego their opening statements, so 
they can do longer questions. So perhaps we can get through 
that.
    I want to welcome our witnesses and look forward to hearing 
their testimony, and thank the chair for calling this hearing 
on this very important issue. Each year for the last 5 years 
NIH has been allocated several billion dollars to support basic 
research in biomedical science. In doing so, the Federal 
Government is investing taxpayer dollars in the future of 
health care, improving health care through promoting scientific 
curiosity and discovery.
    Universities, hospitals, and institutes in my own State of 
Ohio have accepted the challenge, as they have elsewhere, in 
using public dollars to promote discoveries that some day will 
improve the health of not just Ohioans but people in nation 
after nation around the world.
    Case Western Reserve University School of Medicine is among 
the 20 top recipients of NIH research funding among the 
Nation's medical schools. Just yesterday Ohio State was awarded 
a grant as part of a public-private partnership initiated by 
the Friends of Cancer Research, yet today House Republicans are 
asking my Democratic colleagues on the floor to--asking all of 
us to vote on an appropriation bill for the Department of 
Health and Human Services that jeopardizes the progress we have 
made.
    This bill falls short of what is needed merely to keep up 
with inflation and research costs, which NIH estimates at 3.3 
percent for fiscal year 2004. As is everything else around 
here, all important public functions like that have been cut in 
order to make room for a tax cut that goes overwhelmingly to 
the most privileged people in our society.
    I will vote against this bill on the floor, because Federal 
funding of biomedical research is a worthy investment. 
Questions about Congress' commitment to NIH research underscore 
the importance of understanding, in both qualitative and 
quantitative terms, the government's return on its investment 
in biomedical research.
    The reason for today's hearing--and, as I said, I thank the 
chair for this--is to talk about how basic research investments 
are realized as a public health benefit. This process is a 
complex system of many parts, each critical, each contributing 
to the success of the whole. For this process to work, it must 
never forget that this process has a face--the face of a 
patient who 1 day can benefit from cancer vaccines or from stem 
cell research or from a novel diagnostic technique.
    Policy tools like patents, the Bayh-Dole Act, the 
Stevenson-Wydler Act, and incentives for commercialization, are 
important links in the bench to bedside chain, but they are 
ineffective if, at the end of the day, a patient cannot afford 
or does not have access to treatment. They are ineffective if 
they discourage rather than nurture research formally in the 
domain of open scientific discourse.
    Congress has long recognized that the value of an idea is 
in using it. Bayh-Dole allows universities to patent and 
license discoveries made in the course of government-sponsored 
research. But growing concerns about the prohibitive costs of 
prescription drugs and their effect on the health care system 
overall has renewed debate over the licensing of inventions.
    There are also concerns that some of the incentives can 
hinder rather than accelerate research. In this context, our 
witnesses' views on key issues are extremely important. Among 
others that Chairman Bilirakis raised, those issues include 
whether American taxpayers should accept an ``ends justifies 
the means'' approach to justify the outrageous costs of 
prescription drugs when they have already subsidized the 
research on those drugs on the front end and seeing drug prices 
significantly lower in other nations, as well as whether and to 
what extent patents may actually be hindering what our 
constitution explicitly states is the intention of patents--
promoting science and the useful arts.
    I look forward, Mr. Chairman, to an enlightening 
discussion. I thank you for calling this hearing.
    Mr. Bilirakis. The chair was going to recognize Mr. Buyer. 
Let us see, Mr. Stupak.
    Mr. Stupak. I waive opening statement.
    Mr. Bilirakis. Thank you.
    Ms. Capps.
    Ms. Capps. I waive an opening.
    Mr. Bilirakis. No? All right.
    Well, that ends opening statements.
    [Additional statements submitted for the record follow:]

Prepared Statement of Hon. Barbara Cubin, a Representative in Congress 
                       from the State of Wyoming

    Thank you, and good morning.
    There is no denying the fact that America sets the standard in 
medical research. We are the ones constantly pushing the envelope to 
find that ultimate diagnosis--that cure we know is out there.
    It is what makes research at NIH virtually undisputed in this 
country and around the world.
    Year in and year out, Congress devotes billions of dollars to this 
agency, believing it to be not only worthwhile but honorable.
    I often question what it is exactly that makes us so determined to 
conquer the diseases of the human mind and body. Is it financial gain? 
Is it notoriety? Is it arrogance? I don't think so.
    The answer to this question comes down to a common experience that 
each of us will face during our lifetime.
    It is that moment when we walk hand-in-hand with a sick loved-one; 
when we listen as the doctor tells them, ``I'm sorry there is nothing 
else we can do''; when we feel powerless to the disease that is taking 
our family member away.
    That is when I as an individual and we collectively as a country 
put our frustration to good use and say we will find a cure. That is 
all the reason we need.
    There is no single motivating factor greater than personal 
experience. I know that first-hand and, the reality of the human 
condition is such that, you will likely know it too--if not today, then 
someday.
    With each dollar we channel toward medical research, we improve the 
quality of someone's life--perhaps for as little as a day, but maybe 
for years to come. That is what makes all the difference, and that is 
why we do it.
    I commend NIH for its steadfast ability to take something from the 
drawing board and turning that into the miracle drugs and treatments we 
have today. The full extent of how they do that is not clear to me, and 
that is why I would like to learn more about it.
    I look forward to hearing from our witnesses, and appreciate you 
holding this hearing today, Mr. Chairman. I yield back the remainder of 
my time.

                                 ______
                                 
 Prepared Statement of Hon. W.J. ``Billy'' Tauzin, Chairman, Committee 
                         on Energy and Commerce

    Thank you, Mr. Chairman, for holding this timely hearing today.
    The National Institutes of Health serves one primary purpose: to 
generate knowledge that can be used to protect the public health. 
Through NIH research investments, scientists are making huge strides in 
the fight to better diagnose, treat, and ultimately prevent and cure 
disease. Because the NIH shares the results of its research to the 
broader scientific community and the public, creative minds are 
presented a unique opportunity to translate this information into 
tangible products and therapies that improve the quality of life.
    What began as a single laboratory in a military hospital has grown 
to an amazing institution. NIH research programs now operate in almost 
all parts of the United States and internationally. NIH research 
programs also involve more than 16,000 scientists on NIH intramural 
research campuses alone--truly an amazing amount of manpower dedicated 
toward such important purposes.
    What is even more impressive, besides the sheer size of the 
National Institutes of Health, is the real world impact the research 
findings at NIH ultimately have on patients. The volume of information 
generated by NIH is enormous. I am pleased that we will hear testimony 
today from one of the most prominent ``librarians'' in the world, the 
Director of the National Library of Medicine, Dr. Lindberg. This is a 
person who effectively catalogs some of the most important information 
generated by the NIH.
    As new communication mediums unfold, such as the Internet, it is 
critical that our research resources are made as widely accessible as 
possible. I applaud Dr. Lindberg for his dedication to ensuring the 
National Library of Medicine rises to this challenge. It certainly is 
not an easy task to constantly reorganize entire databases so that 
researchers can readily access the most recent scientific findings. But 
the Library of Medicine is doing just that.
    Generating knowledge for public health is the primary purpose of 
the research undertaken at the NIH. We want to ensure that the private 
sector applies the knowledge gleaned from NIH research so that we can 
discover newer and safer ways to treat patients.
    Today, we will hear testimony from the Director of the Office of 
Technology Transfer at the NIH about the technology transfer policies 
in place that create incentives for private sector investments. We will 
have the opportunity to learn more about how technology transfer 
policies impact industry, universities, and patients. These are risky 
ventures where failures are many and successes few. But, every success 
story represents a win for patients. We may not translate all basic 
research into commercialized products, but when we do the American 
public benefits. That's part of the dichotomy of technology transfer.
    Finally, I am glad the Committee is recognizing a new collaborative 
project underway at the Department of Health and Human Services between 
two agencies with distinct missions, the NIH and the Food and Drug 
Administration. Often we speak of the need to create more ``public-
private partnerships.'' Equally important is the goal of ensuring 
collaboration between agencies whose work compliments each other. I am 
excited about the new interagency agreement being developed by the 
National Cancer Institute and the FDA to help speed the approval of 
cancer therapies and improve the post market surveillance of products. 
If this collaboration works, it will become a model for future 
interagency agreements. I am encouraged by the potential of this 
project.
    Mr. Chairman, I look forward to learning more about the critical 
technology transfer policies that are being utilized by the NIH. As our 
Committee continues its oversight over this important agency, there can 
be no more critical challenge than for us to promote policies that move 
the maximum amount of research from the laboratory bench to the 
patient's bedside. We have invested a great deal of resources in the 
NIH in recent years. Now it's time to ensure that taxpayers and 
America's patients are getting a good return on that investment.
    Thank you and I yield back the balance of my time.

                                 ______
                                 
  Prepared Statement of Hon. Gene Green, a Representative in Congress 
                        from the State of Texas

    Thank you, Mr. Chairman, for holding this hearing on research at 
the National Institutes of Health (NIH).
    For the past five years, the Congress has provided unprecedented 
increases in funding for biomedical research within the NIH.
    I have been a strong proponent of these increases, as I have been 
able to witness firsthand some of the miraculous medical breakthroughs 
occurring at Baylor College of Medicine in my home town of Houston, 
Texas, as well as at facilities across this country.
    And while I certainly support additional increases--certainly 
larger increases than the meager 2.5 percent increase in this year's 
Labor HHS appropriations bill--I think it's fair for us to spend some 
time investigating how NIH spends its money, whether we are getting a 
``good rate of return'' on this investment, and whether there are 
things we should be doing differently to ensure that this research 
benefits all taxpayers.
    The issue of technology transfer is a complex one, but I think it 
is an important one for us to look at.
    The technology transfer process ensures that the groundbreaking 
research being done at NIH reaches patients when they need it.
    I am interested in learning more, however, about whether this 
process hinders the development of some areas of scientific research 
that are perhaps not as commercially profitable.
    For example, I know that a constituent of mine suffers from 
scoliosis, and is frustrated by the lack of research being done at NIH 
to find better treatments or a cure for this condition.
    I know her frustration is compounded when she hears about research 
into drugs like Viagra--which certainly earn the pharmaceutical 
industry a lot of money.
    Now I don't know whether Viagra was developed through the NIH, but 
I would like to know how NIH goes about determining where resources are 
allocated, and whether there is more that we can or should be doing to 
encourage research for conditions such as scoliosis.
    This is certainly an important issue, and I look forward to 
learning more about it.
    With that, Mr. Chairman, I yield back the balance of my time.

                                 ______
                                 
    Prepared Statement of Hon. John D. Dingell, a Representative in 
                  Congress from the State of Michigan

    Mr. Chairman, thank you for scheduling this hearing. The laws, 
policies, and practices that govern the process of technology transfer 
are one of the keys to improving public health. The National Institutes 
of Health (NIH) will spend approximately $28 billion this year on 
biomedical research. Other government programs will also make 
multibillion dollar contributions to this kind of research. This will 
be augmented by nearly $30 billion in research and development 
expenditures by the pharmaceutical industry. Philanthropies and 
individuals will also make significant contributions to biomedical 
research.
    In order for this level of support to be sustained or enhanced, the 
translation of basic research into useful therapies needs to occur at 
an acceptable pace. We have an excellent array of witnesses who will 
inform us of what is working well, and what could be improved, in our 
biomedical research and development technology transfer programs.
    The Bayh-Dole and the Stevenson-Wydler Acts were passed in 1980 to 
address the need to convert federal investments in basic research into 
useful innovations that improve public health. The ensuing years have 
shown that these programs, augmented by others, have led to some 
notable successes. Bayh-Dole is one of the key reasons we have a robust 
biotechnology industry. Training programs for scientists and medical 
personnel, as well as advancement of knowledge, have flourished at 
universities in every state. We have many new therapies that are 
enabling persons with serious and life threatening diseases to live 
longer, suffer less, and enjoy life to a greater extent. These 
activities and products provide thousands of jobs and stimulate our 
economy.
    This compels me to mention some matters that could adversely affect 
some of the good things we will hear from today's witnesses. NIH is 
doing a good job, yet the budget provides a meager increase for its 
programs. In addition to my concerns with the budget, I am especially 
disturbed by the so called ``strategic human capital management'' 
initiative and the ``competitive sourcing program.'' These twin 
blunders are already having a corrosive effect on NIH morale and should 
be shelved immediately. The NIH has a unique role in public health. I, 
for one, do not want to see it run just like a business. The NIH funds 
research that the private sector would never support. This is important 
for finding effective therapies for many diseases and conditions that 
are not profitable. NIH also supports large scale biomedical science, 
such as the human genome project. In sum, the private sector and the 
government play vital, yet distinct roles, and they should not be 
effectively consolidated into one.

    Mr. Bilirakis. We are going to take a break. As soon as we 
get back, we will get right into the witnesses. Thank you very 
much for your patience.
    [Brief recess.]
    Mr. Bilirakis. The chair apologizes. You are also very 
important people, and we treat you this way, but that is the 
way things are.
    The first panel consists of Dr. Donald A.B. Lindberg, who 
is Director of the National Library of Medicine with NIH; Dr. 
Mark Rohrbaugh, Director of the Office of Technology Transfer 
from the Office of the Director of National Institutes of 
Health; Dr. Anna D. Barker, Deputy Director for Strategic 
Scientific Initiatives with the National Cancer Institute with 
NIH; and Dr. Theresa Mullin, Associate Commissioner, Office of 
Planning and Evaluation for the Food and Drug Administration.
    Welcome, again, to all of you. Thank you so much for being 
here.
    I will set the clock at 5 minutes. But obviously, if you 
are on a roll in terms of making your point, I will let you go 
for a little while longer. Obviously, your written submittal is 
part of the record, so we would hope that you would sort of 
complement and supplement that.
    Having said that, if we can all be in order here, we will 
recognize Dr. Lindberg. Please proceed, sir.

STATEMENTS OF DONALD A.B. LINDBERG, DIRECTOR, NATIONAL LIBRARY 
   OF MEDICINE, NIH; MARK L. ROHRBAUGH, DIRECTOR, OFFICE OF 
   TECHNOLOGY TRANSFER, OFFICE OF THE DIRECTOR, NIH; ANNA D. 
 BARKER, DEPUTY DIRECTOR FOR STRATEGIC SCIENTIFIC INITIATIVES, 
 NATIONAL CANCER INSTITUTE, NIH; AND THERESA MULLIN, ASSOCIATE 
COMMISSIONER, OFFICE OF PLANNING AND EVALUATION, FOOD AND DRUG 
                         ADMINISTRATION

    Mr. Lindberg. Thank you, Mr. Chairman, for this opportunity 
to brief you and your colleagues about the National Library of 
Medicine. The role of the Library is important to the Nation's 
health, and this is due in large part to the strong support we 
have received from the Congress historically.
    Progress in health care is a cyclical process, much as the 
title of your hearing implies. It starts with a problem 
recognized by a medical practitioner. This leads to experiments 
or experimental observations. Scientists describe the results 
in what we now call the peer-reviewed scientific literature. 
This informs the next cycle of experiments, which in turn are 
read by clinicians to use in patient care, and by patients to 
inform their participation in treatments and cures.
    The National Library of Medicine--NLM--collects about 
27,000 scientific periodicals from across the world, and 
includes about 5,000 of the very best in the printed Index 
Medicus and the online Medline file. The print version started 
in 1879; the computer version effectively in 1965. NLM is the 
biggest medical library in the world, again, due to the 
encouragement and support of the U.S. Congress, plus gifts of 
many historical holdings by scholars. The Library is a major 
scientific and medical resource in the U.S. and abroad.
    Let me give a measure of the information available to 
physicians. Medline holds the descriptions of over 14 million 
scientific reports. Each year we add 500,000 new ones. Clearly, 
no doctor or scientist can possibly know all that is described 
in this library.
    Consider the case of a conscientious medical practitioner. 
Let us imagine the doctor faithfully reads every night before 
going to bed two articles from the specialty journals he or she 
buys. May one imagine, then, that the doctor has by this method 
kept up with progress? Really, no. By the end of such a year, 
this good doctor will have fallen 648 years behind on reading 
the new publications. So in reality what good doctors do is 
search the NLM files--without charge and available night and 
day on the Internet--and read the best one or two articles for 
the particular patient problem of the moment.
    We can tell you countless examples of getting a tough 
diagnosis made through this system, of selecting the best new 
drug for treatment, and even of coming to understand new terms 
and ideas through reading the right paper at the right time.
    Special files cover complementary and alternative medicine, 
space medicine, bioethics, AIDS, and toxicology. There is also 
a version of this knowledge that is aimed at patients, 
families, and the public. We call this MedlinePlus. This is 
organized into about 600 health topics, including genetics 
information for the public.
    An additional important computer resource for linking 
laboratory discoveries to clinical practice is 
ClinicalTrials.gov. Here one can find out over 7,700 clinical 
trials in over 75,000 American communities, including the 
purpose of the trial, the enrollment requirements, and the 
telephone number of the investigator who can take on new 
patients.
    The system began in 1998. It was created by NLM with 
initially the participation and support of all NIH Institutes, 
and subsequently inclusion, too, of trials supported by the 
major pharmaceutical manufacturers. The stimulus for creation 
of this system was congressional; namely, the 1997 FDA 
Modernization Act, which required that FDA, NIH, and NLM make 
some such system available for serious and life-threatening 
diseases.
    Mr. Chairman and members, so far I have described three 
major NLM computer-based information systems that provide the 
fundamental infrastructure that connects doctors, scientists, 
and patients with worthwhile writings and publications on human 
health. This has worked well for, really, about 160 years, but 
now a new science challenges us--the Human Genome Project. This 
and similar genomic studies on literally thousands of animals, 
plants, and microorganisms make our traditional books to some 
extent inadequate.
    The human genome alone contains billions of nucleotide 
bases, tens of thousands of genes, hundreds of thousands of 
biological proteins to do the work of the genes. I am sure my 
colleague Francis Collins discussed this with you in earlier 
hearings before the committee, and doubtless more skillfully 
than I.
    The simple point I want to make now is that genomic 
information simply is not readable from printed books. It is 
accessible only through a computer system that can present the 
right portions of the data along with the desired 
relationships.
    This is comparable to the child looking at a drop of pond 
water. The life of the teeming protozoa and bacteria is visible 
to today's schoolchild just as it was to Leuwenhoek centuries 
ago only through the lens of a microscope. At NLM, that 
microscope to modern medicine is the National Center for 
Biotechnology Information--NCBI.
    NCBI was authorized by the Congress in 1989. It has the 
responsibility to collect, annotate, and provide creative 
access to all the human genome data from the U.S. and abroad, 
as well as much else. The spectacular new anticancer drug 
Gleevec, for example, came directly from clever use of these 
data by scientists in academia and at Novartis Labs.
    Taking together all of the NLM computer knowledge sources I 
have mentioned, these are used online more than a million times 
a day, 500 million uses per year.
    I apologize for describing only the outline of these 
systems, in order to stay within my time. I will submit a more 
detailed description for the record. And, of course, if you 
wish, I would be happy to go into more detail or do my best to 
answer any questions.
    Thank you for the privilege of appearing before you.
    [The prepared statement of Donald A.B. Lindberg follows:]

Prepared Statement of Donald A.B. Lindberg, Director, National Library 
 of Medicine, National Institutes of Health, Department of Health and 
                             Human Services

    Thank you, Mr. Chairman, for this opportunity to brief you and the 
Subcommittee about the National Library of Medicine, which is part of 
the National Institutes of Health within the Department of Health and 
Human Services. The role of the Library is central to the Nation's 
health, and this is due in large part to the strong support we have 
received in the Congress.
    Progress in health care is a cyclical process, much as the title of 
your hearing implies. It starts with a problem recognized by a medical 
practitioner. This leads to experiments or experimental observations. 
Scientists describe the results in what we now call the peer-reviewed 
scientific literature. This informs the next cycle of experiments, 
which in turn are read by clinicians to use in patient care and by 
patients to inform their participation in the treatments and cures.
    The National Library of Medicine--NLM--collects about 27,000 
scientific periodicals from across the world and includes about 5,000 
of the very best in the printed Index Medicus and the on-line Medline 
file. The print version started in 1879, the computer version 
effectively in 1965. NLM is the biggest medical library in the world. 
The Library is a major scientific and medical resource in the U.S. and 
abroad.
    Let me give a measure of the scope of information that is available 
to today's practitioner. Medline holds the descriptions of over 14 
million scientific reports. Each year we add 500,000 new ones. Clearly 
no doctor or scientist can possibly know all the discoveries that are 
described in this library. Consider the case of a conscientious medical 
practitioner. Let us imagine the doctor faithfully reads every night 
two articles from the specialty journals he or she buys. May one 
imagine then that the doctor has by this method kept up with progress? 
Really, no. By the end of such a year, this good doctor will have 
fallen 648 years behind on reading the new publications. So in reality 
what good doctors do is search the NLM files--without charge and 
available on Internet night and day--and read the best one or two 
articles for the particular patient problem of the moment. We can tell 
you countless examples of getting a tough diagnosis made through this 
system, of selecting the best new drug for treatment, and even for 
coming to understand new terms and ideas through reading the right 
paper at the right time.
    There is also a version of this knowledge that is aimed at 
patients, families, and the public. We call this MedlinePlus. This is 
organized into about 600 Health Topics.
    An additional important computer resource for linking laboratory 
discoveries to clinical practice is ClinicalTrials.gov. Here one can 
find out about over 7700 clinical trials in over 75,000 American 
communities, including the purpose of the trial, the enrollment 
requirements, and the telephone number of the investigator who can take 
new patients. The system began in 1998. It was created by NLM with 
initially the participation and support of all NIH Institutes, and 
subsequently inclusion too of trials supported by the major 
pharmaceutical manufacturers. The stimulus for creation of this system 
was the 1997 FDA Modernization Act, which authorized FDA, NIH, and NLM 
to make some such system for all serious or life threatening disorders.
    Mr. Chairman and members of the Subcommittee, so far I have 
described three major NLM computer-based information systems that 
provide the fundamental infrastructure that connects doctors, 
scientists, and patients with worthwhile writings and publications on 
human health. This has worked well for more than 100 years, but now new 
science challenges us: the Human Genome Project. This and similar 
genomic studies on literally thousands of animals, plants, and micro-
organisms make our traditional books to some extent inadequate. The 
human genome alone contains billions of nucleotide bases, tens of 
thousands of genes, hundreds of thousands of biological proteins to do 
the work of the genes. I am sure my colleague Francis Collins from 
NIH's National Human Genome Research Institute discussed this with you 
during the May 22, 2003, hearing before this Subcommittee--and 
doubtless more skillfully than I. The simple point I want to make now 
is that the genomic information simply is not readable from printed 
books. It is accessible only through a computer system that can answer 
questions and present the right portions of the data along with the 
desired relationships. This is comparable to the child looking at a 
drop of pond water. The life of the teeming protozoa and bacteria is 
visible to today's schoolchild just as it was to Leuwenhoek centuries 
ago only through the lens of a microscope. At NLM, that microscope to 
modern medicine is the National Center for Biotechnology Information 
(NCBI), which was authorized by Congress in 1989. It has the 
responsibility to collect, annotate, and provide creative access to all 
the human genome data from the U.S. and abroad--as well as much else. 
The spectacular new anti-cancer drug Gleevec, for example, came 
directly from clever use of these data by scientists in academia and at 
Novartis Labs.
    Taking together all of the NLM computer knowledge sources I have 
mentioned, these are used on-line more than one million times each day, 
500 million uses per year!
    I apologize for describing only the outline of these systems, in 
order to stay within my time. I am submitting for the record a more 
detailed description of these services. If you wish, I would happily go 
into more detail now or do my best to answer any questions.

                   Additional Material for the Record

    The National Library of Medicine has a number of databases and 
services that are involved in biomedical research, health care 
delivery, and information for the public. Three of the most important 
are PubMed/MEDLINE, MEDLINEplus, and ClinicalTrials.gov.

PubMed/MEDLINE
    The ``literature'' is the touchstone of progress in medical 
research and practice. In the health sciences, the standard reference 
source since 1879 has been NLM's published bibliography, Index Medicus. 
For the past 30 years it has been supplemented by MEDLINE, an online 
database derived from the Index Medicus. MEDLINE (and its backfiles) is 
a constantly growing online resource that at last count contained more 
than 14 million references and abstracts to articles from about 5,000 
medical journals. When it appeared in 1971, it was truly a pioneering 
effort in information technology, and it is today the most 
authoritative entry point into an ever-expanding biomedical literature. 
The MEDLINE files extend from the nineteen fifties to the present, and 
the Library is now adding data from even earlier years. PubMed/MEDLINE 
is by far the most widely used medical information database in the 
world. Each day the 14 million records are queried more than 1.3 
million times by 220,000 unique users. This is roughly a half billion 
searches per year.
    The sophisticated yet easy-to-use access system for searching 
MEDLINE on the Web is called PubMed. Since the launch of PubMed in 
1997, continual improvements have been introduced, and today it offers 
a high degree of flexibility. For example, there are now Web links to 
almost 4,000 of the journals represented in MEDLINE, allowing users to 
have access to the full text of articles referenced in the database. In 
addition, NLM has introduced CAM on PubMed, which provides the public 
with access to citations from the MEDLINE database regarding 
complementary and alternative medicine.
    An increasingly popular service on the Web for the scientist and 
health professional is an extension of PubMed known as PubMedCentral. 
This is a digital archive of life sciences journal literature, created 
by NLM's National Center for Biotechnology Information (NCBI). 
Publishers electronically send peer-reviewed research articles, essays, 
and editorials to be included in PubMedCentral. A journal may deposit 
material as soon as it is published, or it may delay release for a 
specified period of time. NLM undertakes to guarantee free access to 
the material; copyright remains with the publisher or the author. There 
are at present more than 50 journals in PubMedCentral, with more soon 
to come online.

MEDLINEplus
    The National Library of Medicine, in 1998, introduced an 
information service directed at the general public--MEDLINEplus. 
MEDLINEplus is a source of authoritative, full-text health information 
from the NIH institutes and a variety of non-Federal sources. The main 
features of MEDLINEplus: more than 600 ``health topics,'' from 
Abdominal Pain to Yeast Infections, detailed and consumer-friendly 
information about 9,000 brand name and generic and over-the counter 
drugs, an illustrated medical encyclopedia and medical dictionaries, 
directories of hospitals and health professionals, a daily health news 
feed from the major print media, and 150 interactive and simply 
presented tutorials (with audio and video) about diseases and medical 
procedures. With one click in MEDLINEplus, one can even do a search 
using PubMed/MEDLINE to retrieve references and abstracts (and in some 
cases, full text) of biomedical journal articles. The most recent usage 
figures for MEDLINEplus attest to its growing popularity among the 
public and health professionals. In June 2003 there were more than two 
million unique visitors who viewed almost twenty million MEDLINEplus 
pages.
    The Library has learned that many health professionals are finding 
MEDLINEplus to be an excellent source of information. They use it to 
keep current on medical subjects outside of their specialty. Others are 
referring their patients to MEDLINEplus for up-to-date and 
authoritative information about their health conditions. One reason 
physicians feel comfortable in doing this is that they trust the 
imprimatur of the National Institutes of Health and the National 
Library of Medicine. They know that highly trained NLM information 
specialists follow strict guidelines in selecting Web pages that are 
appropriate to the audience level, well-organized, easy to use, 
educational in nature, and not selling a product or service. NLM 
receives a constant stream of testimonials from both the public and 
health professionals about how useful--clear and comprehensive--the 
system is.
    Like MEDLINE, MEDLINEplus is a constantly evolving system. Links 
are checked daily and new health topics added weekly. In the days 
following September 11, entries on anthrax, smallpox, and other 
bioterrorism-related subjects were quickly compiled and for a while 
were even more heavily accessed than cancer information. The latest 
improvement is MEDLINEplus en Espanol, introduced in September 2002. It 
provides hundreds of links to health information in Spanish and is 
being constantly expanded. The next major improvement in MEDLINEplus 
will be to link users to local resources--city, county, state, and 
regional agencies and support groups. In this regard, a successful 
prototype of a statewide system has been developed with NLM support and 
introduced in North Carolina.

ClinicalTrials.gov
    The MEDLINEplus health topics have links to a database of ongoing 
and planned scientific studies--ClinicalTrials.gov. Trials are 
conducted when there is no proven treatment for a specific disease, or 
to test which treatment works best for a particular disease of 
condition. ClinicalTrials.gov is a registry of some 7,700 protocol 
records sponsored by NIH and other Federal agencies, the pharmaceutical 
industry, and nonprofit organizations in over 75,000 locations, mostly 
in the United States and Canada, but also in some 70 other countries. 
The stimulus that brought the FDA, NIH, and NLM together to create 
ClinicalTrials.gov was the 1997 FDA Modernization Act. NLM designed the 
system and coordinates all input from the National Institutes of Health 
and, through the FDA, from industry.
    ClinicalTrials.gov includes a statement of purpose for each study, 
together with the recruiting status, the criteria for patient 
participation in the trial, the location of the trial, and specific 
contact information. The site is used extensively by patients and 
health professionals, and hosts over 8,000 visitors daily. NLM has 
worked with the Food and Drug Administration in crafting FDA's 
``Guidance for Industry: Information Program on Clinical Trials for 
Serious or Life-Threatening Diseases and Conditions.'' Within six 
months following its release, ClinicalTrials.gov received over 400 
protocols from pharmaceutical industry sponsors.

Human Genome Information
    The National Center for Biotechnology Information, a component of 
the NLM authorized by the Congress in 1989, designs and develops 
databases to store genomic sequence information and creates automated 
systems for managing and analyzing knowledge about molecular biology 
and genetics. With the release of the ``working draft'' of the human 
genome, the global research focus is turning from analysis of specific 
genes or gene regions to whole genomes, which refers to all of the 
genes found in cells and tissues. To accommodate this shift in research 
focus, NCBI has developed a suite of resources to support the 
comprehensive analysis of the human genome and is thus a key component 
of the NIH Human Genome Project.
    One of the principal resources is the GenBank database, a publicly 
available, annotated, collection of all known DNA sequences. The NCBI 
is responsible for all phases of GenBank production, support, and 
distribution, including timely and accurate processing of sequence 
records and biological review of both new sequence entries and updates 
to existing entries. GenBank is growing rapidly with contributions 
received from scientists around the world and now contains more than 15 
million sequences and more than 14 billion base pairs from over 100,000 
species; it is accessed on the web 200,000 times each day by some 
50,000 researchers.
    Scientists use not only the sequence data stored in GenBank, but 
avail themselves of the sophisticated computational tools developed by 
NCBI intramural investigators, such as the BLAST suite of programs for 
conducting comparative sequence analysis. Entrez is NCBI's integrated 
database search and retrieval system. It allows users to search 
enormous amounts of sequence and literature information with techniques 
that are fast and easy to use. Using this system, one can access NCBI's 
nucleotide, protein, mapping, taxonomy, genome, structure, and 
population studies databases, as well as PubMed, the retrieval system 
for biomedical literature.
    Continued progress in our understanding of the relation between 
genes and disease requires that our information-handling capabilities 
keep pace with the voluminous data being generated by scientists. The 
assembled and annotated human genome sequence is allowing researchers 
to identify diseases genes, decipher biological mechanisms underlying 
disease, and design and develop therapeutic strategies for treating and 
preventing disease.

    Mr. Bilirakis. Thank you very much, Dr. Lindberg. And, of 
course, there will be questions, and so you will have that 
opportunity.
    Dr. Rohrbaugh, please proceed, sir.

                 STATEMENT OF MARK L. ROHRBAUGH

    Mr. Rohrbaugh. Chairman Bilirakis and members of the 
subcommittee, I am pleased to present to you a synopsis of NIH 
technology transfer activities both within the National 
Institutes of Health and at institutions receiving NIH funds.
    First, I would like to speak to the NIH mission, which is 
to uncover new knowledge that will lead to better health for 
everyone. In furtherance of this mission, we conduct our 
technology transfer activities with the following goals in 
mind--to expand fundamental knowledge about the nature and 
behavior of living systems; to improve and develop strategies 
for the diagnosis, treatment, and prevention of disease; and to 
communicate the results of research to the scientific community 
and the public at large with the goal of improving public 
health.
    One of the greatest challenges to realizing the promise of 
the NIH mission is the ability to translate basic research 
findings into drugs and therapies for patients. Translating a 
new drug discovery from the laboratory to an initial clinical 
evaluation in patients requires navigation of a multi-step 
review process involving several critical implementation issues 
over the course of 6 to 10 years.
    This ``bench to bedside'' pathway often begins with the 
transfer of an early stage technology developed in the course 
of federally funded research to a private sector partner. While 
this is but one step in a lengthy and expensive process, it is 
often the step that jump starts the development of a new 
therapeutic product.
    The overwhelming majority of the NIH budget--over 80 
percent--is devoted to the support of scientists at 
approximately 1,700 organizations. This is what is known as our 
extramural program. A much smaller portion of our budget--
slightly less than 10 percent--supports research and training 
conducted by the Federal scientists at NIH facilities. This is 
known as our intramural research program. I believe it is 
important to make this distinction while discussing technology 
transfer activities, because these two areas are governed by 
different legislative authorities.
    In its broadest sense, technology transfer is the movement 
of information and technologies from research findings to 
practical application, whether for further research purposes or 
commercial products. At the NIH, we transfer technology through 
publications of research results, exchange of data, sharing 
materials, public-private partnerships, as well as the 
patenting and licensing of technologies.
    The NIH Office of Technology Transfer administers over 
1,500 active licenses and approximately 2,400 patents and 
patent applications. In fiscal year 2002, we received more than 
$51 million in royalties from licensees. This accounts for 
about two-thirds of the royalties collected by all Federal 
laboratories combined.
    About 200 products have reached the market that include 
technologies licensed from the NIH; 17 of these are vaccines 
and therapeutics. We view these products as the best and 
ultimate measure of our success in facilitating the transfer of 
technologies that the private sector develops into products 
that benefit the public health.
    This leads me to a brief discussion of the Bayh-Dole Act of 
1980, which applies to recipients of Federal funds. As you 
mentioned, Mr. Chairman, the Act provides incentives to move 
federally funded inventions to the private sector where they 
benefit the public. With a few exceptions, the legislation does 
not prescribe methods to be used in the licensing of these 
inventions, but the institutions must agree to pursue practical 
application of inventions, and to provide the U.S. Government 
with a royalty-free right to use the inventions for government 
purposes.
    That Federal Government right does not extend from the 
federally funded technology to the final product, except in 
those rare cases where the technology is the final product. 
Moreover, this government right applies only to the patent--
that is, the intellectual property--not to the materials 
themselves that constitute the physical embodiment of the 
invention. In most cases, a federally funded technology is 
combined with other intellectual property or know-how, often 
proprietary to a company, to develop the final product.
    NIH-funded technology is usually at the earliest stage of 
development and requires much further investment to bring the 
technology to the marketplace. Thus, technology transfer is a 
high-risk venture, and few inventions ultimately result in 
products that reach the marketplace, yet the NIH has been 
fortunate in having a number of its technologies licensed and 
incorporated into methods of making, administering, or as 
components of new products.
    In summary, the field of technology transfer facilitates 
the movement of research findings to promote further research 
or to develop them further into products of use to the public. 
It is through our statutory framework, unique institutions, and 
public-private partnerships that the Nation has created the 
most envied research enterprise in the world.
    I can assure you, Mr. Chairman, and members of the 
subcommittee, that the NIH is committed to its mission of 
improvement of public health and will utilize all of the 
mechanisms it has to achieve this mission.
    I thank you for the opportunity to come before you today, 
and I welcome any questions you may have.
    [The prepared statement of Mark L. Rohrbaugh follows:]

Prepared Statement of Mark L. Rohrbaugh, Director, Office of Technology 
 Transfer, Office of the Director, National Institutes of Health, U.S. 
                Department of Health and Human Services

    Chairman Bilirakis and Members of the Subcommittee, I am pleased to 
present to you a synopsis of NIH technology transfer activities both 
within the National Institutes of Health (NIH) and at institutions 
receiving NIH funds. I would also like to refer the Subcommittee to a 
report developed by the NIH, with input from patient advocacy groups, 
academia, and industry, on ensuring that the taxpayers' interests are 
protected. This report, titled ``A Plan to Ensure Taxpayers' Interests 
are Protected,'' was submitted to the Senate Appropriations Committee 
in July 2001 and provides excellent background information on the 
nature of Government-funded research and drug discovery, the history of 
Federal agency technology transfer legislation, including the Bayh-Dole 
Act, and the ways in which the NIH ensures that the American taxpayers 
benefit from our technology transfer activities.
    First, I would like to speak to the NIH mission, which is to 
uncover new knowledge that will lead to better health for everyone. In 
furtherance of this mission, we conduct our technology transfer 
activities with the following goals in mind: (1) to expand fundamental 
knowledge about the nature and behavior of living systems; (2) to 
improve and develop strategies for the diagnosis, treatment, and 
prevention of disease; and (3) to communicate the results of research 
to the scientific community and the public at large with the goal of 
improving public health.
    One of the greatest challenges to realizing the promise of the NIH 
mission is the ability to translate basic research findings into drugs 
and therapies for patients. Translating a new discovery from the 
laboratory to an initial clinical evaluation in patients requires 
navigation of a multi-step review process involving several critical 
implementation issues over the course of six to ten years. These 
include issues relating to preclinical efficacy evaluation, drug 
production, preclinical safety assessment, regulatory documentation and 
approval, protocol design and approval, and a range of logistical 
issues regarding execution of the trial itself. This ``bench to 
bedside'' pathway often begins with the transfer of an early-stage 
technology developed in the course of federally-funded research to a 
private-sector partner. While this is but one step in a lengthy and 
expensive process, it is often the step that ``jump-starts'' the 
development of a new therapeutic product.
    Our success in meeting the goals of our technology transfer 
activities depends on the ability to disseminate and share research 
findings with the research community and, when possible, to transfer 
findings into research and diagnostic tools and devices, and to assist 
in the development of therapeutic drugs and vaccines. Despite the 
lengthy and expensive process to bring research findings to use by the 
research community and the public, the NIH and federally-funded 
institutions have been able to bring new technologies forward to 
enhance the research enterprise and public health. This is due in part 
to the enactment of legislation to overcome a number of the issues that 
hampered research and development and the licensing of federally funded 
technologies for further development into products. Prior to the 
passage of the Bayh-Dole Act in 1980, many inventions arising out of 
government research sat on the shelf and were never commercialized into 
products to treat patients. Since 1980, these incentives have paved the 
way for the development of many new drugs, vaccines, and medical 
devices. These activities have also stimulated economic development and 
the creation of new jobs in the United States. My remarks will provide 
you with several examples of NIH technologies that have been of benefit 
to public health, and other speakers will be able to enumerate the 
successes they have been able to produce with Federal research funds.
    The overwhelming majority of the NIH budget, over 80%, is devoted 
to the support of more than 200,000 scientists and their collaborators 
in the extramural research community who are affiliated with 
approximately 1700 organizations, including universities, medical 
schools, hospitals, and other non-profit and for-profit research 
facilities located in all 50 states, the District of Columbia, Puerto 
Rico, Guam, the Virgin Islands, and points abroad. This is what is 
known as our extramural program. A much smaller portion of our budget, 
slightly less than 10%, supports research and training conducted by 
Federal scientists at NIH facilities. This is known as our intramural 
research program. I believe it is important to make this distinction 
when discussing technology transfer activities, because these two areas 
are governed by different legislative authorities.
    In its broadest sense, technology transfer is the movement of 
information and technologies from research findings to practical 
application, whether for further research purposes or commercial 
products. At the NIH we transfer technology through publications of 
research results, exchange of data, sharing of materials, public-
private partnerships, as well as patenting and licensing technologies. 
Technologies licensed from the NIH include the HIV Test Kit, marketed 
by several companies including Abbott; Videx (ddI), marketed by 
Bristol-Myers Squibb for the treatment of HIV/AIDS; Vitravene, marketed 
by Isis Pharmaceuticals for the treatment of cytomegalovirus infections 
of the eye and the first product of its class; Zenapax, manufactured by 
Hoffman La Roche for the treatment of non-Hodgkin's lymphoma and the 
first radioimmunotherapy to be approved; and Fludara, marked by Berlex 
as a treatment for chronic lymphocytic leukemia (CLL).
    I direct the central technology transfer office at the NIH, which 
is located in the NIH's Office of the Director. Our responsibilities 
can be viewed as twofold. First, we are responsible for the 
identification, evaluation, protection, marketing, and licensing of 
technologies arising out of NIH laboratories to achieve the agency's 
mission. As a part of that activity, we monitor our licensees' progress 
and collect royalties from licensed technologies. Secondly, we provide 
policy direction to the agency and to scientists and administrators 
receiving NIH funding. We also represent the Department of Health and 
Human Services on technology transfer matters. Other technology 
transfer transactions, such as the negotiation of agreements to 
transfer materials and collaborations with private institutions, are 
conducted by technology transfer staff who are employed by the 
individual Institutes and Centers at NIH.
    The activities of the Office of Technology Transfer are carried out 
by a well-qualified staff and supported by contractors, including 11 
patent law firms. Members of our professional staff generally have at 
least one advanced degree, such as Ph.D., J.D., or M.B.A., and many 
have more than one advanced degree. Our staff administers over 1500 
active licenses and approximately 2,400 patents/patent applications. In 
Fiscal Year 2002, we had 331 Employee Invention Disclosures, 173 patent 
applications filed in the United States, and 88 patents issued, and we 
executed 231 license agreements.
    While we have these metrics as outputs of our activity, we have 
initiated through the GPRA process the development of a new metric to 
measure the ultimate outcomes of our activities. We have developed a 
system of case studies for technologies developed at the NIH and 
licensed to private sector partners for further development and 
commercialization. To date, we have completed two case studies: Havrix, 
the first vaccine against Hepatitis A; and Synagis, a therapeutic for a 
lower respiratory tract infection in infants and small children. This 
new metric provides a more complete view of the technology transfer 
process by providing a time line for the development of a technology 
into a final product, a description of the respective roles of the NIH 
and its private sector partner, and the impact of that new product on 
public health. It is that final measure that, we believe, provides the 
best indicator of success, since it addresses the NIH mission to 
improve public health. We expect to have three additional studies on 
our web site by the end of the calendar year, and we will be 
contracting for support to accelerate this process for all of products 
and materials that have reached the market utilizing at least in part 
technologies licensed from the NIH.
    NIH intramural research technology transfer activities, as is the 
case for all federal research and development technology transfer 
activities, are governed by the Stevenson Wydler Act, the Federal 
Technology Transfer Act, and subsequent legislation. The original 
legislation was enacted in 1980 as part of an economic stimulation 
package for the U.S. economy. The legislation calls for the Federal 
laboratories to review their research findings to determine if they 
constitute new inventions, whether patent protection should be sought, 
and finally to use mechanisms such as licensing to move these new 
technologies to the private sector for further development and 
commercialization.
    Our license agreements provide rights to use NIH technologies in 
return for royalty fees and, in the case of commercialization licenses, 
a commitment to bring the technology to the market. Fees are assessed 
usually on an annual basis throughout the term of the license or when 
certain milestones are reached. When a product reaches the market, our 
licenses call for a negotiated percentage of sales to be paid to the 
NIH. We have been able to generate strong returns from licensing 
activities. In Fiscal Year 2002, NIH generated $51M in royalty income. 
That amount represented about two-thirds of the royalty income 
generated by all the Federal laboratories combined. Over the past 9 
years, we have generated over $325M in royalty income. By law, we pay a 
prescribed portion of royalty income to inventors, and the remainder of 
royalty income is used for technology transfer activities and for 
further research.
    Our licensing policies, including the manner in which we grant 
licenses and structure the terms of those agreements, are also designed 
to promote the overall mission of the NIH. Exclusive licenses, which 
constitute a small portion of our total license portfolio, are granted 
when necessary as an incentive for a company to invest in the high-
risk, long-term commercial development of a particular technology. 
While our statutory authorities for licensing inventions prescribe the 
conditions under which we can grant exclusive licenses, we go a step 
further in ensuring that exclusive licenses encourage the broadest 
development of new technologies for the public good. For example, the 
scope of a license to a single technology with broad applicability is 
usually limited to include only those aspects of the technology the 
company intends to develop and demonstrates the capability to develop. 
Thus, multiple aspects of a single technology may be exclusively 
licensed to multiple parties. For example, a technology for treating a 
variety of cancers might be licensed to one company for lung cancer 
therapeutics and to another for liver and pancreatic cancer 
therapeutics. In addition, we require licensees to provide a plan to 
ensure the rapid development of the technology. Our monitoring group 
has post-licensure responsibilities to ensure that the company 
reasonably complies with these terms.
    This leads me to a brief discussion of the Bayh-Dole Act, which 
applies to recipients of Federal funds. This 1980 Act brought about a 
major change in governmental operations by permitting institutions 
receiving Federal funding for research and development, as grantees and 
contractors, to retain title to any invention developed with the use of 
Federal funds. Prior to this time, title to these inventions generally 
reverted to the U.S. Government, where they rarely were moved to the 
private sector and thus did not benefit the public.
    In return for the right to hold title to inventions developed with 
Federal funding, institutions agree to pursue practical application of 
those inventions and to provide the U.S. Government with a royalty-free 
right to use the invention for Government purposes. That Federal 
Government right does not extend from the federally-funded technology 
to the final product, except in those rare cases where the technology 
is a final product. Moreover, this Government license right applies to 
only the patent, that is, the intellectual property, not the tangible 
property that constitutes the physical embodiment of the invention.
    The legislation did not prescribe methods to be used in the 
licensing of those inventions, with a few exceptions. Institutions 
electing title are required to give preference to small, U.S. 
businesses in licensing their technologies; exclusive licensees are 
required to manufacture their product substantially within the US when 
a product is to be used or sold in the US; licensing terms should not 
encumber future research and discovery; and non-profit organizations 
must obtain Government approval to assign title to third parties.
    In most instances, NIH-funded technology, both in our intramural 
and extramural activities, is at the very early stage of development 
and requires much further research and development to bring the 
technology to the marketplace. The discovery may be a basic research 
finding without any animal testing or human clinical trials, a method 
for making or using a material, or a material that is only a part of 
the total technology that must be brought together to create a new 
product. As early stage technologies, they are highly risky projects 
for anyone to pursue and require a great deal of time and money to 
bring them to fruition. The closer a technology is to the marketplace, 
the lower the risk and cost to the licensee, and the more valuable the 
technology from a royalty standpoint.
    However, in both academia and Federal laboratories, technology 
transfer is a high-risk venture, and few inventions ultimately result 
in products that reach the marketplace. The NIH has been fortunate in 
having a number of its technologies licensed and incorporated into the 
process of manufacturing, administering, or as one of the ingredients 
in making new prescription drugs, therapeutics, and vaccines. In most 
cases, a federally-funded technology is combined with other 
intellectual property or know how, often proprietary to a company, to 
develop a final product.
    Due to the regulatory requirements on technologies that involve 
products used in humans, the development of biomedical technologies may 
take from 7 to 10 years to reach the market, if it ever reaches the 
market due to a high failure rate. This makes the biomedical technology 
development process expensive and risky.
    The NIH has been quite successful in its pursuit of technology 
transfer activities and is viewed by many as one of the premier 
biomedical technology transfer operations in the world. We are pleased 
to report that NIH technologies have been licensed as part of the 
development of 17 prescription drugs and vaccines approved by the FDA. 
Again, we have not developed the final products; our technology is only 
a part of the process for making or administering the product or 
ingredients incorporated in the product. Overall, about 200 products 
are sold utilizing, at least in part, technologies licensed from the 
NIH.
    I would also like to bring to your attention our biomedical 
research resources policy, known as our Research Tools policy. It is an 
important part of NIH's role to serve as a provider of technical 
assistance to NIH and recipient institution scientists and 
administrators. This policy arose from concerns in the scientific 
community that there appeared to be reluctance on the part of some 
institutions and researchers to share unique research tools at all or 
at least under reasonable terms. These tools include cells lines, 
strains of mice, reagents, monoclonal antibodies, and in some instances 
software. In response to the concern, the NIH asked a subgroup of the 
Advisory Committee of the Director to conduct a review. Their review 
found that these concerns were well founded and consequently 
recommended that the NIH develop guidelines for the research community 
to follow in combating the problem.
    In 1999, NIH issued a document entitled, ``Sharing of Biomedical 
Research Resources, Principles and Guidelines for Recipients of NIH 
Research Grants and Contracts.'' The policy applies to research tools 
developed with NIH funds and calls for the sharing of these tools among 
non-profit organizations with minimal terms and impediments. In the 
passage of the Technology Transfer Commercialization Act of 1999, P.L. 
106-404, language was added in support of the tools guidelines when 
they amended the Bayh-Dole Act's purpose. The language was changed to 
state that inventions made under Federal funding are to be brought to 
practical application in a manner to promote free competition and 
enterprise without unduly encumbering future research and discovery.
    This policy is now a term and condition of NIH grants, and the 
latest information we have gathered indicates that this policy has 
significantly improved the sharing of materials between non-profit 
institutions, has improved sharing between non-profit institutions and 
for-profit entities, and reportedly has also improved the sharing by 
for-profits with non-profit entities. We continue to monitor this area 
to ensure that our recipients are complying with the intent of the 
policy.
    While my comments have centered mostly on licensing activities, I 
have mentioned other technology transfer mechanisms including public-
private partnerships, such as Cooperative Research and Development 
Agreements (CRADAs) and Clinical Trial Agreements. I would be pleased 
to provide information on these mechanisms if the Subcommittee so 
desires.
    In summary, the field of technology transfer combines legal, 
business, and scientific skills to bring about the movement of research 
findings to promote further research or to develop them further into 
products of use to the public. It is through our statutory framework, 
unique institutions, and public-private partnerships that the Nation 
has created the most envied research enterprise in the world. I can 
assure you, Mr. Chairman and members of this Subcommittee, that the NIH 
is committed to its mission of improvement of public health and will 
utilize all of the mechanisms it has to achieve that mission. I thank 
you for the opportunity to come before you today and I welcome any 
questions you may have.

    Mr. Bilirakis. Thank you very much, Doctor.
    Dr. Barker?

                    STATEMENT OF ANNA BARKER

    Ms. Barker. Good morning. Thank you, Mr. Chairman and 
members, for the opportunity to be here today to discuss a new 
task force that the NCI has established with the Food and Drug 
Administration. I have the privilege of co-chairing that task 
force, along with Dr. Mullin, who will speak after me.
    Before highlighting the mission and work of this task 
force, I would like to focus just briefly on the stunning 
advances in biomedical research over the past few years that 
recently led our Director at the National Cancer Institute, 
Andy von Eschenbach, to challenge the cancer community with a 
goal, and that goal is to eliminate suffering and death due to 
cancer and to do it by 2015.
    That is a daunting and challenging goal for all of us. Why 
do we believe that that is a feasible goal, even though it is a 
major challenge? The reason is that progress in research over 
the past few years has led to unimagined advances across the 
entire research continuum of discovery, development, and 
delivery. As a result, we have reached an inflection point in 
research, meaning that progress from this point forward can be 
unprecedented and nearly unimagined.
    The sequencing of the human genome, which you heard about 
from Francis Collins recently, and associated progress in new 
areas such as genomics and proteomics, are allowing us to 
dissect out the genetic changes and mechanisms that actually 
produce cancer. We now understand that cancer is a process--a 
process with multiple opportunities to develop new, more 
effective interventions to detect, treat, and prevent this 
disease.
    The development of targeted therapies and preventives for 
cancer is really within our grasp. For the first time in our 
national effort to conquer this devastating disease, we have 
proof of concept. What do I mean by that? With new targeted 
drugs, such as Gleevec that you just heard about from Dr. 
Lindberg, we are on the threshold, we believe, of a paradigm 
shift in the way we treat cancer. This new approach is based on 
targeting specifically molecular defects in tumor cells, and we 
believe this will allow us to move from a model of toxic, 
moderately effective agents, to highly efficacious drugs with 
minimal toxicity.
    Genomics and proteomics, combined with progress in 
bioinformatics, immunology, nanotechnology--and I could go on--
other areas of science, also offer us the ability to detect 
cancer early before it metastasizes, and to adopt rational 
approaches, finally, for preventing the disease.
    To achieve this goal of eliminating suffering and death 
from cancer, we must match the extraordinary advances in basic 
science fueled, in large measure, by the doubling of the NIH 
research budget over the last 5 years. We must also make 
progress in translating that research into patients and 
delivering those agents to people in need.
    To optimize and hopefully accelerate efforts to translate 
these advances from the laboratory into the clinic, we have 
undertaken a range of new initiatives. Our new partnership with 
the FDA is one of those initiatives. There are others.
    NCI has a long history of working with the FDA to deliver 
safe, more effective drugs to patients as soon as possible. For 
example, a currently ongoing program at the NCI and the FDA in 
clinical proteomics is allowing our agencies to jointly provide 
the foundation for the new development of proteomics-based 
diagnostic technologies.
    These new revolutionary technologies developed through the 
clinical proteomics program have generated protein 
fingerprints, or patterns, that may provide early warnings of 
cancer and offer new ways to measure drug side effects. This 
collaboration has yielded the identification of more than 130 
proteins in cancers of the breast, ovary, and prostate, the 
change in types and amounts as the cells in these tissues grow 
abnormally, and they can be detected.
    NCI and FDA staff will continue to develop this particular 
program and use it as a foundation, along with others, to build 
initiatives in other areas, such as diagnostic imaging and 
molecular targeting.
    Although it is early in the work of this taskforce, Dr. 
Mullin and I and our colleagues have just begun. We have 
identified several areas of common interest across this 
continuum of research, including the development of a formal 
interagency agreement, which will allow us to do several 
things, common bioinformatics platforms, and joint programs to 
further optimize the processes that we undertake to develop 
drugs, including science-based models for endpoints to assess 
clinical benefit patients.
    And, finally, joint training programs and appointments for 
staff--although I don't have time during my opening comments to 
discuss each of these activities, we anticipate that each of 
these focus areas will be valued in our joint efforts. For 
example, a common bioinformatics platform will be key to 
improving the reporting of data across the continuum of drugs 
and device discovery and development, especially in areas such 
as reporting of clinical trials.
    This is a key step in evaluating the safety and efficacy of 
new drugs and technologies in patient populations. Since both 
agencies have significant strengths in these areas, we are 
exploring ways to leverage both of our capabilities.
    The task force will also examine science-based strategies 
that could enable the development of standard approaches for 
evaluating potential biomarkers of clinical benefit. Some of 
these biomarkers and technologies may some day serve as 
surrogate endpoints for the conventional measures that we 
usually use to measure clinical benefit and clinical trials.
    Finally, all of these initiatives will benefit from staff 
training and joint appointments of staff and fellows, who will 
have training rotation at both agencies. The task force is 
currently assessing existing programs that offer opportunities 
for joint training and appointments, as well as determining 
needs for efforts in areas such as new technologies.
    In conclusion, the goal of this task force is to ensure 
that the NCI and the FDA work together more effectively than 
ever before for the benefit of cancer patients and their 
families. With over 1.4 million Americans expected to be 
diagnosed with cancer this year, and 560,000 people expected to 
die from this disease--1,500 people today--NCI is committed to 
meeting the challenge of eliminating suffering and death from 
this tragic disease.
    We anticipate that this new alliance with the FDA will 
facilitate a seamless continuum across discovery, development, 
and delivery of new cancer drugs and devices that will be 
needed to achieve our goal.
    Our Director, Dr. von Eschenbach, features on the cover of 
our plan for 2004 made the following statement, ``When I look 
into the eyes of a patient losing the battle with cancer, I say 
to myself it just doesn't have to be this way.'' We are 
committed to ensuring that it just doesn't have to be this way.
    Thank you again for this opportunity to discuss this new 
initiative. We are excited about this new collaboration with 
the FDA. And I would be happy to answer any questions when we 
get to the question period.
    Thank you very much.
    [The prepared statement of Anna Barker follows:]

   Prepared Statement of Anna Barker, Deputy Director for Strategic 
Scientific Initiatives, National Cancer Institute, National Institutes 
           of Health, Department of Health and Human Services

    Good morning, I am Dr. Anna Barker, Deputy Director for Strategic 
Scientific Initiatives for the National Cancer Institute (NCI) of the 
National Institutes of Health within the Department of Health and Human 
Services, and Co-chair of the NCI/FDA Oncology Task Force.
    Thank you, Mr. Chairman and distinguished members of the 
Subcommittee, for the opportunity to be with you this morning to 
discuss the National Cancer Institute's recent announcement of the 
formation of joint Task Force with the Food and Drug Administration 
(FDA). The mission of the Task Force is to work together to explore 
areas of mutual interest and responsibility that could better inform 
and optimize the development and review processes for new cancer drugs 
and technologies. The scope of this Task Force includes several areas 
of common interest including the extension of current collaborations 
and the development of: 1) a formal interagency agreement; 2) 
bioinformatics platforms; 3) joint programs to further optimize each 
agency's research and regulatory processes; 4) science-based models for 
endpoints to assess clinical benefit in patients; and 5) joint training 
programs and appointments for staff. NCI is committed to meeting the 
challenge of eliminating suffering and death due to cancer by 2015; and 
we anticipate that this collaboration with the FDA will help to achieve 
that goal by providing safe, more efficacious cancer drugs to patients 
sooner.
    With over 1.4 million Americans diagnosed with cancer each year, 
NCI recognizes the need for a closer collaboration with the FDA in 
order to best serve patients' needs. NCI's goal, in furthering all of 
its collaborations with the FDA, is to work jointly to improve 
communication and outcomes in key areas of cancer drugs, especially 
targeted agents and diagnostics development. This alliance with the FDA 
will focus on the development of a seamless continuum between 
discovery, development, and delivery of new cancer drugs and devices.
    Exponential growth in biomedical research and the explosion of 
enabling technologies have resulted in a ``new science'' of oncology. 
Since there is still a great deal that we must learn about cancer, we 
must continue to support the biomedical research that drives this 
engine of discovery. In parallel, it is critical that we translate our 
understanding of cancer beyond the cell into the individual and into 
specific populations. The sequencing of the human genome and our 
sustained investment in all areas of biomedical research have led to an 
ever-increasing fundamental understanding of cancer as a disease 
process. This foundation of knowledge now provides us with multiple 
opportunities to intervene at various steps of this process through the 
development of new drugs and technologies to detect, prevent, and treat 
cancer. We must capitalize on this 21st century ``inflection point'' in 
cancer research, accelerate the translation of knowledge into new 
interventions for cancer patients, and ensure that they are delivered 
to all who are in need.
    The collaboration between the NCI and the FDA will be formalized 
through an interagency agreement. Interagency agreements between 
government agencies allow and facilitate the exchange of services, 
supplies, advice, counsel, and funds. NCI has several successful 
Interagency Agreements already in place with the FDA, including the 
Cooperative Center for Biologics Evaluation and Review-NCI Microarray 
Program for the Quality Assurance of Cancer Therapies and other 
Biological Products, and the FDA-NCI Clinical Proteomics Program. The 
clinical proteomics initiative has allowed our agencies to jointly 
provide the foundation for the development of proteomics-based 
diagnostics technology.
    Proteomics is the study of the proteins that are produced by cells 
to carry out the specific tasks that underlie most of our life 
processes. New technologies that were developed through the Clinical 
Proteomics Program have generated protein fingerprints that may provide 
early warnings of cancer and offer new ways to measure drug side 
effects. This collaboration has yielded the identification of more than 
130 proteins in cancers of the breast, ovary, and esophagus that change 
in types and amounts as the cells in these tissues grow abnormally. The 
assessment of these patterns may provide new means of diagnosing and 
treating cancers earlier. Most recently, this collaboration has 
produced a new technique that may allow physicians to monitor patients' 
responses to molecularly targeted drugs. In one study, researchers 
successfully identified specific proteins that may be useful in 
monitoring patients treated for breast and ovarian cancer. This 
approach could assist physicians in monitoring patients on therapy to 
determine if a particular drug is working effectively. The NCI-FDA 
proteomics team has developed new tools for visualizing and analyzing 
protein patterns that reduces the risk of error, increases 
productivity, and provides an efficient method to analyze large sets of 
protein data. NCI and FDA staff will continue to develop this clinical 
proteomics collaboration and use it as a foundation to build 
initiatives in other areas, such as diagnostic imaging and molecular 
targeting.
    The FDA-NCI Task Force will also explore opportunities to 
facilitate the sharing of information technologies and tools that may 
further optimize the drug and device development process. To this end, 
the Task Force has established a working subgroup to examine the 
potential of creating an overarching and inclusive bioinformatics 
structure that is capable of capturing and integrating data from 
preclinical, pre-approval, and post-approval research across all the 
sectors involved in the cancer drug development and delivery process. 
Bioinformatics is a key linkage across the discovery, development, and 
delivery continuum--and common data platforms for communication will be 
key to future progress. A new NCI initiative, the NCI Cancer 
Bioinformatics Grid (CaBIG), which will be piloted in a selected number 
of NCI cancer centers and programs this year, will provide tools and 
expertise to support the achievement of this goal.
    Common bioinformatics platforms will serve to facilitate the 
performance and reporting of clinical trials--a key step in evaluating 
the safety and efficacy of new drugs and technologies in patient 
populations. The Task Force also plans to identify opportunities to 
optimize other interfaces that occur across the continuum of drug and 
device development and delivery. An additional focus of the group's 
efforts to optimize the work of all sectors is the further development 
of biomarkers; which have the potential to optimize and accelerate both 
the discovery and development of new targeted cancer drugs for 
treatment--and to improve diagnostics for early detection of cancer.
    The group will mutually examine science-based strategies that could 
enable the development of standard approaches for evaluating potential 
biomarkers of clinical benefit. Some of these biomarkers and 
technologies may someday serve as surrogate endpoints for the 
conventional measures of clinical benefit currently being used to 
assess new agents and technologies. NCI and FDA will explore ways to 
develop the science required for the development of evidence-based 
standards and approaches to evaluate these endpoints. A portion of this 
effort will also be dedicated to further study of standards and 
processes that could facilitate the development of safe agents for 
cancer prevention, especially chemoprevention.
    Finally, all of these initiatives will benefit from staff training 
and joint appointments of staff and fellows, who will have training 
rotations at both agencies. The Task Force is currently assessing 
existing programs that offer opportunities for joint training and 
appointments as well as determining opportunities for new efforts in 
areas such as new technologies.
    In conclusion, the goal of this Task Force is to ensure that the 
NCI and FDA work together more effectively than ever before--for the 
benefit of cancer patients and their families. We have a tremendous 
opportunity to optimize and hopefully to accelerate the development 
process for new cancer drugs and diagnostics. Bridging the gaps between 
research and regulatory processes benefits everyone involved, 
especially cancer patients. Building on past collaborative efforts with 
FDA, and working toward the development of a seamless continuum between 
the discovery, development and delivery of safe and effective drugs, 
will help the NCI achieve its goal of eliminating suffering and death 
due to cancer by 2015.
    Thank you again for this opportunity to discuss NCI's new 
collaboration with FDA to optimize and accelerate the development of 
safe and more effective drugs and technologies to detect, prevent, and 
treat cancer. I will be happy to answer any questions that the 
Subcommittee may have.

    Mr. Bilirakis. Thank you very much, Dr. Barker.
    Dr. Mullin?

                 STATEMENT OF THERESA M. MULLIN

    Ms. Mullin. Good morning, Mr. Chairman, Ranking Member 
Brown, and members of the subcommittee. I am Theresa Mullin, 
the Assistant Commissioner for Planning at the U.S. Food and 
Drug Administration.
    And since January of 2003, I have been directing FDA's 
development of a new strategic plan, have played the lead role 
in coordinating the Agency's new initiative to ``Improve 
Innovation in Medical Technology Beyond 2002.'' And I am co-
chairing with Dr. Barker the Interagency Oncology Task Force, 
and we appreciate the opportunity to testify with NCI about our 
collaborative efforts to facilitate drug development.
    Today, I would like to provide FDA's perspective on why we 
are entering into this collaboration and what we hope to 
achieve.
    FDA's primary role is to ensure the safety and 
effectiveness of drug products through pre-market drug review 
and post-marketing safety. Today I will focus on our role in 
the pre-market phase.
    There are several phases to drug development, and FDA 
interacts with product sponsors all along the way. This enables 
the sponsor to focus research on studies of compounds that are 
likely to lead to approval. And after completing and analyzing 
their research, sponsors, including NCI-funded researchers, 
file an application with FDA. The application provides evidence 
from clinical trials to demonstrate that a product is safe and 
effective for its intended use.
    By setting clear standards for the evidence that we need in 
order to approve a product, we can take the guesswork out of 
the process. Under the prescription drug user fee program, FDA 
is committed to goals for fast review and action on submitted 
applications. For example, we are committed to completing the 
review and acting on 90 percent of submitted priority 
applications within 6 months.
    In 2002, FDA continued to meet those review goals, but the 
number of approvals for truly new drugs is now at the lowest 
level we have seen in about 10 years. This is directly related 
to the decline in the number of applications submitted to FDA 
for new drugs, new molecular entities, and biologic licensing 
applications. But this is a worldwide phenomena right now.
    This chart you see over here with the bars shows you the 
trends in filed applications and those approved. The line shows 
the number of filed applications, and this is just looking at 
new molecular entities. That is the really new drug 
applications and biologic licensing applications, and the bars 
show the number of approvals for those kinds of products. And 
you can see that there really is a pattern that follows. What 
we get submitted to us is what we can work with for approvals.
    But we think that this is temporary, because at the same 
time that that is occurring the government and industry are 
spending significantly increased amounts of funds on research 
and development, and there are a lot of complex and innovative 
new products in development, as Dr. Barker was describing and 
others have described. And so we see this as an opportunity for 
FDA and NCI to move more products to applications.
    In January of this year, FDA launched an initiative to 
improve innovation in medical technology, and that focuses on 
trying to maximize our efficiency in reviewing and 
communicating with sponsors, and also trying to put out the 
best guidance possible for sponsors to speed development all 
along the pipeline.
    My second chart shows the drug development pipeline, and 
the lettering in orange--it is too small for you to read I 
think from where you are sitting, but it describes some of the 
problems that sponsors may face in trying to develop products 
all along the way. And below that we have in green, which I am 
afraid you also can't see, what FDA--the kinds of actions that 
FDA is trying to take all along the way to help products move 
as quickly as possible.
    And as part of that initiative, we will be clarifying 
regulatory pathways for some emerging technologies, for 
example, cell and gene therapies. And we are developing 
guidance to help specify the clinical endpoints for clinical 
trial design, and so that we can get the best quality 
applications possible submitted, and that allows us to avoid 
delays in approval and helps reduce development costs.
    Our collaboration with NCI and the interagency task force 
is really a great fit to what we are trying to do in this more 
general way and allow us to expand and strengthen our work in 
trying to develop new cancer drugs and helping with speeding 
the drug--development of cancer products.
    The NCI/FDA collaboration will provide FDA reviewers with 
some exposure--additional exposure to state-of-the-art 
technologies, and that will give them a better understanding of 
those technologies for products in development. By the same 
token, NCI researchers could benefit from hands-on experience 
with the FDA review process to understand better the kinds of 
evidence of safety and effectiveness that are looked for for 
quick approval of new products.
    Although the interagency task force is at its early stages, 
we are considering several areas--I will be brief here, because 
Dr. Barker has described them--but joint training and 
fellowships, development of markers of clinical benefit, 
including surrogate endpoints, information technology 
infrastructure to better collect and share data, and improve 
the development process.
    We look forward to collaborating with NCI in building on 
the Institute's cancer bioinformatics infrastructure to 
streamline data collection, for example, integrating data 
analysis for preclinical, preapproval, and postapproval 
research. This spans all of the sectors in development and 
delivery of new cancer therapies, and we are hopeful that that 
collaboration will ultimately help reduce the reporting burden 
for clinical investigators and improve the quality of the data.
    The Tufts Center for the Study of Drug Development has 
noted that faster development times and quicker decisions to 
terminate unsuccessful compounds and higher success rates 
provide industry with substantial savings in drug development. 
But NCI is also engaged in development and, clearly, they 
should also benefit from those opportunities. So the 
discussions of our task force will probably yield additional 
ideas for streamlining the process.
    In conclusion, FDA's safety and effectiveness standards are 
viewed by many as the gold standard, and FDA is recognized as a 
world leader in both quality and speed of regulatory review. We 
believe that FDA and NCI's new interagency oncology task force 
will further our goals in providing new drugs for patients who 
need them as swiftly and cost effectively as possible.
    I am happy to answer any questions you have.
    [The prepared statement of Theresa M. Mullin follows:]

  Prepared Statement of Theresa M. Mullin, Assistant Commissioner for 
                 Planning, Food and Drug Administration

                              INTRODUCTION

    Mr. Chairman, Ranking Member Brown and Members of the Subcommittee, 
I am Theresa Mullin, Assistant Commissioner for Planning at the U.S. 
Food and Drug Administration (FDA or the Agency). I advise and assist 
the Commissioner concerning the performance of FDA planning, evaluation 
and economic analysis activities. Since the beginning of January 2003, 
I have been directing FDA's development of a new strategic plan and 
have played a lead role in coordinating the Agency's new initiative to 
``Improve Innovation in Medical Technology Beyond 2002.'' I am also Co-
Chair of the National Cancer Institute (NCI)/FDA Interagency Oncology 
Task Force, which involves senior staff from both agencies.
    We appreciate the opportunity to testify with NCI about our 
collaborative efforts to facilitate cancer drug development. As you may 
know, we are at the very beginning of this new initiative, but this is 
a goal that both agencies have shared. Today I will provide FDA's 
perspective as to why we are entering into this collaboration and what 
we hope to achieve.

                     FDA'S DRUG DEVELOPMENT PROCESS

    FDA's primary mission is to protect and promote the public health. 
One way we do this is by promptly and efficiently reviewing 
investigational new drug applications (INDs) for clinical studies 
within 30 days of submission by the product sponsor. In addition, FDA 
reviews new drug applications (NDAs) and biologics license applications 
(BLAs) and does so on an expedited basis for applications with priority 
status, such as those for new cancer drugs. We also monitor on-going 
clinical studies to ensure that subjects who volunteer for studies are 
protected and that the quality and integrity of scientific data are 
maintained.
    There are several phases to drug development, and FDA makes itself 
available to interact with product sponsors during this process (see 
Attachment A, Drug Development Pipeline). Meetings requested by the 
sponsor provide an important venue for communication. Formal meetings 
were established by Congress under the FDA Modernization Act of 1997, 
and FDA has committed to performance goals for such meetings under the 
Prescription Drug User Fee program. These meetings can occur from the 
pre-IND phase all the way to pre-NDA/BLA submission. FDA receives 
requests for and convenes over 1,000 such meetings with sponsors each 
year. Meetings with FDA can help sponsors to clarify research questions 
that need to be addressed, identify earlier the unsuccessful compounds, 
and focus research on studies of compounds that are likely to lead to 
approval. The Tufts Center for the Study of Drug Development has cited 
earlier consultation between FDA and sponsors as a key factor in 
reducing drug development time. Tufts estimates that shifting 5 percent 
of all clinical failures from Phase III/regulatory review to Phase I 
would reduce out-of-pocket clinical costs by up to $20 million.
    Upon completing and analyzing their research, sponsors, including 
NCI-funded researchers, send us applications providing evidence from 
clinical trials to demonstrate that a product is safe and effective for 
its intended use. We assemble a team of physicians, statisticians, 
chemists, biologists, microbiologists, pharmacologists, and other 
scientists to review the sponsor's data and proposed labeling for the 
drug. By setting clear standards for the evidence we need to approve a 
product, we try to take the guesswork out of the process and help 
medical researchers bring new products to American consumers more 
rapidly.
    Once a drug is approved for sale in the United States, our consumer 
protection mission continues. We monitor the use of marketed drugs for 
unexpected health risks. If new, unanticipated risks are detected after 
approval, we take steps to inform the public and change how a drug is 
used or even remove a drug from the market. We also monitor 
manufacturing changes to make sure they will not adversely affect 
safety or efficacy. We evaluate reports about suspected problems from 
manufacturers, health care professionals and consumers.
    As the pharmaceutical industry has become increasingly global, we 
are involved in international negotiations with other nations to 
harmonize standards for drug quality and the data needed to approve a 
new drug. This harmonization can assist in reducing the number of 
redundant tests manufacturers do and help ensure drug quality for 
consumers at home and abroad.

                CURRENT STATUS OF FDA NEW DRUG APPROVALS

    By the end of 2002, FDA was able to meet all of the review goals 
for NDAs and BLAs established under the Prescription Drug User Fee Act. 
We evaluated many new drugs that offered important treatment options 
for Americans. Thanks to the enormous growth in research investments, 
more complex and innovative products are in development. We see this 
situation as one of great opportunity, and FDA is doing its part to 
help sponsors capitalize on the opportunities presented. However, we 
are concerned that the number of approvals for truly new drugs is at 
the lowest level in a decade, and this is directly related to the 
decline in the number of new applications for drugs and biologics being 
submitted to the Agency for approval. This trend is illustrated in the 
bar chart depicted in Attachment B. This pattern is occurring at the 
same time that the government is allocating significantly more 
resources to promote research, and the pharmaceutical industry has 
increased spending on research and development to more than $30 billion 
per year.

                   FDA MEDICAL TECHNOLOGY INITIATIVE

    In January of this year, FDA launched an initiative to improve the 
development and availability of innovative medical products. We 
recognize that early communication with sponsors is essential to 
achieve the Agency's goal to further reduce delays and avoidable 
product development costs, and also to improve the quality of new 
product applications. With the complex new technologies in development, 
FDA sees an opportunity to reduce the uncertainty for product 
innovators, including small companies with limited experience bringing 
a medical technology to commercial development. We are working to 
clarify regulatory pathways for emerging technologies, by, for example, 
working to further characterize, and define the dosing for new products 
like cellular and gene therapies. Also, we think it would help sponsors 
for FDA to update current guidance and provide new ones that specify 
clinical endpoints, including surrogate endpoints, such as tumor 
shrinkage, that will provide good evidence of safety and effectiveness 
for new treatments for particular diseases. FDA hopes to facilitate the 
development of new technology by addressing and clarifying regulatory 
uncertainty and by increasing the predictability of product 
development. Some of the steps FDA is taking under its new initiative 
to more quickly facilitate the drug development process are listed in 
Attachment A.
    In addition to doing what we can to help sponsors improve the 
quality of their data and submitted applications, the Agency is also 
taking steps to further improve its application review process by 
identifying and addressing the causes of avoidable delays in new drug 
review. This month we expect to publish a request for proposals to 
conduct both a retrospective analysis and a prospective evaluation of 
our review process and to provide us with ideas for possible process 
improvements based on comments from both FDA staff and drug sponsors.

                         NCI-FDA COLLABORATION

    FDA is committed to finding better ways to get safe and effective 
treatments to patients with life-threatening diseases as quickly as 
possible. FDA's participation in the NCI-FDA Oncology Task Force is 
consistent with the Agency's initiative to improve the development and 
availability of innovative medical products. FDA's role is to help 
ensure the safety and effectiveness of drug products through the pre-
market drug review process and through post-marketing programs. Through 
basic and clinical biomedical research and training, NCI conducts and 
supports programs to understand the causes of cancer; prevent, detect, 
diagnose, treat, and control cancer; and disseminate information to the 
practitioner, patient, and public. NCI's clinical research for new drug 
development is also subject to FDA regulation and oversight.
    The NCI-FDA collaboration will provide FDA with exposure to state-
of-the-art technology that will enable the Agency to have a better 
understanding of new products in development. Similarly, NCI will 
benefit from hands on experience with FDA's review process that will 
help it to conduct and oversee research to provide evidence of safety 
and effectiveness, resulting in faster development of approvable 
products. We are hopeful that our collaborative efforts will result in 
better communication between reviewers and researchers, which we 
believe is essential to improving the development and availability of 
innovative medical products. Though the Task Force is in its early 
stages, we are considering several areas of collaboration including: 
joint training and fellowships; developing markers of clinical benefit, 
including surrogate endpoints; information technology infrastructure to 
better collect and share data; and ways to improve the drug development 
process.

Joint Training and Fellowships
    Staff capabilities can be enhanced through collaborative training, 
joint rotations, and joint appointments. We hope that bridging gaps 
between research and regulatory processes will make the drug 
development process more efficient. As noted above, early effective 
communication between researchers and reviewers is critical in product 
development. Cancer drugs are typically designated by FDA as priority 
review products and are eligible to be designated as ``Fast Track'' 
products. Beginning in fiscal year 2004, FDA will be piloting two 
programs to provide earlier FDA review and feedback for ``Fast Track'' 
products while they are still in development.
    While a primary goal of the NCI/FDA collaboration is to provide 
cross-fertilization between the two agencies, the Task Force will also 
explore the possibility of a nationwide program to rotate fellows 
through FDA and NCI who have completed their training in medical 
oncology.

Developing Markers of Clinical Benefits
    The Medical Technology Initiative that FDA announced last January 
included a series of collaborative discussions with the American 
Society of Clinical Oncology to identify appropriate endpoints for 
clinical trial design for cancer therapies, by type of cancer and stage 
of disease. NCI is also involved in this process. These identified 
endpoints will be published in guidance documents. Such guidance 
documents, developed in collaboration with other government and 
academic organizations, the pharmaceutical industry, health 
practitioners and patients, can help sponsors structure claims, offer 
proven standardized approaches to evaluating efficacy, and give 
insights into safety testing. In NCI-FDA's Interagency Task Force 
discussions to date, there has been interest in further extending this 
work and in further identification of clinically valid surrogate 
endpoints.
    NCI and FDA will also continue their current collaboration 
involving proteomics, the discovery of protein markers in the blood 
that can be used to detect and monitor disease course and drug 
response. In addition, FDA's Center for Biologic Evaluation and 
Research is currently collaborating with NCI on a Microarray Program 
for the Quality Assurance of Cancer Therapies including therapeutic 
cancer vaccines and other cellular and gene therapy biological 
products. The Microarray Program has provided a foundation for the 
identification of new molecular targets, understanding of the mechanism 
of action of targeted cancer therapeutics, and characterization of 
complex therapeutic cancer vaccines. As potency and identity of these 
cancer vaccines is difficult to assign, the genomics (study of genes)-
based technology provides a novel approach to achieving this goal.

Information Technology Infrastructure
    FDA looks forward to collaborating with NCI building on its cancer 
bio-informatics infrastructure to streamline data collection, 
integration and analysis for pre-clinical, pre-approval, and post-
approval research across all of the sectors involved in the development 
and delivery of cancer therapies. We are hopeful that this 
collaboration may ultimately reduce the reporting burden for clinical 
investigators and improve the quality of reported data. Some proposals 
being considered are: creation of a shared repository for clinical 
investigator Curricula Vitae (CVs) to keep current and to eliminate the 
requirement of repeated submissions of such CVs. Another proposal being 
explored is for development of templates for INDs and clinical trial 
protocols to simplify the process of creating and submitting these 
documents and improve the quality of submissions. NCI grantees may also 
be product sponsors that FDA regulates. Given this dual role, there may 
be duplicative reporting requirements that we may be able to streamline 
through this collaborative effort.

Improving the Drug Development Process
    Tufts Center for the Study of Drug Development has noted that 
faster development times, quicker decisions to terminate unsuccessful 
compounds, and higher success rates would enable industry innovators to 
reap substantial savings in the cost of new drug development. NCI is 
the sponsor of many cancer studies regulated by FDA. They too can 
benefit from faster development times, quicker decisions to terminate 
unsuccessful products, and higher success rates.

                               CONCLUSION

    The safety and effectiveness standards for drug review and approval 
in the U.S. are viewed by many as the ``gold standard.'' FDA is the 
recognized world leader in both the quality and speed of regulatory 
review. The scientists at FDA constantly strive to maintain these high 
standards and we believe that the new NCI-FDA Interagency Oncology Task 
Force will further our goals of providing new life-saving drugs to 
patients who need them as swiftly and cost-effectively as possible.
    I am happy to answer any questions you may have.

    Mr. Bilirakis. Thank you very much, Dr. Mullin.
    I hear your testimony, and all I can think of is wow. Yet 
at the same time, think back--I lost my sole surviving brother 
this last April to lung cancer, and, you know, it makes me 
wonder. You know, all of these good things are taking place, 
but he wasn't helped.
    Let me ask Drs. Barker and Mullin very quickly, is the task 
force--has the task force been created--and it sounds like 
gangbusters to me, so I commend you for it. But was it created 
because the feeling was that there is just a lack of proper 
coordination among NCI and FDA? What would you say there?
    Ms. Mullin. I will speak first, if Dr. Barker----
    Mr. Bilirakis. Yes, very quickly.
    Ms. Mullin. I think we actually see that we have a lot of 
good success, that it looks like a great opportunity to build 
on what we have got already. There are a number of 
collaborations going on, and we want to take it up to the next 
level, I think, and do it more broadly. We see a lot of 
synergy.
    Mr. Bilirakis. Should the same thing be done regarding 
other diseases, other institutes, etcetera?
    Ms. Mullin. I think so, and I know our Commissioner, Dr. 
McClellan, is reaching out. And we are looking for 
opportunities to do this.
    Mr. Bilirakis. Is he? Great.
    Ms. Mullin. Yes.
    Mr. Bilirakis. Okay. Dr. Barker, is there anything you 
wanted to add?
    Ms. Barker. I would just add, actually, I think it is more 
opportunity than anything else. In the cancer arena especially, 
we have a pipeline of a hundred, maybe thousands of 
opportunities for new drugs and diagnostics. And I think we 
want to do everything we can to help the FDA by bringing our 
science forward in ways that can inform these processes.
    And it helps that I think that within 24 hours actually of 
Dr. McClellan's appointment, Dr. von Eschenbach was in his 
office offering him the opportunity to work with him. Dr. 
McClellan was enthusiastic about this, and the task force just 
grew out of that almost immediately. So I think we are all 
committed to this.
    Mr. Bilirakis. That is terrific, and I do think it should 
be considered for other diseases.
    Dr. Lindberg, are you aware of any research materials 
produced largely in part by federally funded projects that are 
not made publicly available? And if they are, if that is the 
case, why aren't they?
    Mr. Lindberg. I don't, but there is a variety of mechanisms 
involved. NLM really deals with the published scientific 
literature, and generally speaking there is not a great amount 
of delay in bringing forward those announcements.
    In addition to the literature itself, of course, this 
sometimes involves materials--organisms or tissues or 
whatever--as an integral part of the research. And NIH has 
taken the formal position of stating that it wants to encourage 
the ready availability of both kinds of results of research 
funded by public funds as quickly as possible.
    Mr. Bilirakis. Well, you illustrate in your written 
testimony how health care providers are able to access journal 
articles on Medline in order to get up-to-the-minute 
information, etcetera. Obviously, it is an undeniable benefit. 
But I am curious about what type of doctors have been able to 
take most advantage of this service. Are the patterns of 
utilization different between doctors who practice in urban 
areas versus those who practice in rural or frontier 
communities?
    And, of course, I would ask: does the Library have the 
capability to track this type of information? Otherwise, you 
wouldn't be able to answer my question, right?
    Mr. Lindberg. We are concerned about all of those things. 
Historically, actually, the Library has taken the point of view 
that it would pay for the communication costs, even before 
there was Internet, so that there was exact parity whether you 
practice in a rural area or a metropolitan area, because the 
communication costs were absorbed in what were earlier the 
charges for the search.
    We do, however, worry more about the availability of 
computers and Internet connections on the part of the public, 
because we think probably only half of the people really have 
that access. And so we have initiated a string of experiments 
with public libraries, because they are more numerous and they 
are more likely to be at a community level, asking ourselves 
whether the public would bring medical questions to the 
library, what are the nature of the questions, how good are the 
answers, how can we help.
    And in all cases, we found that it is actually a very good 
strategy. People do bring questions to the libraries. In many 
cases, they get very, very good answers, and what worried me 
was, how can we help? Because I was afraid that they were going 
to say that we would like you to provide $10 interlibrary loans 
to 100 million people.
    But, in fact, the answer was that the public library people 
would like instruction from the medical people on how to do 
these sort of searches, and that, of course, is readily 
available. So that is a somewhat long-winded answer to your 
good question.
    Mr. Bilirakis. Well, you have indicated a possible lack of 
computers, but could a country doctor, for instance, pick up 
the telephone and call the Library of Medicine and----
    Mr. Lindberg. Oh, absolutely.
    Mr. Bilirakis. [continuing] get the information that they 
might need?
    Mr. Lindberg. Yes, sir. Happens all the time.
    Mr. Bilirakis. It happens all the time.
    Mr. Lindberg. Yes.
    Mr. Bilirakis. So my son who is an internist--I don't know, 
how long has he been out of medical school now? Ten years I--
anyhow, he would know that the Library of Medicine is available 
for this type of information?
    Mr. Lindberg. I am pretty certain that he would. We get 
about a million calls a day.
    Mr. Bilirakis. I guess I will have to ask him that. You do, 
a million calls a day?
    Mr. Lindberg. Yes.
    Mr. Bilirakis. Wow.
    Mr. Lindberg. And of that, about 30 percent actually are 
non-doctors, non-scientists, ergo members of the public. Of 
course, we know we can all wear more than one hat. But 
basically about a third of the use of the Library is now the 
public, and we are very happy about that.
    Mr. Bilirakis. Okay. Thank you. Thank you very much.
    Mr. Brown?
    Mr. Brown. Thank you, Mr. Chairman.
    I would like to ask all four panelists one sort of 
central--at least central in my mind--question. I would start 
with the technology transfer of Taxol, which has been a very 
successful--for the public and successful for Bristol-Meyers 
and successful for the government--drug.
    I think that the facts generally are well known--the GAO 
report of earlier this summer. NIH invested $484 million on 
discovering/developing Taxol, most of that from the National 
Cancer Institute. Some of that money was to begin the clinical 
trials. Bristol-Meyers told GAO, although GAO seems to look at 
this number with a bit of skepticism, that once they were given 
the drug to produce and market they spent somewhere in the 
vicinity of a billion dollars, including their clinical trial 
costs.
    The government began the clinical trials. Bristol-Meyers, 
during that period, provided--supplied the drug, $90 million or 
so worth of the drug it cost them, and then, as I said, they 
told--Bristol-Meyers has told GAO they spent about a billion 
dollars total on the clinical trials.
    Bristol-Meyers made $9 billion in profits. For several 
years running, they made a billion dollars a year. But overall, 
from 1993 to 2002, they made $9 billion. NIH negotiated a 
royalty rate of five-tenths of 1 percent, which resulted in the 
government getting back $35 million in royalties.
    I would add also that of the $9 billion in profits in those 
10 years, a significant amount of that came from the 
government--Medicare, I assume, and hospital costs, because 
Medicare, as we know, doesn't have a drug benefit. Medicare 
paid Bristol-Meyers $687 million over the period 1994 to 1999. 
I don't have the numbers for the entire 10 years.
    So, in other words, we have a drug that taxpayers put 
basically a half a billion dollars in--very quantifiable, very 
proven number of dollars. We have a drug that was almost given 
to a company, who has done a good job of developing it, further 
developing and marketing. They claim a billion dollars; that 
number is probably high. But even if it were a billion, 
Medicare paid $600 million of that. So of $600 million, it 
was--they made $9 billion in profits. Government gets a paltry 
$35 million.
    My question is: is that fair? Is that a good system that 
way? And my more specific question is: should we consider a 
larger but still modest return--royalty rate for the 
government, considering what the government put in and what 
Bristol-Meyers has reaped?
    Now, understanding this doesn't happen every time, but when 
it does, if Bristol-Meyers or any biotech firm or drug company 
makes this kind of money, these kinds of huge profits off a 
blockbuster drug, when the government has done almost all, if 
not all, of the basic research and really discovered this 
product, is there something we should do differently from the 
way we do it now?
    Mr. Lindberg. I don't think I can offer you any wisdom on 
that topic. Sorry. I am just not an expert in it.
    Mr. Brown. What about as a taxpayer?
    Mr. Lindberg. Well, what I am remember is the people in the 
street claiming that we are going to strip the planet of yew 
trees because of Taxol. And I was grateful that the synthetic 
chemists were able to make it in a lab. I think it is a great 
outcome, and I don't know--I really don't know the answer to 
your question, what is a fair return. I simply don't.
    Mr. Brown. Dr. Rohrbaugh?
    Mr. Rohrbaugh. Well, at the time that the National Cancer 
Institute started working with Bristol-Meyers-Squibb, they were 
looking for partners to move forward an important--what they 
perceived as an important, potentially therapeutic, 
chemotherapeutic drug. And it has been quite a success with 
over a million people treated, primarily women, for ovarian and 
breast cancer and now lung cancer.
    It is a generic compound that is being combined with a 
number of other therapies by many different companies in 
treating now more than a million people. So from the 
perspective of our mission to benefit the public health, this 
has been a great success.
    With respect to the return, the only mechanism we have to 
receive a return is to license inventions made by government 
scientists. And the only invention here that was made by a 
government scientist was a method of administering the drug, 
and this method was not required for FDA approval, it is not in 
the packaging insert, it is not in the instructions.
    It was only a small part of the total package, so to speak, 
of the drug that went forward. And we licensed that technology 
to Bristol-Meyers-Squibb for a reasonable amount, considering 
the technology that we had licensed. But ultimately, our 
mission is to benefit public health, and this has been a great 
success.
    Mr. Bilirakis. Dr. Barker? All right, yes. Very quickly, if 
you can go--Dr. Barker?
    Ms. Barker. It is a complex question, and I am not wise 
enough to answer it in terms of the return on investment 
issues. But I am able to tell you that Taxol is a revolutionary 
drug in terms of the treatment of ovarian and breast cancer 
specifically, and now lung cancer.
    I have a personal story in that regard, actually. My 
mother, who was suffering from breast cancer at that point, was 
one of the first people on a clinical trial, and probably 
gained an additional 2 years of life because of that drug.
    So from our standpoint in the National Cancer Institute, 
this was an extremely successful venture in terms of this 
particular drug. So I think for us it was a success story.
    Ms. Mullin. Mr. Brown, I don't think I have a good answer 
to your question. It is a really difficult one. I think, 
prospectively, it is hard to know how things will work out 
often when you are developing a product, and in hindsight 
things may look different as well.
    Mr. Bilirakis. Mr. Buyer for 8 minutes.
    Mr. Buyer. I don't villainize drug companies, so the answer 
is not a difficult one. What is excluded, I think, out of the 
proposition that Mr. Brown has given to you in that question is 
that if we, as the government--i.e., you are going to take 
public dollars and make this investment--we believe that in the 
end we are going to improve the quality of life of our society.
    And from that, there are tremendous benefits, both that are 
tangible and intangible, whether it is quality of life and 
productivity, and is it meaningful to have a mother for a 
child. I mean, the list goes on and on and on. So get out the 
pen and paper, Mr. Brown, and try to calculate all those other 
things. That is what I would ask.
    But, you know, it is a lot more fun in politics to 
villainize somebody or something out there. That is the 
politics of it, and that is what is unfortunate, and it just 
turns my stomach. I applaud your answers.
    I do have a question that is outside of the scope perhaps 
of the hearing. It was sort of stimulated as I was listening to 
your testimonies. The more you want to collaborate, that is all 
wonderful. The access to the Library, that is all wonderful. 
What was stimulated in my thinking--and I don't know the answer 
to this question that I am about to ask--is about your 
information technology enterprise architecture.
    So you can talk about how you want to collaborate and talk 
to each other, but if under HHS, and you have got NIH and CDC 
and HRQ and FDA, can you all talk to each other in an architect 
enterprise? And then, you have got institutes below each of 
them--let me just ask the two doctors. Here we have got Center 
for--we have got the Cancer Institute and FDA. Can you all talk 
to each other? Can you send e-mail? Can everybody talk to 
everybody within----
    Ms. Mullin. Everybody is on the same network. Yes, we can 
pull up names on our, you know, Outlook and every----
    Mr. Buyer. So everyone within HHS----
    Ms. Mullin. Yes.
    Mr. Buyer. [continuing] is all on the same enterprise 
architecture, there are no little cultures out there that are--
that you can't access.
    Ms. Mullin. We certainly have a lot of things in common at 
this point, common platforms.
    Mr. Buyer. That is great.
    Ms. Barker. I think the challenge for us in science 
actually is the explosion of data from genomics and proteomics 
in areas of science that has evolved very quickly has prompted 
us specifically at the Cancer Institute to create a grid to 
connect our cancer researchers, specifically the physicians 
with the scientists.
    And so that is a challenge that we are actually rolling out 
this year, a new information grid that is--but it is totally 
connected to everything else we just talked about. So we are 
actually in pretty good shape, I think.
    Mr. Buyer. So between your hardware, your storage, and your 
servers, and your software, it is all compatible, and you all 
can talk to each other, and there are no problems?
    Ms. Mullin. I think that that is a major initiative and 
goal for our department, and in following the President's 
management agenda. But I know that HHS is working very 
diligently to--we have a lot of things in common. We are 
working to have everything possible that makes sense to have 
common and interconnected.
    Mr. Buyer. Working toward that goal. So we are not there 
yet.
    Ms. Mullin. I think there are some----
    Mr. Buyer. Dr. Lindberg, do you have anything you can add 
to that?
    Mr. Lindberg. Well, I think just at the level of 
communicating I don't think there is any problem whatsoever. 
But I would attribute that as much to the Internet as I would 
to our own department. Now, whether there is reason to 
communicate, that is, of course, an administrative matter.
    But I have been delighted. I have been in government only 
since 1984, but I have been delighted to see how many good 
people there are in each of the agencies, and how easily they 
do work together. I think it is a myth to say that they don't 
work together when there is reason to.
    Mr. Buyer. I am not proposing that there is even a myth. I 
just wanted to make sure, if you want to corroborate, that you 
have got the architecture to actually do it. So what I 
discovered in our work with other departments and agencies, you 
would be shocked to find out who has got what funding stream, 
and somebody goes out and buys whatever they want, and finds 
out that they can't talk to each other.
    Thank you. I yield back.
    Mr. Bilirakis. The chair appreciates that.
    Mr. Stupak for 8 minutes.
    Mr. Stupak. Thank you, Mr. Chairman.
    Let me just follow up a little bit on what Mr. Brown was 
saying. He used Taxol, but just about any of these drugs that 
the government helped to develop, a lot of us feel that the 
return we are getting is inadequate.
    Taxol, if you use Mr. Brown's numbers, the government put 
forth $500 million and royalties--to date it has been $35 
million. A lot of people believe that we should at least go a 
dollar for a dollar, get our return on the money. Do you think 
that would stifle research if we did that? Does anyone care to 
answer that?
    Mr. Rohrbaugh. In the late 1980's, early 1990's, we had a 
reasonable pricing clause in our agreements. And there was 
concern by the mid-1990's that this was causing companies not 
to even consider collaborating with us. We held----
    Mr. Stupak. What is reasonable reimbursement? You said you 
had a reasonable reimbursement clause. Can you define that for 
me?
    Mr. Rohrbaugh. That is part of the problem.
    Mr. Stupak. You can't define it.
    Mr. Rohrbaugh. It is difficult to define, but all we had 
was the clause that said that the price would be reasonable.
    Mr. Stupak. So you moved from reasonable to what?
    Mr. Rohrbaugh. And in 1994, we held two public hearings 
with members of the public constituency groups, etcetera, who 
determined that the clause inhibited the formation of 
potentially beneficial scientific collaborations without 
providing an offsetting benefit to the public. And some 
question whether we had----
    Mr. Stupak. Okay. I don't mean to rush you, but I want to 
get through a lot of questions, and I don't want to take 8 
minutes on trying to get this one answer. What is the standard 
now?
    Mr. Rohrbaugh. There is no----
    Mr. Stupak. It was reasonable. It is gone now. What is it 
now?
    Mr. Rohrbaugh. There is no control in our license 
agreements over the pricing of----
    Mr. Stupak. So each is negotiated.
    Mr. Rohrbaugh. We negotiate a standard licensing agreement 
based on the technology we are licensing, and industry tells us 
if the government has control over its costs, they would not 
work with us. And, therefore, these drugs would not reach the 
market. So I think our choice is: does the government----
    Mr. Stupak. How would you have control over their costs? 
When they spend $2 on advertising for every dollar on research, 
that is the problem some of us have--they spend twice as much 
on advertising as they do on research and development, and 
government seems to be supplementing it. And we are getting 
five-tenths of 1 percent return?
    Mr. Rohrbaugh. Our mission at the NIH is to facilitate the 
development of new information and new products that are 
brought to the market by the private sector with a great deal 
of time and investment by the private sector.
    Mr. Stupak. I don't disagree, but if you have a 
reimbursement program, a lot of us feel it should be 
reasonable. By that, I mean at least a little bit more than 
five-tenths of 1 percent.
    Let me move on to something else. Dr. Mullin, you indicate 
in your testimony that FDA is there to make sure that we have 
safety and effectiveness of a drug is--is paramount in your 
mission statement. We have done hearings on the ImClone and 
Herbitex. And while the drug was being developed in the initial 
application to see if it was going to be a beneficial cancer 
drug, there was a lot of hype in that drug through USA Today, 
Business News, even 60 Minutes.
    FDA testified they were appalled at the statements or 
claims being made. Should not the FDA then step in, when these 
drugs are being promoted and hyped, while they are still in the 
initial stages of development, and say, wait a minute, folks. 
If you are concerned about safety and effectiveness of a drug, 
that the hype you just saw on USA Today or 60 Minutes 
shouldn't--don't you have a responsibility to step out and say 
that is not true, that is not what the tests are showing?
    Ms. Mullin. I am afraid, Mr. Stupak, that I can't--I don't 
know the legal constraints on the agency with respect to what 
we can say when a product is still under IND.
    Mr. Stupak. Sure. But under IND, when they are making 
claims that can't possibly be true, to protect your mission, to 
continue to be the gold standard, as you like to be referred 
to, don't you have a responsibility as the FDA to say these 
claims are not going to the effectiveness or the safety of a 
drug, it is in IND as you call it? Don't you have a 
responsibility to let the public know that this isn't true? 
Because, as we saw, we had all kinds of investor fraud and 
everything else associated with that.
    Ms. Mullin. I would like to be able to follow up with you 
and with the people who are most familiar with that drug and 
that issue, so I can give you an accurate answer on that, if 
that is all right.
    Mr. Stupak. Okay. You further go on and testify that drugs 
are being approved now 90 percent within the 6 months 
underneath PDUFA. During this 6-month period, have you been 
able to get all of the information you requested from the drug 
companies?
    Ms. Mullin. I think maybe I was--I didn't say it clearly 
enough on what that meant. FDA won't approve a product until 
all of our questions are answered, but we--what we will commit 
to is a complete review and a letter and an action. The action 
might be a letter that says this is not approvable, or it is 
approvable, but the following questions must be satisfactorily 
addressed.
    So it doesn't mean an approval within 6 months, unless the 
application does answer all of the questions and there is 
adequate demonstration of safety and effectiveness. So I didn't 
mean to imply that we approve them and guarantee anything of 
that kind. We will approve a product when it is shown that it 
is safe and effective, and we are satisfied that we have that--
the evidence that is necessary.
    Mr. Stupak. Well, if we are concerned about the safety and 
effectiveness, and some of us are concerned at how quickly some 
of these drugs are being approved, when we take a look at it 
underneath this new system we have had in place we have had 
more drugs withdrawn in the last few years than you did in the 
whole history of the FDA, because they have been approved so 
quickly they had to be later withdrawn.
    And the answer we usually get with the FDA is, well, if it 
is 3 or 4 percent that have to be withdrawn, that is what it 
was before. Even though we are approving more drugs quicker 
now, we are still withdrawing about 3 or 4 percent of more 
drugs, which would result in about 1,200 tests.
    Is quickness the standard you are using? Or what is the--
are you under a legislative timeframe to do it in 6 months? Or 
is it really safety and effectiveness that should be the goal 
here?
    Ms. Mullin. Well, the review process--there is a 
legislative timeframe, although we have--which is 180 days. But 
we work with and are committed to trying to meet the PDUFA 
commitments that are not legislative but that FDA has committed 
to, and that is just for review.
    We don't have particular timeframes for withdrawal, and 
what those statistics that you are referring to mean is on 
average. And what we looked at in the 3 to 4 percent that you 
describe is the average over a longer term in terms of 
withdrawal rates for approved products.
    And one of the things that you are seeing is a great--a 
much greater uptake of new products once they are approved, and 
there is a much greater use of new products within----
    Mr. Stupak. Greater drugs are being approved, but a greater 
number are being withdrawn when you just look at the raw 
numbers.
    Ms. Mullin. Greater numbers----
    Mr. Stupak. Later being withdrawn.
    Ms. Mullin. Well, actually, and the rate of withdrawal has 
not gone up and----
    Mr. Stupak. No, it has not gone up. But you have got more 
drugs, you are withdrawing more drugs. So how is that an 
improvement upon the safety factor, is what I am asking.
    Ms. Mullin. Well----
    Mr. Stupak. Let me ask you this. My time is almost up. You 
said on page 4, once a drug is approved for sale in the United 
States, our consumer protection mission continues. We monitor 
for the use of marketed drugs for unexpected health risk, and 
we take steps to inform the public.
    Other than a public health advisory to doctors or to 
prescribing physicians through MedWatch, how do you inform the 
public? And what mechanism is in place to do post-marketing 
review once a drug is approved for sale?
    Ms. Mullin. Post-marketing review--what we--as part of the 
prescription drug user fee reauthorization last year, we have 
actually established--we have enlarged our post-marketing 
safety and oversight and have additional funds now to do that 
activity.
    One of the things FDA is currently doing through, as I have 
mentioned, our strategic action plan that we are developing is 
to try to get, work with others who collect data to get the 
largest capability to do active surveillance that we can, Mr. 
Stupak, because we know that drugs are--they are used according 
to labeling, and they are also used in a way that is not always 
according to the labeling.
    And it is very important that we get the earliest and best 
information that we can to understand what the problem is, if 
there is a problem on a product. We need to analyze whether it 
is the product or how it is being used----
    Mr. Stupak. Right, realize all of that, but----
    Ms. Mullin. [continuing] to work that out. So we have----
    Mr. Stupak. But there is no scheme in place, like 6 months 
later review it, a year later----
    Mr. Norwood [presiding]. Mr. Stupak, your time has expired. 
Let her finish answering the question, please.
    Mr. Stupak. Sure. Well, I was just trying to get to the 
meat of it.
    Mr. Norwood. I know. I understand.
    Ms. Mullin. What we are doing--if I just--one quick thing 
on that. We have this program in place now for risk management 
in the post-market period, the first 2 to 3 years when if we 
are going to see something unexpected, that we didn't pick up 
on in clinical trials, we are doing a lot more active work, and 
over the next 5 years expect to spend about $70 million on 
post-market safety, which is so much better than we have been 
able to do in the past.
    So I think we will be very vigilant in those first few 
years, because that is when a lot of the safety problems 
happen, and we pick up on them.
    Mr. Stupak. And then, my other question was: how do you 
inform----
    Mr. Norwood. Mr. Stupak?
    Mr. Stupak. [continuing] the public--can she just answer--
--
    Mr. Norwood. Your time has expired, and it has expired a 
good bit.
    Mr. Stupak. Other than MedWatch, do you do anything else to 
inform the public?
    Mr. Norwood. Ma'am, don't answer the question, please.
    Your time has expired.
    I want to remind myself that when the yellow light comes 
on, it means your time is almost up. When the red light comes 
on, it means your time is up, and it gives all members an equal 
opportunity to question the witnesses.
    Mr. Whitfield, you are now recognized for 5 minutes.
    Mr. Whitfield. Mr. Chairman, thank you very much.
    I suppose this question would go to Dr. Mullin. But of the 
approvals that you give for new medicines, would you have an 
idea what percent of those would be coming from what I would 
refer to as small, maybe startup companies, versus companies 
like Merck, Bristol-Meyers, the large, large drug companies?
    Ms. Mullin. You know, I don't have that number on the top 
of my head, but we do keep track of that information, and I can 
get that information to you.
    Mr. Whitfield. Do you have any idea at all?
    Ms. Mullin. I am going to hazard a guess that it is at 
least 20 percent, but I think higher than that from small 
companies.
    Mr. Whitfield. Twenty percent? And I suppose this would go 
to Dr. Barker or someone else, but are there funding mechanisms 
in the government that helps bridge this R&D phase of drug 
development and assist small companies to bring a drug through 
the FDA clinical trials for a new drug application?
    Ms. Barker. The National Cancer Institute has several of 
these mechanisms, including, of course, the SBIR and STTR 
awards, which many small companies use to develop drugs, and 
that is probably one of the most I think effective mechanisms. 
Those are partnerships generally with universities and small 
companies.
    We also have at the NCI two other programs for technology 
development--one called the unconventional innovation program--
UIP--the second one is called the IMAT program. Both of those 
programs actually are good vehicles for small companies to 
actually bring their drug forward. Small companies often don't 
know going into these kinds of development activities how much 
they are going to cost.
    So we are actually looking more closely at that at the NCI, 
because we do have a lot of interesting cancer, as you might 
imagine, in the biotechnology companies. And many of these 
small companies just don't succeed, and we are looking for 
mechanisms to capture some of that technology or to lend some 
different kinds of assistance, maybe through some of our 
university relationships. It is an issue we are very interested 
in.
    Mr. Whitfield. The very first two you mentioned, one was 
SBIR, and what was the other one?
    Ms. Barker. STTR. One is more of a technology-focused grant 
for diagnostics and other kinds of technologies.
    Mr. Whitfield. And do you have any idea how many dollars 
are available for those programs each year?
    Ms. Barker. In the case of the SBIR program, it is in 
proportion actually to the amount of dollars that you receive 
as a Federal agency. And I don't exactly--I don't have that 
number right at hand. I can certainly get it for you.
    Mr. Whitfield. Okay. Thank you.
    This I guess would be going back to FDA again, but I notice 
in your testimony you refer to at some point priority approval 
and standard approval.
    Ms. Mullin. Right.
    Mr. Whitfield. Would you explain to me how you determine 
what is a priority and what is a standard?
    Ms. Mullin. FDA determines whether an application will be 
priority or standard. And the priority applications are ones 
for treatment or therapies that represent a new approach to 
diagnostic treatment, and just--so it is something that offers 
an approach or a therapy that hasn't--that doesn't already 
exist. So, for example, it is the first of a kind in an area 
for diagnostic or treatment.
    Mr. Whitfield. And you mentioned also new drug applications 
and biologic license applications.
    Ms. Mullin. Yes.
    Mr. Whitfield. Would either one of those include--or would 
it be separate--a new drug delivery technique, for example?
    Ms. Mullin. A new drug delivery system, for example, might 
involve a device component and a biologic or device and a drug 
combination, and those--we refer to those as combination 
products, and they may be classified as a device and be in what 
is called a PMA. It will be jointly reviewed by a device center 
and the center that would handle, say, the drug component of it 
or the biologics component of it.
    We actually have a new Office of Combination Products to 
facilitate and make sure those reviews occur in a very timely 
fashion.
    Mr. Whitfield. But if the drug delivery system consisted 
only of some new chemical mechanism or, for example, a system 
that would disguise the drug being used so that your own immune 
system would not attack it, would that be considered a device, 
or would that be a drug delivery system or----
    Ms. Mullin. I don't think I can answer that, I am sorry to 
say. And, actually, it can be kind of complex sometimes to 
figure out what the--where the home of it or where the review 
will be primarily done. And there are increasing numbers of 
products that are combination products that are very effective.
    Mr. Whitfield. Thank you, Mr. Chairman.
    Mr. Norwood. Thank you, Mr. Whitfield.
    Ms. Capps, you are now recognized for 8 minutes.
    Ms. Capps. Thank you, Mr. Chairman.
    I thank you for your presence here today, this panel, and 
for the committee for organizing it.
    I was not here when the goal of doubling the funding for 
NIH was started, but one of my proudest moments was to see that 
goal realized. And we will be needing to leave to speak on the 
floor because of our funding appropriation that we are dealing 
with today, which includes NIH funding. And I am dismayed that 
we have actually gone backward the very next year by flatlining 
the budget.
    I really so support what you all do, that umbrella of NIH 
that includes each of your particular positions. I think the 
fact that Congress took this on, to double the funding, speaks 
to the value that the American people place in what you do. And 
that is, well, for some folks, and me included, research is to 
be valued for its own sake.
    I was married to an academician for over 30 years, and that 
whole life means a lot to me. And I think you get such 
wonderful unintended results sometimes from trips to the moon 
or wherever people decide--what people decide to do with their 
intellect. So I would value it for its own sake.
    But now we see clearly--and I have the experience of having 
a daughter in the battle of her life for a year with lung 
cancer, and I know what clinical trials are about. And so to 
the extent that we see close up the impact of what you are 
about, it makes this a very significant arena for our 
deliberation as Members of Congress as well.
    We are raw, some of us, from having gone through the 
Medicare modernization, including prescription medication 
debate right here a few weeks ago, and then 2 weeks ago on the 
floor. And so that is why there is feeling about the high cost.
    And I want to use this little time to explore the 
relationship between what you do, valuable as it is in itself, 
and then the close relationship that exists in the private 
sector which allows--to the degree that that is an ingredient 
that is essential to having that really make a difference in 
people's lives.
    And so I don't even know where I am going to address this, 
but I am going to start with the fact that Bayh-Dole was 
initiated with a relationship with universities, and I know our 
second panel is going to get us more there. And I am not going 
to go so far as to say, how can we get more of a return on some 
of these very lucrative byproducts, because I don't know that 
you can anticipate that in advance. And you wouldn't want that 
to be the issue.
    But I was taken with a comment--I think, Dr. Rohrbaugh, you 
mentioned a method by which a standard agreement is negotiated. 
And maybe that is a good starting point, to hear from you, and 
ways that perhaps with our leadership we should develop--or 
should we revisit Bayh-Dole, or should we--what advice can you 
give someone like me? Start with that. Very open, I am sorry.
    Mr. Rohrbaugh. Well, Bayh-Dole applies to the recipients of 
Federal funds.
    Ms. Capps. Yes.
    Mr. Rohrbaugh. There is the Stevenson-Wydler Act and 
amendments to the Federal Technology Transfer Act that apply to 
Federal agencies and direct our activities in technology 
transfer.
    We license technologies at a very early stage. We often 
don't have much more, if we are fortunate than a proof of 
principle often before that point of time. So industry takes on 
a great risk in having very early stage risky technology that 
may not prove to be a benefit, may fail, most of them fail in 
the process of development. That is just the way things work.
    Ms. Capps. Yes.
    Mr. Rohrbaugh. And we license our technologies that are 
invented by government employees under standard licensing 
agreements, with terms that are negotiated based on the value 
of the technology, the stage of the technology, and its overall 
value. And what we license ultimately is typically a small 
part, or only one part, of the final product.
    Even if we have a chemical entity that becomes ultimately a 
drug developed by a company, the company may--usually provides 
an awful lot of other important proprietary technology in 
formulating it, in encapsulating it, in developing it, in 
finding ways to make it better and cheaper and bringing it to 
market.
    So ours is only a small part of the final product, then, 
typically.
    Ms. Capps. I am not saying that you don't need to defend 
the private sector. I am just concerned that there--from some 
of your remarks that I heard earlier, it seems like they are 
holding hostage to some degree, that they won't--if you go too 
far down the road, they are not--and limit the amount that they 
can make or do any kind of things that impinge on that, that 
they won't have a relationship with you. What is that like?
    Mr. Rohrbaugh. Industry and investors in industry are 
reluctant to--the investors are reluctant to invest, and 
companies are reluctant to take on technologies at a very early 
stage, as our technologies are, if we have some control over 
the final price of the product. It is too far downstream. They 
have to invest so much money into it. Ours is a small part of 
the final product. They just will not work with us under those 
conditions.
    Ms. Capps. I will wait until the second panel to get into 
more that the university might have a different relationship 
with you in terms of that partnership. But I will--I don't want 
to--I am looking at the clock, and, Dr. Barker, I do want to 
get in one question about the National Cancer Institute and the 
mapping of clinical trials. And maybe that isn't even what you 
came prepared to discuss, but that is certainly a very big 
interest to many people.
    Ms. Barker. Could you clarify your question?
    Ms. Capps. To make it easier for--and it wouldn't just be 
cancer, but that is certainly an area where life-saving 
depends--can often be seen as getting into a trial. And how can 
we make that work more efficiently for----
    Ms. Barker. I know you are very familiar with this process.
    Ms. Capps. Yes.
    Ms. Barker. As you know, also, we only have about 3 percent 
of patients go on clinical trials who have cancer, and that is 
a very complex--there is a whole series of complex reasons why 
that is true.
    We have undertaken a lot of activities at the NCI, ranging 
from new communications tools to actually new bioinformatics 
systems, to ease the burden of actually putting people on 
clinical trials in the communities, increased funding basically 
for the cooperative groups to actually make them more 
competitive in terms of actually really enhancing opportunities 
to put people on clinical trials.
    And clinical trials actually is a major initiative across 
the National Institutes of Health is part one of Dr. Zuhini's 
road maps this year.
    Ms. Capps. Okay.
    Ms. Barker. So we have an enormous number of initiatives, 
especially in the National Cancer Institute, to actually 
increase accrual and to make it simpler for patients to access, 
know about the trials, and ultimately be enrolled, and for 
physicians to actually have enough resources to put patients on 
clinical trials.
    Ms. Capps. So this is an area--and I know my time is up, 
but this is an area that funding could really be useful in--
that there would be a real impact on consumers.
    Ms. Barker. Well, I think the doubling of the NIH budget 
has actually allowed us to do an enormous number of things in 
clinical trials. And certainly, going forward, that would be 
beneficial to continue to improve this for cancer specifically, 
but I think for other diseases as well.
    Ms. Capps. Thank you.
    Mr. Bilirakis. Dr. Norwood for 5 minutes.
    Mr. Norwood. Thank you very much, Mr. Chairman. I am 
enjoying this immensely and having a lot of my questions 
answered by others' questions. So I would like to take my 5 
minutes and yield it to Mr. Stupak and let him finish his line 
of questioning.
    Mr. Stupak. I thank the gentleman for yielding and 
appreciate the courtesy, because I was trying to ask Dr. 
Mullin, in the information we have--and I asked you about, how 
do you notify the public, then, about the effectiveness of a 
drug or the safety of a drug, because they say you issue public 
health advisories to doctors, which are commonly called Dear 
Doctor Letters, or else there is the MedWatch.
    How does the public know about the safety of a drug? If you 
have a question, how do you communicate that to the public, I 
guess is what I am asking.
    Ms. Mullin. Mr. Stupak, if FDA has a question or----
    Mr. Stupak. Well, the FDA has found something wrong, so 
that is when you do a Dear Doctor. You have to notify the 
prescribing physicians that you have to watch for this or do 
something like this.
    Ms. Mullin. Right.
    Mr. Stupak. How do you inform the public? Because you said 
in your statement, again on page 4, if new, unanticipated risks 
are detected after approval, we take steps to inform the public 
and change how a drug is used or even remove it from the 
market. So I am asking, how do you inform the public?
    Ms. Mullin. Actually, as part of this planning effort that 
I have described this year, we are identifying a number of 
partners through--both public and private to try to both get 
the data--as I mentioned before, we see information technology 
as one key to trying to get a more complete picture as quickly 
as possible. We are going to be partnering with grantees for 
the AHRQ, with the CDC networks----
    Mr. Stupak. Okay. But there is no mechanism like launching 
some kind of program to inform the public?
    Ms. Mullin. Well, on the other part of that----
    Mr. Stupak. It is still being developed?
    Ms. Mullin. Yes. And we are trying to partner with--well, 
as you know, the list of MedWatch partners, there are various 
practitioner groups and specialties, and we are basically going 
to be disseminating information through as many conduits as we 
can to health care professionals.
    Mr. Stupak. Yes, health care professionals. But I am asking 
the general public. So we, the patients, and eventually the 
victims when a drug goes wrong, how do we know to watch for 
things?
    Ms. Mullin. Well, we are also looking for ways to get 
better information to the media and better ways, which is a 
very effective way to reach patients and refer them to their 
physician. And we actually have been pretty successful in that 
mode of having people become aware through the media, and then 
people ask their doctor or can visit FDA's website, or get more 
information at that point as they need to.
    Mr. Bilirakis. Has the gentleman--the advising of the 
provider, of the medical doctor, are you satisfied in terms of 
how that is done?
    Mr. Stupak. The question was to the public. Advising the 
medical doctor doesn't help the patient or the families, if the 
problem----
    Mr. Bilirakis. Well, I was just----
    Mr. Stupak. [continuing] to clarify----
    Mr. Bilirakis. [continuing] the doctor ought to know.
    Mr. Stupak. Sure. They should, yes. The key word is 
``should.''
    Mr. Bilirakis. Are you satisfied as to how that is done? I 
don't know whether that----
    Mr. Stupak. Oh, no. I am satisfied that they notify the 
physicians.
    Mr. Bilirakis. All right.
    Mr. Stupak. But how do you get it--her statement was to the 
public. I am just trying to say, how do we get it to the 
public?
    Ms. Mullin. Well, and I think that is--we absolutely agree 
with that, and we have the patient safety initiative going on 
at FDA to identify every mechanism possible to reach people, to 
do it through media, we think every venue, every channel you 
can go to to try to reach people as quickly as possible.
    Mr. Stupak. Let me ask you this. If you are going to have 
to change a label because of a safety concern on a drug, do you 
have that labeling that is found on a drug product, does that 
have to be changed within so many days or months or years, 
wherever it is going to be?
    Ms. Mullin. I know there is a timeframe for it, Mr. Stupak, 
but I don't know what it is. I can get that information.
    Mr. Stupak. If you would, I would appreciate it.
    With that, I will yield back to Dr. Norwood. Appreciate 
your courtesy, Dr. Norwood, for letting me follow up on that 
question.
    Mr. Norwood. Thank you. Thank you very much.
    Mr. Chairman, I will just get in one quick one, since I 
have got a minute left. I am a big fan of NIH. I am very 
pleased with the work that you do, and I presume that I 
understand it right when you do basic science, you do research. 
It comes out basically through the National Library. That is 
where people actually pick up on that. Is that--do I understand 
that right?
    Mr. Lindberg. I think that is right. I think I could add 
something to the question Mr. Stupak asked, actually, because 
there is a phenomenon we call clinical alerts. Now, when 
Medline searches are done, and they are done a million times a 
day, we have a banner in certain cases that announces a piece 
of emergency information.
    So, for example, when the women's health trial, the 
estrogen-progestin trial, when it reached a point where they 
could conclude early that it should be stopped, the arm of the 
combined drugs, that was a clinical alert. That was announced, 
and the decision was made by the director of the relevant 
Institute, in that case Heart/Lung.
    Now that was an alarm. That said stop doing it, because you 
are endangering people. But in happier circumstances, a trial 
will be terminated early because of a very good result. So, for 
instance, the use of massive doses of corticosteroids for acute 
spinal cord injury, was tested in 20 academic centers and NIH, 
and it ended early because they were so effective.
    So that was a clinical alert that announced that we don't 
want anyone on the control side of that one anymore. We want 
everybody getting the treatment. So we do have at least that 
mechanism, and it relates to drugs but not directly. It more 
relates to clinical trials.
    We fought very hard to get it in, because the--in some of 
the better journals--the New England Journal of Medicine, for 
instance--there had been a rule that if you are going to 
announce these results before it is published, we won't take 
your paper.
    So in order to put through this particular scheme, we 
convened a meeting at National Library of Medicine in which the 
editors of New England Journal and JAMA and certain other major 
papers all agreed that this should happen, these clinical 
alerts should be permitted, and it would not bother anybody's 
acceptance or non-acceptance of the paper. So I am just 
suggesting that this is yet one other mechanism which we do 
use.
    Mr. Bilirakis. Ms. Eshoo for 5 minutes.
    Ms. Eshoo. I didn't make an opening statement, Mr. 
Chairman.
    Mr. Bilirakis. Under the rules, you have to be here in 
order to waive the opening.
    Ms. Eshoo. Oh, all right. I am sorry.
    Well, I would like to welcome the panelists here, and say--
repeat what I always say when anyone from the NIH comes before 
us, that it represents I think to our country the National 
Institutes of Hope. And I think really that is why you are here 
today to talk about the undertakings that are a part of that 
mission of hope, and I salute you for the work that you do and 
what it is producing for the people of our country, and 
certainly for the world.
    You are the gold standard, and we want to keep you that 
way. I think the investments that have been made are amongst 
absolutely the best that the Congress has ever made. Absolutely 
amongst the best. And so I want to start out with that, because 
I have enormous respect for each one of you and the work that 
you do, and the work that has come out of the--our National 
Institutes.
    I would like to just say something about some of the 
conversation that took place earlier in the committee's 
hearing. I don't know how many members know that earlier this 
week--I think it was Monday--that a GAO report found that the 
Federal Government, while it has been licensing agreements for 
only four of the top 100 drugs dispensed by the DoD, that there 
are only four.
    I think that the case is not as large as maybe it was 
referenced, and I think that members should avail themselves to 
this GAO report, because even though it is being charged, you 
know, this whole case that the Federal Government is paying X 
number of dollars, getting very little out of it. I would say 
that it is important to read the report, because there are four 
drugs. There are only 4 out of 100 that are actually dispensed 
by the DoD.
    The Federal Government contributes 1.6 percent in terms of 
bioresearch. So while we are a player, and a very important 
one--and I think that we should be doing more, most frankly--
but because, again, I think this is amongst the most important 
and the greatest impact return for the investment dollars, it 
is 1.6 percent.
    It reminds me of constituents at town hall meetings that 
believe that 25 percent of the Federal budget represents 
foreign aid, and it is widely exaggerated. There are those that 
don't support any dollars for foreign aid, but I don't think 
that we should lose sight of the context here. And as we don't 
lose sight of the context, we will, I think, more fully 
appreciate what 1.6 percent is bringing back to us.
    To any of the witnesses, how often has the NIH turned over 
fully completed drug products to a drug or biotechnology 
company? Has that ever happened?
    Mr. Rohrbaugh. I am not aware of any.
    Ms. Eshoo. Anyone on the panel aware of any? That is what I 
thought, but I think that it is a question that is worth 
asking.
    Dr. Rohrbaugh, you mentioned that the reasonable pricing 
clause had a detrimental effect on public-private partnerships. 
Can you elaborate on that? And do you have statistics showing 
that?
    Mr. Rohrbaugh. Those conclusions were made based on public 
hearings that were held in 1994. I don't have all of the 
statistics, but the report that I would be happy to refer to 
you is on the website from those committees. And they did 
conclude that it was having a chilling effect on the interest 
of industry to work with the National Institutes of Health 
collaboratively and in licensing technologies.
    Ms. Eshoo. And it is now a decade later, since that report. 
Do you believe that what----
    Mr. Rohrbaugh. Yes, it has had a positive effect. And since 
then from the standpoint of our statistics, our licenses, our 
royalty income, all of the measures of our tech transfer 
activities are higher, much higher than they were at that time. 
And new and better drugs are being developed from our partners, 
who invest their time and money in these early stage 
technologies.
    Ms. Eshoo. I thank you all again, and I think that you are 
really a great source of pride to our country in terms of what 
you do. I am so impressed with what the Library is doing. I 
thought that the national ``do not call list'' had a lot of 
hits, but I think that you are right up there, and that speaks, 
excuse the expression, volumes about what you have and what you 
do. Thank you very, very much.
    Mr. Bilirakis. The chair thanks the gentlelady, and you 
certainly made a point that I tried to make, and that is--it is 
a wild thing to me that they do so much. And what is 
available--if only the people--the patients, and particularly 
the medical providers are aware of all that is available to 
them. And that is something that concerns me. I don't know 
whether it should or shouldn't.
    Let us see. Mr. Burr is recognized for 5 minutes.
    Mr. Burr. I thank the chairman. I won't take 5 minutes.
    I would like to pose two questions probably to Dr. 
Rohrbaugh and Dr. Barker. The first one is: what do you see the 
future of combination products playing in the delivery of 
health care in this country? And the second question would be: 
as we look at the plus-up that Congress has made in the NIH 
budget over the last several years, and hopefully a plus-up 
that will continue, how much of those extra dollars have been 
used for extramural research?
    Ms. Barker. As you know, the majority of our work at the 
NIH is in the extramural community, and certainly that is true 
at the National Cancer Institute. So most of those dollars have 
gone to the extramural community.
    In terms of your first question, it is intriguing that you 
are--I think everyone is beginning to see that the future of 
medicine actually is going to be in genomics. And as we know 
more about genomics, we are beginning to understand that these 
molecular defects are very rarely due to a single defect. It is 
going to be multiple defects.
    So we are challenged to address that issue. And at the 
National Cancer Institute especially, we are looking at all 
kinds of ways to do that, all the way from computational 
biology and systems biology to be able to use approaches to 
predict what that should look like, to very specific kinds of 
models and animals to actually effectively predict that before 
we can go into humans.
    And the future, of course, is even more interesting because 
areas like nanotechnology, where we will be able to very 
specifically deliver multiple ligands or signatures within 
cells, also sits there. And we are just beginning to exploit 
that for cancer. And as you go forward, you are going to be 
able to see how you are going to be able to combine imaging, 
for example, with therapeutics.
    So the future is just--what I said in my opening comments 
is so true. It is just unimagined what we can accomplish in the 
next probably as few as 5 years, and even at 10 years I think 
we will look back and wonder how we were so naive in terms of 
our approaches to therapy and diagnostics and prevention today.
    So I think you are right on in terms of the issues of 
combinations. That is where the world is going to go, 
especially for us in cancer.
    Mr. Burr. Well, my hope is that you devote some time to 
spend not only with FDA but possibly with CMS as it relates to 
understanding the world of combination products. My greatest 
fear is that we make tremendous progress at NIH and through the 
extramural programs, and then we hit this permanent red light 
that deals with the approval process that we continue to--we 
improve and we have improved.
    But the combination product decisions are much tougher down 
the road than what we have had up until this point, and I 
believe it has been even tougher to try to determine a 
reimbursement scheme as it relates to those products. And many 
times our great work is only for naught if, in fact, we can't 
get it to the patient.
    Ms. Barker. I would agree with that.
    Mr. Burr. Thank you.
    Anything to add?
    Mr. Rohrbaugh. No, I don't.
    Mr. Burr. Great. Thank you, Mr. Chairman. I yield back.
    Mr. Bilirakis. The chair thanks the gentleman.
    Mr. Allen to inquire.
    Mr. Allen. Thank you, Mr. Chairman, and thank you, in 
particular, for allowing me to participate in this hearing 
today. Though a member of the committee, I am not a member of 
this particular subcommittee, and a lot of good work is done in 
this subcommittee.
    I want to thank all of the panelists for being here today. 
This is a very helpful and informative hearing.
    Dr. Mullin, I would like to begin with you. I have 
introduced a bill in June called the Prescription Drug 
Comparative Effectiveness Act of 2003. It is a bipartisan bill. 
It would fund studies of comparative effectiveness and cost 
effectiveness of prescription drugs that are used to treat 
particular diseases or conditions, specifically those which 
involve high amounts of expenditures for Medicare and Medicaid.
    The bill authorizes $50 million for NIH and $25 million for 
the Agency for Health Care Research and Quality to carry out 
these studies on comparative effectiveness and cost 
effectiveness.
    And, Mr. Chairman, with your approval, I would like to 
offer for inclusion in the record an editorial in the July 
issue of Clinical Therapeutics, which explains the bill.
    Mr. Bilirakis. Without objection, that will be the case.
    Mr. Allen. The FDA--it is assumed under the legislation 
that the FDA would cooperate with NIH and AHRQ in doing this, 
dealing with this issue. I assume you haven't had a chance to 
review the bill.
    Ms. Mullin. Right, I haven't.
    Mr. Allen. But I wondered if you could comment briefly on 
the value of having better information and how drugs that treat 
a particular disease or condition should be compared to other 
drugs that treat the same disease or condition, and ultimately, 
of course, you know, the question of relative cost 
effectiveness. You are probably familiar with what Oregon has 
done in this--along these lines.
    Ms. Mullin. Well, I especially can speak to the different--
looking at weighing the therapeutic benefit of one versus 
another in the review process. I am not a reviewer, but I know 
very well that they make those decisions about approval of a 
new product with all of the other options in mind, what is 
already out there available to patients.
    And FDA has a trove of information and experience, and 
because of where we are in the process we see everything. We 
see all of the detailed clinical data, and so I--and we will 
be, I am sure, collaborating. I know we have conversations with 
AHRQ already underway, you know, and we want to share what we 
know more.
    And there is a summary that is always provided at the end 
of a review process when a drug is approved that talks about 
that product and this clinical--and within the armamentarium of 
what is available to treat patients with the condition. So I 
think we see that as an opportunity.
    Mr. Allen. Well, thank you for that. Of course, this goes 
beyond the FDA's traditional mission of safety and efficacy, 
but it is an important area.
    Dr. Rohrbaugh, we have a--you were talking earlier about 
the conversations you have with industry when something that 
has been developed at NIH is ready to go out and be further 
developed for the market. We have a staff memorandum here that 
says that in July 2001, NIH submitted to Congress a plan to 
assure taxpayers' interests are protected, and talked about 
greater transparency.
    And it said you would modify your existing extramural 
policy manuals to assure that grantees and contractors report 
to the agency the name, trademark, or other appropriate 
identifiers of a therapeutic drug that embodies technology used 
by NIH, that you would make that information available on a 
web-based data base that--anyway, I just wondered if you could 
clarify just where that process is. I mean, is that kind of 
information now being developed, and is it available on a data 
base that could be used by the public?
    Mr. Rohrbaugh. It is. What we have done for the intramural 
program, the program that I oversee, is list on our website all 
17 FDA approved technologies, drugs, therapeutics, vaccines, 
that include, at least in part, technologies licensed from the 
NIH.
    With respect to our recipient--the recipients of Federal 
funds, that was handled by the Office of Extramural Research, 
and they have implemented that program. And on their website, I 
believe there was only one reported drug last year. I don't 
know if any have been reported this year.
    Mr. Allen. But there should be more as we go forward?
    Mr. Rohrbaugh. Yes.
    Mr. Allen. Yes. Well, it is important, I think, just 
because if we are going to understand this process, we need to 
know how much of the value--or how much of the research that 
went into a particular drug was publicly funded, and then we 
can discuss the policy implications of that later.
    Mr. Rohrbaugh. Exactly.
    Mr. Allen. Thank you.
    Thank you very much, Mr. Chairman.
    Mr. Bilirakis. And I thank the gentleman.
    Yes, we are going to go into our second panel now, but I 
want to thank you all. You were just tremendous, as usual. We 
will have questions in writing to you as per the way it is 
usually done. We would appreciate timely responses to them.
    And, you know, the second panel has sat through the 
audience and listened to you. And then, of course, you are all 
busy people, so you will probably be leaving. And that is why I 
told the staffer, hey, I want one panel, everybody to be here 
together to hear each other, and what not.
    But I would hope that if you can't stay for the second 
panel you would maybe ask someone from your particular, you 
know, office to stay in your place and take notes, and what 
not, because I think it is--I know you are concerned. I mean, 
you are certainly interested in the comments that will be made 
by the second panel.
    Thank you so very much. Thanks.
    The second panel consists of Dr. Phyllis Gardner, Senior 
Associate Dean for Education and Student Affairs, Stanford 
University; Dr. Andrew Neighbour, Associate Vice Chancellor for 
Research, University of California Los Angeles; Dr. Jonathan 
Soderstrom, Managing Director of the Office of Cooperative 
Research, Yale University; and Dr. Ellen V. Sigal, Chairperson, 
Friends of Cancer Research located here in Washington, DC.
    If you will take your seats, please. Again, your written 
statement is a part of the record, and we would hope that you 
would complement and supplement it orally. We will set the 
clock at 5 minutes, and I would appreciate it if you could stay 
as close to that as you can, but certainly I won't cut you off 
if you are on a roll regarding a particular point.
    Okay. Let us start off with Dr. Gardner. Thank you very--
thank you all for being here and for your patience and, you 
know, waiting and having to wait while we have votes and that 
sort of thing. But anyhow, Dr. Gardner, please proceed.

    STATEMENTS OF PHYLLIS GARDNER, SENIOR ASSOCIATE DEAN FOR 
  EDUCATION AND STUDENT AFFAIRS, STANFORD UNIVERSITY; ANDREW 
 NEIGHBOUR, ASSOCIATE VICE CHANCELLOR FOR RESEARCH, UNIVERSITY 
  OF CALIFORNIA LOS ANGELES; E. JONATHAN SODERSTROM, MANAGING 
DIRECTOR, OFFICE OF COOPERATIVE RESEARCH, YALE UNIVERSITY; AND 
    ELLEN V. SIGAL, CHAIRPERSON, FRIENDS OF CANCER RESEARCH

    Ms. Gardner. Chairman Bilirakis and members of the 
committee, I am pleased to testify before you today regarding 
technology transfer issues as they relate to the biotechnology 
industry. Thank you for your continued leadership in the area 
of health care.
    I am here today representing Biotechnology Industry 
Organization, or BIO. BIO represents more than 1,000 
biotechnology companies, academic institutions, and State 
biotechnology centers. BIO members develop medical and 
pharmaceutical products as well as agricultural, industrial, 
and environmental products.
    My testimony is based on my own experience in both the 
academic and private sector. I have been a tenured associate 
professor in the departments of molecular pharmacology and 
medicine since 1984 at Stanford University. I am a former 
Senior Associate Dean for Education and Student Affairs.
    In addition, in the past 10 years, I was associated with 
ALZA Corporation--a pharmaceutical company acquired by Johnson 
& Johnson--as the vice president and head of their Technology 
Institute. I have been on biotechnology company boards. I have 
served on the boards of private and public biotechnology 
companies, I have founded companies, and I have advised venture 
capital firms as a partner and advisor.
    I want to emphasize three important points today, and ask 
that my written testimony be submitted for the record.
    Point one, the biotechnology industry differs significantly 
from large pharmaceutical companies. There are over 1,400 
biotechnology companies in the U.S. In contrast to large 
pharmaceutical companies, many biotech companies are small, not 
publicly traded, and have not achieved profitability yet. While 
large pharmaceutical companies tend to pursue blockbuster drugs 
with market potentials of a billion dollars or more, many 
biotechnology companies pursue products with much lower market 
potentials, including orphan drugs.
    The biotechnology industry is the most research and 
development industry in the world. In 2002, the industry spent 
$20.5 billion on R&D focused on new targets and highly 
innovative therapies. No industry spends more on R&D per 
employee. No industry faces a lengthier or more complex 
regulatory process to bring products to market. And you all 
know the statement--a biotech company typically spends 15 years 
and hundreds of millions of dollars to complete testing and 
secure product approval.
    Point two, the Federal Government funding plays a small but 
important role in biotech R&D. As Congresswoman Eshoo pointed 
out, only 1.6 percent of the industry's R&D funding in 2002 
originated from the Federal Government. Thus, public support 
for biotechnology and the far greater dollars is key to the 
success of the industry. Federal R&D programs must be flexible 
enough not to stifle the private sector investment that is so 
critical for bringing products to market.
    Point three, partnerships between the Federal Government 
and private sector foster innovation and improve health. 
Passage of the Bayh-Dole Act, which has been discussed much 
today, and the Federal Technology Transfer Act, established 
vehicles, including licensing and the cooperative research and 
development agreement, or CRADAs, for tech transfer from the 
public to the private sector.
    Prior to these laws, Federal agencies rarely relinquished 
ownership of federally funded inventions, and valuable 
technology was left languishing on the shelves of research 
institutions.
    In addition to CRADAs and licensing, biotechnology 
companies also rely on direct financial support from the 
government through small business innovation research 
programs--the SBIRs--and advanced technology programs, or the 
ATPs. The SBIR program is a competitive three-phase government-
funded program. It is used overwhelmingly by seed stage 
companies for startup and early development stages of product 
development.
    The advanced technology program, by contrast to supporting 
product development, it supports enabling technologies 
essential for the development of new products, processes, and 
services across diverse application areas. Both of these 
vehicles support seed stage companies in critical early phases. 
This early support is critical to support the large private 
investment for subsequent development and commercialization. 
They are particularly important in down markets when VC and 
other sources of private funding divert to later stage, less 
risky companies.
    BIO does suggest one change in SBIRs, or one change to the 
Small Business Administration--that is, that they redefine the 
definition of size of small business and equity ownership, so 
that it will not preclude venture capital backed funding for 
small business--the venture capital backed companies from being 
funded.
    In conclusion, BIO supports the various vehicles that 
Congress has authorized for transferring valuable technology 
from the public to the private sector. Given the significant 
technological breakthroughs achieved in medical and health 
fields, BIO believes that Federal dollars invested in 
biotechnology research have yielded significant benefits 
generally for the health of the Nation and specifically for the 
Federal Treasury.
    Thank you, again, for your support of biotechnology's 
efforts to contribute and advance the health of the United 
States. I would be pleased to respond to questions from the 
committee.
    Thank you.
    [The prepared statement of Phyllis Gardner follows:]

Prepared Statement of Phyllis Gardner, Associate Professor of Medicine, 
     Stanford University, on Behalf of the Biotechnology Industry 
                              Organization

    Chairman Bilirakis and Members of the Committee, I am pleased to 
testify before you today regarding technology transfer issues as they 
relate to the biotechnology industry. I would like to thank the 
Committee for its continued leadership on issues related to Americans' 
health. I am here today representing the Biotechnology Industry 
Organization (BIO). BIO's membership includes more than 1,000 
biotechnology companies, academic institutions, state biotechnology 
centers and related organizations in all 50 U.S. states. BIO members 
are involved in the research and development of health-care, 
agricultural, industrial and environmental biotechnology products.
    My comments today are based on my years of experience on biomedical 
research in both the academic and private sectors. I have been a 
tenured associate professor in the departments of molecular 
pharmacology and medicine at Stanford University since 1984. I am also 
the former Senior Associate Dean for Education and Student Affairs.
    In the past ten years, I have also been associated with ALZA 
Corporation--a leading drug delivery and pharmaceutical company, 
recently acquired by Johnson & Johnson--serving as Vice President of 
Research and Head of the ALZA Technology Institute. In addition, I am 
or have been a member of the board of directors of several public and 
private biotech companies, including Aerogen, Inc., Aronex, Inc. 
(acquired by Antigenics, Inc.), BioMarin Pharmaceuticals, 
Pharmacyclics, iMEDD Pharmaceuticals, Health Hero Network and Elim 
Biopharmaceuticals, Inc. I have also served on a number of advisory 
committees to the National Institute of Health. In addition, I serve as 
an adjunct partner of Essex Woodlands Health Ventures, a BIO member, 
and am an advisor to Draupnir, LLC, a private equity firm.

 THE PRIVATE SECTOR ANNUALLY FUNDS BILLIONS OF DOLLARS OF RESEARCH AND 
                 DEVELOPMENT IN THE BIOTECHNOLOGY FIELD

    The biotechnology industry is the most research and development 
intensive and capital-focused industry in the world. R&D in the 
biotechnology world is robust, focusing on new targets and highly 
innovative therapies. No industry spends more on research and 
development per employee and no industry faces a lengthier or more 
complex regulatory process to bring products to market than the 
biotechnology industry. There are over 1,400 biotechnology companies in 
the United States, of which about 25 percent are publicly traded. The 
revenue of these companies was about $35 billion in 2001 with a market 
capitalization of $206 billion in mid-2003. This research-intensive 
industry spent $20.5 billion on R&D in 2002 1, with the top 
five companies spending an average of $133,000 per employee on R&D. 
Biotechnology companies rely heavily on public-private partnerships in 
their R&D initiatives. Importantly, however, only approximately 1.6 
percent of the industry's R&D funding in 2002 originated from 
government sources.2
---------------------------------------------------------------------------
    \1\ Source: Ernst & Young, ``Resilience: America's Biotechnology 
Report 2003''
    \2\ Source: BioWorld Online, ``2002 Grants and Awards to Biotech 
Companies,'' April 7, 2003. Grants and awards to biotechnology 
companies from federal government agencies totaled $326.1 million in 
2002.
---------------------------------------------------------------------------
    Biotechnology companies range from very small, private companies 
with few employees to larger public ones such as Amgen and Genentech. 
Generally, however, biotechnology companies are either privately held 
or have much lower market capitalization than the large pharmaceutical 
companies and very few have yet achieved profitability. While large 
pharmaceutical companies tend to pursue development of ``blockbuster'' 
drugs with market potentials of $1 billion or more, many biotechnology 
companies will pursue products with lower market potentials, including 
those products whose projected revenues may only be 10% or so of the 
acceptable market potential for a large pharmaceutical enterprise.
    Biotechnology companies use living organisms to make their 
medicines rather than the chemicals used by pharmaceutical companies. 
As well as--entailing very complicated R&D efforts, this also requires 
enormously complex manufacturing capabilities. The manufacturing 
facilities, whose role is to define the biotech medicine, are subject 
to strict FDA licensing requirements. In addition, both the facilities 
and the medicine itself are very tightly regulated.
    The biotechnology industry is also a dynamic one. The industry 
supports 437,000 U. S. jobs, including approximately 200,000 jobs 
directly in the industry, in sectors as varied as agriculture, 
industrial products and pharmaceuticals. As a whole, the industry is 
not yet profitable, but biotechnology companies make tax payments of 
about $10 billion per year, including income, corporate and other 
federal, state and local taxes.
    Moreover, unlike the pharmaceutical industry, the vast majority of 
biotech companies spend more than 50 percent of their operating 
expenses on research and development. This is necessary given the huge 
investments required to bring a product through the discovery and lead 
optimization phase, preclinical testing, and then clinical trials 
required to gain market approval. With the consolidation in the 
pharmaceutical industry and the risk-averse culture of many of the 
largest companies, the bulk of early stage research and early clinical 
development is now performed by the biotech industry, especially in 
areas focusing on newer targets and featuring the most innovative 
therapeutics approaches.
    It is the early stages of drug development that are most vulnerable 
to perturbations in the capital markets. While it has been relatively 
easy for entrepreneurs to obtain seed financing, it is the follow-on 
financing, the second and third rounds of venture investment required 
to fund companies beyond ``proof of concept'', that is often the most 
difficult. Through the first six months of 2003, follow-on venture 
financing has represented only twenty five percent of the total venture 
financings. The total amount of venture financing raised during this 
period is down twenty seven percent from the same period in 2002. The 
same challenges also confront smaller cap public companies that have a 
difficult time raising capital through secondary offerings with 
depressed stock prices. It is this critical link in the drug 
development value chain that could be jeopardized if investors become 
concerned about the government seeking additional compensation for 
participation in early stage ``proof of concept'' research.

 THE BAYH-DOLE ACT HAS BEEN AN EFFECTIVE ENABLER FOR TECHNOLOGY TO BE 
     TRANSFERRED FROM FEDERAL AGENCIES TO UNIVERSITIES AND INDUSTRY

    As the Committee examines the effectiveness of the transfer of 
biotechnology from federal laboratories to universities and private 
companies, it is important to understand the historical and current 
framework for these transfers.
    Over twenty years ago, Congress enacted the landmark Bayh-Dole Act 
to promote the transfer of government-sponsored research to 
universities and small businesses. This action was taken in response to 
concern that the majority of technologies developed with federal 
funding were not being commercially exploited.
    Prior to Bayh-Dole, federal agencies would rarely relinquish 
ownership of federally funded inventions to the academic and private 
institutions, even when private sector scientists and engineers 
actually contributed to the inventions. Valuable technology was left 
languishing on the shelves of research institutions. For example, in 
the 1960s, the U.S. government asserted that it owned rights to 5-
fluorouracil (an important anti-cancer drug) even though it had 
provided merely a fraction of the funding that went into discovery. As 
a result, market entry of this critical product was unnecessarily 
delayed and industry distanced itself from federally funded university 
research.
    Bayh-Dole authorizes universities, non-profits and small businesses 
to elect title to inventions made under federal funding agreements. 
Additionally, Bayh-Dole authorizes federal agencies to grant exclusive 
licenses in their technologies to private companies. Later, President 
Reagan extended the policy of Bayh-Dole to large for-profit businesses 
which today are able to elect title to many inventions they make under 
federal contracts and grants. The ability to elect title to inventions 
and to further license valuable technologies gives companies the market 
exclusivity they need to achieve commercial exploitation.
    At the same time, Bayh-Dole reserves to the government a royalty-
free license to use the invention for government purposes. 
Additionally, Bayh-Dole gives the government so-called ``march-in 
rights,'' which enable it to compel licensing of a federally funded 
invention if the patent owner has not commercialized the invention in a 
reasonable time.
    Since the enactment of Bayh-Dole, technology partnerships have led 
to the founding of more than 1,100 companies based on NIH and 
university research. These technology partnerships and the patents on 
which they are based are particularly important to small biotechnology 
companies, which focus their research on breakthrough technologies that 
arise from basic biomedical research.
    At Stanford University alone, over 1,200 ``spin-off'' companies 
have been established by current or former students and faculty. 
Recognized early on by then University President Fred Terman as an 
important strategy for seed funding of translational research and 
innovation, the vast majority of these companies were founded with 
technologies initially developed under government funding. Successful 
``spin-off'' ventures help bring valuable products to market, and also 
develop the vibrant Silicon Valley surrounding Stanford, which leads in 
high tech, biotech, and medical device industries. This thriving 
business ecosystem, in turn enables further R&D initiatives and two-way 
technology flow between academia and industry. Stanford's Office of 
Technology Licensing has a robust record of licensing university 
patents, with royalty income that flows back to the university and the 
individual inventor. The Cohen-Boyer patent for gene splicing, for 
example, was supported by NIH grant funding. That patent yielded $30 
million per year in royalty revenue at its peak, for a total value of 
over one quarter billion dollars to the University, which was spent on 
further research and education.

THE SMALL BUSINESS INNOVATION RESEARCH PROGRAM IS A VALUABLE SOURCE OF 
SEED FUNDING FOR THE BIOTECHNOLOGY INDUSTRY, BUT SHOULD BE IMPROVED TO 
ALLOW GREATER PARTICIPATION BY COMPANIES THAT ARE SUPPORTED BY VENTURE 
                             CAPITAL FUNDS

    The Small Business Innovation Research (SBIR) program is a 
competitive, three phase, government funded program that was designed 
to encourage commercialization of promising technologies. Federal funds 
are used for the critical startup and early development stages--i.e. 
those stages that provide proof of concept to attract private equity 
into further funding rounds. Because the private sector is expected to 
take over 100% of funding by the third stage, companies are 
incentivized to expedite commercialization of a particular technology, 
product, or service.
    Since the enactment of the Small Business Innovation Act in 1982, 
SBIR funding has helped many biotechnology companies compete for 
federal research and development awards. To qualify for SBIR awards, a 
small business must be owned by U.S. individuals (as defined by the 
Small Business Administration's [SBA] guidelines) be independently 
operated, for-profit and limited to 500 employees. Ten federal 
departments and agencies, including the Department of Health and Human 
Services, are required by SBIR to reserve a portion of their R&D funds 
for award to small businesses.
    Because they help biotechnology companies evaluate new technologies 
and products at their earliest stage, SBIR awards can be very useful in 
helping companies to initiate new commercial opportunities. Before--
most biotechnology products can become commercially available, however, 
typically 15 years of work and hundreds of millions of dollars of 
investment capital are required to complete adequate testing and to 
secure the necessary approvals.
    While SBIRs serve a very useful role, particularly when private 
equity may be plentiful but directed to late stage private and public 
companies where the investor's exit strategy is clear and risks are 
lower, they are by no means a substitute for sustained equity 
investment. SBA's implementation of the program makes it difficult for 
companies who also have venture capital (VC) funding to participate in 
the program.
    Under the SBA's current regulations a company applying for SBIR 
funding must be more than 51% owned by ``individuals'' who are US 
citizens or permanent resident aliens and must have less than 500 
employees. The SBA has interpreted ``individuals'' to mean only 
``natural persons'' and not venture capital firms and employee pension 
funds. Many biotechnology companies have less than 500 employees and 
obtain the bulk of their funding from venture capital investment. 
Typical small start-up biotechnology companies that are backed by VC 
funds are generally more than 51% owned by the VC syndicates. The 
``individual'' shareholders that make up the VC syndicates are often 
the founders, employees, friends of the company, and angel and family 
investors. The most promising companies are the ones that attract VC 
capital. This typical combination of venture funding, industry 
collaboration and only modest investment directly by individuals boosts 
``non-individual'' ownership above the 51 percent level very early in a 
company's existence and, in virtually every instance, renders the small 
business ineligible for SBIR funding. Most if not all start-up 
biotechnology companies would be ineligible for SBIR funding as 
interpreted by the SBA.
    The SBA has proposed new regulations to clarify the ownership 
criteria for SBIR awards. However, the proposed regulations do not 
address the concerns of the industry with respect to VC-backed 
companies. BIO believes that a provision to remove VCs from 
determination of size eligibility would allay the concerns of our 
member companies and fulfill Congressional intent behind the statute. 
See attached comments filed by BIO. We urge this Committee to express 
its support for a revised definition of small business that would not 
penalize those small businesses supported by venture capital funds.

   COOPERATIVE RESEARCH AND DEVELOPMENT AGREEMENTS ARE AN IMPORTANT 
VEHICLE FOR PUBLIC-PRIVATE PARTNERSHIPS ON BIOTECHNOLOGY R&D AND SHOULD 
                              BE CONTINUED

    The Federal Technology Transfer Act (FTTA) allows government and 
government owned contractor operated laboratories to enter into 
Cooperative Research and Development Agreements (CRADAs), in order to 
promote collaboration between the federal government and the private 
sector. In the medical arena, the goal is to take research ``from the 
bench to the bedside''. Under a CRADA, the government shares resources 
such as personnel, facilities, and equipment with private entities, but 
does not make cash outlays to the private sector participant. The 
private sector funds its own activities under the CRADA, thus sharing 
the total cost of the collaboration.
    CRADAs typically allow the private sector participant to retain 
intellectual property rights to inventions it makes under the CRADA. 
Also, under recent amendments to the Stevenson-Wydler Act, the private 
sector participant has a first right of refusal to license any 
inventions the government makes under the CRADA. Further, technical 
data that is developed by the government under a CRADA may be protected 
from disclosure for a period of five years, thus giving the private 
sector participant a potential competitive advantage in the 
marketplace.
    For biotech companies, CRADAs can be an important opportunity to 
gain or retain intellectual property rights on biomedical inventions. 
They can also be helpful by allowing private companies to utilize 
specialized equipment or tools that are sometimes only available in 
federal laboratories to test the validity of innovative concepts and 
new ideas. CRADAs are thus important tools to enable startup 
biotechnology companies to jump the gap between a useful idea or theory 
to a successful and profitable product.
    NIH has entered into over 400 CRADAs since 1985. One of the most 
successful CRADAs with NIH was entered into with Aviron (which has 
since been acquired by MedImmune) in 1995. The CRADA was for a 
promising influenza vaccine invented at the University of Michigan in 
the 1960s under US Army sponsorship.----This vaccine had been the 
subject of NIH-sponsored clinical trials through the 70s and 80s. 
Despite the lack of a committed industrial sponsor, NIAID had built an 
impressive base of scientific knowledge around this flu vaccine and its 
novel form of administration via the nose. Under the CRADA, Aviron and 
NIAID jointly funded the clinical trials resulting in FDA approval of 
the vaccine now known as FluMist tm.

   THE ADVANCED TECHNOLOGY PROGRAM HAS BEEN AN IMPORTANT VEHICLE FOR 
           BIOTECHNOLOGY RESEARCH AND SHOULD BE FULLY FUNDED

    The Advanced Technology Program (ATP) was instituted in 1990 under 
the management of the National Institutes of Standards and Technology. 
The ATP does not fund product development. Instead, it supports 
enabling technologies that are essential to the development of new 
products, processes, and services across diverse application areas. 
This innovative program provides cost-share funding in the critical 
early stages of R&D, when research risks are too high for other sources 
of funding. Funding under the program is available to pay up to 
$2,000,000 in direct costs over a period not to exceed three years for 
a single company and up to half of the total project costs for a 
maximum of five years for a joint venture involving more than one 
company.
    Twenty percent of the Advanced Technology Program funding has gone 
to biotechnology applications. ATP grants are designed to fill the gap 
in financing the development of high-risk technologies that 
biotechnology companies often encounter, and that cannot be financed by 
venture capital.
    ATP grants make a tangible difference to the competitively chosen 
small companies receiving the assistance, especially during periods 
when seed investment to fund early, technology-validating R&D is 
scarce. For example, a grant of $1.2 million during a biotech 
investment trough in 1998 accelerated the development of the stem cell 
culturing device by two years and helped its fledgling developer 
subsequently attract more than $70 million in private investment. 
Another small biotechnology company had just 17 employees when it 
received a grant in the mid-1990s to develop systems of gene expression 
analysis. The company leveraged the ATP research into five patents and 
$100 million in corporate partnerships, growing rapidly into a billion-
dollar company with more than 300 employees and a solid balance sheet 
that will fund the technology's translation into new medicines.
    Since its inception, ATP has fostered development of dozens of 
biomedical technologies that might otherwise have been delayed for 
years. Examples of ATP success stories include: an autologous stem cell 
culturing device that eliminates the need for bone marrow extraction or 
multiple (up to 140) skin punctures to withdraw blood; an enzyme used 
in DNA sequencing, including the Human Genome Project, and another 
enzyme that may replace radioactive substances in diagnostic aids; and 
a mammography innovation that lowered the cost and widened availability 
of this life-saving diagnostic procedure. More apropos to today's 
technology needs is the development of miniaturized, automated DNA-
analysis ``chips'' that are becoming invaluable for rapid, accurate 
genetic analysis.
    The ATP program is of course subject to Congressional 
appropriations. Notwithstanding the multiple successes of the program, 
Congress has not consistently funded the program at the necessary 
levels. BIO believes that continued funding for ATP would reap benefits 
for health and medical research far in excess of the federal funds 
invested.

                               CONCLUSION

    BIO supports the continuing efforts of federal agencies to utilize 
the various vehicles that Congress has authorized for transferring 
valuable technology from the public to the private sector. As noted, 
licensing of federally funded inventions and partnering under CRADAs 
are two critical vehicles for private sector companies to gain access 
to technology developed with federal support. Additionally, the SBIR 
and ATP programs provide critical financial assistance to small and 
emerging biotechnology companies. BIO supports modifications to the 
SBIR program that would increase the opportunities for companies to 
participate in the program. Additionally, BIO encourages the Congress 
to continue fully funding the ATP initiative. The federal government's 
support helps small companies attract the necessary private sector 
investment to bring good ideas to the market.
    Given the significant technological breakthroughs that have been 
achieved in the medical and health fields, BIO believes that the 
federal dollars that are invested in biotechnology research have 
yielded significant benefits generally for the health of the nation and 
specifically for the federal treasury.
    However, while continued federal support is key to the future of 
the biotechnology industry, federal funding still represents only about 
1.6% of the total funds raised for research and development by the 
industry. Thus, federal R&D programs must be flexible enough not to 
stifle the private sector investment that is so critical for bringing 
products from the bench to the bedside.
    Thank you again for your support of biotechnology's efforts to 
contribute to the advance of health in the United States. I would be 
pleased to respond to questions from the Committee.

    Mr. Bilirakis. Thank you very much, Dr. Gardner. And, 
again, thank you for coming such a long way to be here to help 
us out.
    Dr. Neighbour, please proceed.

                  STATEMENT OF ANDREW NEIGHBOUR

    Mr. Neighbour. Chairman Bilirakis, members of the 
subcommittee, on behalf of the University of California, I 
welcome and thank you for this opportunity to testify before 
this subcommittee.
    As Executive Director of Research Administration at UCLA, I 
am responsible for managing publicly and privately sponsored 
research on our campus, and for the transfer of its innovative 
technologies to the marketplace. I hope to demonstrate today 
that there exists an effective collaboration between American 
universities, the life sciences industry, and NIH, that yields 
enormous benefit for our society and for mankind. I will 
briefly describe some of these benefits as well as several 
challenges and controversies that have the potential to impede 
this success. I would ask that you refer to my written 
testimony for greater detail.
    As you have heard already today, university tech transfer 
began approximately 23 ago with the passage of the Bayh-Dole 
Act. A prime example of successful technology transfer occurred 
in 1973, however, well before the Act was contemplated or 
enacted with the invention, by Cohen and Boyer, of recombinant 
DNA technology known as gene splicing.
    Funded in part by NIH, these two scientists at Stanford at 
the University of California discovered how to insert genetic 
material into native DNA. This technique launched a new 
industry called biotechnology.
    At that time, ownership of NIH-funded inventions rested 
with the government. However, because of a special patent 
agreement with NIH, the two universities were allowed to own 
the patent and assume the responsibility for its 
commercialization. Stanford's Technology Transfer Office 
licensed the patent to more than 300 emerging companies.
    Recognizing that effective license was beyond the 
government's resources, Congress, in a bold and inspired move, 
passed the Bayh-Dole Act, and universities took over the 
responsibility. And since 1980, NIH has played a lead role in 
implementing the Act, and universities have built effective 
programs for managing their intellectual property while 
maintaining their commitment to provide public access to the 
results of their research.
    Major NIH-funded discoveries at the University of 
California, or UC, have included new technologies for improving 
radiographic imaging, improved methods to develop and develop 
therapeutic drugs, and novel diagnostics for people and 
animals. In addition, NIH funding has formed a major platform 
for research that has fostered additional Federal and private 
funding sporting a plethora of high value products.
    Unfortunately, success has led to criticism, which I 
believe is founded mostly on three misunderstandings. These 
are: firstly, many think tech transfer is a simple linear 
process that speeds inventions from the bench to the bedside. 
In reality, it is a rather complex, slow, and resource-
intensive activity, often spanning many years.
    UC, for example, spends almost $20 million per year in 
managing a portfolio of more than 5,000 inventions and 1,000 
active licenses. Almost 1,000 new inventions are disclosed to 
us each year, and that is with less than 5 percent of those 
ever being commercialized.
    The process is more of a circle with multiple inputs and 
outputs than something linear. Federal funds encourage support 
from industry and other sources. Academic research produces 
early stage scientific knowledge, and that in turn stimulates 
the development of commercial products. Partnership with 
industry is invariably essential to convert the results of NIH-
funded endeavors to products that can directly aid the public.
    The second misunderstanding is that money is often used to 
measure technology transfer success. This metric ignores the 
many additional benefits that derive from technology transfer. 
The education of students that go on to feed the workforce, new 
companies and jobs that aid regional economies, and the 
products themselves that save lives and improve the quality of 
life.
    And, finally, many people believe that universities do tech 
transfer to make money or to get rich. After all expenses are 
paid, even those universities with gross revenues from 
licensing in excess of $20 to $50 million only retain $5 to $10 
million of that. And this is reinvested back into the research 
enterprise. While these funds are of great value to the 
university, few institutions would view this as an effective 
way to increase their capital assets.
    Imagine a world without knowledge of the human genetic 
code--recombinant DNA tools to splice and correct genes, ways 
to map and fingerprint DNA to convict the guilty and free the 
innocent. All of these technologies, together with vaccines and 
new drugs, began in universities that were financed in whole or 
in part by NIH.
    It is my fervent belief that this alliance between the NIH, 
the universities, and the industrial sector, is working well. 
We must preserve it, but we must also continue to strive to 
enhance its effectiveness and to ensure that arbitrary 
impediments are removed for the health of the public and of 
this Nation. With a greater knowledge and understanding of the 
tech transfer process and the accomplishments of NIH, and their 
academic partners, you on this committee I believe will play a 
key role in protecting these beneficial outcomes.
    Thank you very much for the opportunity to testify before 
you today.
    [The prepared statement of Andrew Neighbour follows:]

 Prepared Statement of Andrew Neighbour, Associate Vice Chancellor for 
          Research, The University of California, Los Angeles

    Chairman Bilirakis, Ranking Member Brown, Representative Waxman and 
Members of the Subcommittee: On behalf of the University of California, 
I welcome this opportunity to testify before this subcommittee on the 
topic of ``NIH: Moving Research from the Bench to the Bedside.'' As the 
Executive Director for the Office of Research Administration at UCLA, I 
am responsible for the management of both publicly and privately 
sponsored research for the campus, and for the transfer of its 
innovative technologies to the marketplace. I have enjoyed more than 
twenty years working in the realm of technology transfer in both 
academic and corporate sectors. I also serve as a Board Member of the 
Council on Governmental Relations (COGR), an association of more than 
150 leading US research universities, and am the incoming chair of 
COGR's Committee of Contracts and Intellectual Property.

                               BACKGROUND

    Over the past twenty years or so, the NIH and research universities 
throughout the United States who receive their funding support from 
extramural NIH grant programs have developed a collaborative and 
effective alliance that yields enormous benefit for our society and for 
mankind. In my remarks today, while I will describe some of these 
benefits, I will also discuss the challenges and controversies that 
have the potential to impede this success.
    The passage of the Bayh-Dole Act in 1980 was a bold and inspired 
move that shifted from the government to universities the 
responsibility for protecting and commercializing inventions made with 
federal funds. The Act applies to research funded by any federal 
agency. However, because most life sciences and biomedical research is 
supported through the NIH, and this segment tends to generate the most 
intellectual property, it is the NIH that plays perhaps the most 
visible role in Bayh-Dole implementation. Over the past twenty years or 
so, the guidance, oversight and coordination provided by NIH has served 
to build a collaborative alliance between academe and the government 
leading to more and more effective technology transfer.
    In the University of California alone, more than 6,500 individual 
scientists have reported new inventions since the enactment of Bayh-
Dole representing the creation of a vast research enterprise that has 
brought immeasurable and invaluable benefits to society.
    Perhaps the prototypical example of the benefit of federal/
university collaboration is the 1973 discovery by Cohen and Boyer of 
recombinant DNA technology, otherwise known as ``gene splicing.'' In 
research funded by the American Cancer Society, National Science 
Foundation and NIH, these two scientists at Stanford and the University 
of California discovered the means to insert genetic material 
artificially into native DNA. This technique launched an entire new 
industry called ``biotechnology.'' As you will note, this invention 
predated Bayh-Dole. However, because of a special ``patent agreement'' 
with NIH, Stanford and the University of California were allowed to 
elect title to the patent and, in so doing, assumed the responsibility 
for licensing the invention. During the life of the patent, Stanford's 
technology transfer office executed and managed more than 300 non-
exclusive licenses with this growing biotechnology industry.
    With this experience in view, many individuals and organizations 
believed that the task was well beyond the means and capabilities of 
the government. Consequently, they encouraged the Congress to consider 
moving the responsibility for commercializing federally funded 
inventions from the government agencies to the University receiving the 
federal grants. Passage of Bayh-Dole conferred not only the right to 
take title to inventions arising from government-funded research, but 
also an obligation to commercialize these inventions diligently for the 
benefit of the public. With this mandate, Universities began the 
difficult task of developing technology transfer programs equipped to 
steward their newly acquired intellectual property assets.

          TECHNOLOGY TRANSFER AT THE UNIVERSITY OF CALIFORNIA

    With the largest academic research enterprise in the US and perhaps 
the world, the University of California system has built a technology 
transfer program that many consider to be among the most effective yet 
developed. Initially, the program was centered in the Office of the 
President as a central Office of Technology Transfer. As experience 
grew, the University realized the merits of moving some of the 
activities to the local campuses, particularly those with large 
research programs. Presently, the larger campuses (and the federal 
laboratories managed by the University) perform most of the technology 
activities at the local campus. The systemwide OTT provides 
coordination, oversight, policy review, legal support and some 
licensing support. The individual campuses that have their own 
technology transfer offices manage the licensing of their portfolios 
locally. The system as a whole expends approximately $10-12 million per 
year in operating expenses and the same amount in ``out-of-pocket'' 
patenting costs to manage almost 1,000 new inventions received each 
year. The University has accumulated a total portfolio of more than 
5,000 active inventions in its systemwide portfolio and monitors almost 
1,000 patent licenses with industry. In FY02, the University executed 
125 new patent licenses and 55 plant licenses. In summary, the process 
involves the evaluation of inventions, protection of the intellectual 
property through patent or copyright, marketing to industry, 
negotiating and executing licenses, and monitoring the licensees' 
diligence in commercializing inventions.
    Since the Cohen-Boyer invention, major discoveries that resulted 
from NIH-funded research at the University of California have included 
new technologies for improving radiographic imaging, improved methods 
to develop and deliver therapeutic drugs, and novel diagnostics for 
people and animals. In addition, NIH funding has formed a major 
platform of research that has fostered additional federal and private 
funding spawning a plethora of high value products. UCLA alone has 
brought to the public many valuable advances in healthcare including 
devices to correct brain aneurisms, the nicotine patch to control 
tobacco addiction, positron emission tomography (PET scanning), and new 
diagnostics for breast and prostate cancer. All of these examples were 
either directly or indirectly supported by NIH and the technology 
transfer process.
    Unfortunately, however, these very successes have turned a 
spotlight onto the process which, in turn, has caused some to ask just 
how successful are we? Are we getting too rich from tax-payer supported 
research? Or perhaps we are wasting this resource and not realizing 
adequate return on investment.
    While oversight and monitoring of federally supported programs is 
clearly appropriate and desirable, some of the criticisms appear to be 
founded on misunderstandings of the process and the drivers that 
motivate its participants.
    In my view, there are three myths that underlie most of the 
criticism of the technology transfer process. They can be briefly 
summarized as:

(i) Technology transfer is a simple linear activity from ``bench to 
        bedside;''
(ii) Money is a sound measure of performance and value; and
(iii) Universities commercialize their inventions to create wealth for 
        themselves.
    I will now amplify each of these myths.

           MYTH #1: TECHNOLOGY TRANSFER IS A LINEAR ACTIVITY

    Previous speakers have provided definitions of the term 
``technology transfer.'' Many people who are not familiar with 
technology transfer conjure in their minds a somewhat linear activity, 
whereby federally funded research in the university results in a new 
discovery. Then driven by the Bayh-Dole Act, the university technology 
transfer office: reviews the invention for commercial viability; elects 
title; files a patent; markets it to industry; negotiates a license; 
and the product, perhaps a new therapy for a major disease, goes to 
market. In other words, an academic researcher discovers a new drug and 
soon afterwards it shows up in the pharmacy.
    Like many other things, this process is not as simple as that. In 
observing that gravity could bend light waves, Einstein showed nearly a 
century ago that the shortest distance between two points is not a 
straight line but a curve. Thus, we too should imagine a technology 
transfer process that is not linear, but rather one whose beginnings 
and endings merge to form a circle. For example, while public funding 
supports discovery, the early stage inventions made in the basic 
science laboratory of a university frequently attract support from the 
private sector. Collaborations with industry that follow may then lead 
to the building of new products on the knowledge and platform 
technologies made by the university scientist. Industry turns these 
through lengthy development cycles over many years into products. Most 
product candidates wither along the way; few make it through 
development and testing to the market. Product sales generate profits 
and wealth, some of which is returned through taxation to restore the 
federal coffers. In addition, through sponsored research and 
philanthropy, industry reinvests some of this wealth into new research. 
Sometimes new discoveries become the platform for the creation of new 
companies that bring new jobs to our communities and sustain economic 
development through taxes. Royalties paid to the university are shared 
with the inventor and the university portion is used to sustain the 
technology transfer process, build new research infrastructure, and 
support new discovery programs.
    In fiscal year 2002, 973 new inventions were reported to University 
of California technology transfer offices adding to a total invention 
portfolio of more than 5,000 active cases. On receipt of a new 
invention disclosure, the first task for the technology transfer office 
(TTO) is to determine what funding sources were used to support the 
research yielding the new discovery. This is done to establish whether 
prior rights may be attached to the invention based on commitments to 
the funding source. If supported with any NIH grants or contracts (or 
any other federal agency), the invention will fall under the conditions 
of the Bayh-Dole Act requiring that we report the invention and decide 
whether or not to elect title and file for intellectual property 
protection through the US Patent and Trademark Office. To arrive at 
this decision, the TTO must exercise professional judgment based on a 
scientific, technical and business assessment to determine the 
commercial viability of the invention. Is it a profound scientific 
breakthrough with no commercial utility? Is it perhaps, simply a better 
mousetrap for which there is no market need? Or perhaps it is so new, 
that there are no comparable products in the market. The point being 
that technology transfer is not a straightforward process in which 
research by NIH always generates inventions with an obvious value in 
the marketplace. A certain medical school dean once asked me why we 
didn't only patent ``the good ones.'' Because many University 
inventions are so unrefined and untested, it is difficult to determine 
with certainty the future path for the majority of the inventions that 
faculty researchers disclose. Illustrative of the process is the oft 
used axiom of the princess kissing frogs in search of a prince.
    Once the patent application is filed, the TTO sets about marketing 
the invention to appropriate industry partners in the hope of finding 
one willing to develop the invention into a product under a suitable 
contract or license. Frequently, the inventions themselves are valuable 
not as an actual saleable product, but as a technology that will assist 
the corporate partner in developing their own products. A common 
example arising from NIH-funded research might be the discovery of a 
new cellular component that is responsible for triggering cancer 
growth. It may be possible to gain a patent on the discovery of this 
protein and on its use as a target for drugs that might inhibit its 
function and stop cancer cells from spreading. The drug, in this 
example, would be developed exclusively by the company. However, they 
might need a license to the original invention and access to the 
knowledge and skill of the university inventor in order to develop 
their commercial product effectively.
    Having found a company interested in licensing the invention, the 
TTO negotiates a license that establishes the obligations of the 
licensee to develop the invention diligently at its expense and to pay 
fees and royalties against future product sales in return for the 
license to make, use and/or sell the invention.
    The ``frog-prince analogy'' is a good one as there is an enormous 
winnowing effect with very few discoveries getting through this process 
and reaching the marketplace. On average, the University of California 
files new patent applications on 45-50% of the new inventions disclosed 
each year. Approximately 30% of these will issue as US patents, and 
less than half of those will ever be licensed. To recap, of the 973 new 
discoveries received in 2002, only 5% will be licensed. Many of these 
will fail to reach the market.
    To close the loop on this circular process, however, it should be 
stressed that the discovery is often the beginning of a new process. 
Exposure to the researcher and his or her invention by the company 
frequently generates a new interest that results in the company 
becoming a private sponsor of a new research program in the inventor's 
laboratory. In addition, under those rare circumstances where a highly 
commercial invention does yield a successful product in the 
marketplace, income earned from royalties by the University is 
reinvested into research, and the companies tax obligations result in 
sources of revenue to fund future agency research appropriations, 
thereby completing the circle.
    From this discussion, I hope the Subcommittee will appreciate the 
complexity of technology transfer and the relative difficulty of moving 
inventions from bench to bedside.

       MYTH #2: MONEY IS A SOUND MEASURE OF PERFORMANCE AND VALUE

    For the external observer, it is tempting and easy to measure 
technology transfer by the amount of money it yields. For any given 
University, this would mean examining the annual gross revenues derived 
from licensing its inventions. The technology transfer circle is like a 
catherine wheel, a firework (popular in Great Britain) consisting of a 
disk with rockets equally spaced around its perimeter. When lit, it 
spins at high speed and showers energy and light in a broad 
circumference. Indeed, some licenses generate income, but the research 
enterprise yields so much more. In reality technology transfer includes 
the training and graduation of students who move into the world as 
trained scientists and professionals. Knowledge is created and shared 
through publication and presentation. Faculty scientists serve as 
consultants and advisors to the public and private sectors. While some 
inventions must be patented to ensure commercial interest and value, 
not all discoveries benefit society through licensing and 
commercialization. Counting dollars to quantify technology transfer 
ignores these other sometimes more valuable benefits that accrue from 
federally supported research activities in the University.
    A letter from Carl Feldbaum, President of the Biotechnology 
Industry Organization, dated June 11, 2001 to Dr. Maria Friere, then 
Director of Technology Transfer at NIH, succinctly and thoroughly lists 
the varied and significant returns on investment that accrue to the 
public from NIH-sponsored research. These include basic science 
knowledge and understanding; the development of new therapeutics and 
diagnostics; scientific training that provides employees for a rapidly 
growing new biotechnology industry; research tools to advance 
scientific research; and the licensing of new inventions from both 
intramural and extramurally-funded research.
    Furthermore, a quantitative performance assessment is predicated on 
the assumption that more money means greater societal value. Is a 
University that makes many millions of dollars from an improvement in 
cell phone technology necessarily more successful at technology 
transfer than one that develops a cure for a rare disease that may 
yield less than one hundred thousand dollars?
    Critics of academic technology transfer who focus on the revenue 
streams derived from licensing often erroneously contend that 
universities should not get rich from exploiting tax payer's funds. 
Simply put, universities do not ``get rich'' from their technology 
transfer activities. The University of California, widely held to be 
one of the most successful university systems in the field of 
technology transfer averages an annual gross income from licensing of 
approximately $80 million. After payment of legal expenses, the cost of 
providing technology transfer services, and the inventor's share, $20-
25 million is returned to the system to support ongoing research. This 
amount represents less than one percent of the total research 
expenditures of the UC system. The annual survey published by the 
Association of University Technology Managers (AUTM) shows that fewer 
than ten universities generated more than $20 million in gross revenues 
in FY2002. In virtually all cases, this was because each had a single 
invention that yielded the majority of the income. At the University of 
California, 25 inventions from its total active portfolio of 5,000 
produced 68% of its annual income.
    Similarly, few individual inventors receive significant funds from 
their inventions. Since most inventions yield less than $10,000 in 
gross royalties per year, few faculty inventors realize any significant 
gains from the 35% revenue share that must be split with their co-
inventors.
    It has also been argued by some that royalty bearing licenses of 
federally funded discoveries contribute to unreasonable pricing of 
``blockbuster'' drugs. While it has been clearly documented that few if 
any of these drugs arose directly from federally funded research, it 
has been unequivocally demonstrated that drug pricing is determined by 
the high cost of development and testing required before a drug can be 
sold, and that royalty obligations have negligible effect on market 
price of these treatments.
    Paradoxically, NIH was recently criticized for not charging a high 
enough royalty for technology it developed that was part of a major 
drug now marketed by Bristol-Myers Squibb.
    Therefore, measuring technology transfer accomplishments by the 
amount of money an invention generates for the university or the 
inventors fails to capture the broader benefits to the public that 
accrue from NIH-funded research and the larger research enterprise.

 MYTH #3: UNIVERSITIES COMMERCIALIZE THEIR INVENTIONS TO CREATE WEALTH 
                             FOR THEMSELVES

    Focusing on the income derived from licensing for one moment, an 
experienced businessman would conclude that based upon return on 
investment ratios, University technology transfer is largely 
unsuccessful. A quick search of the Patent Office database shows that 
the Regents of the University of California have been awarded 4,313 US 
patents since 1975. That's more than Pfizer, Inc., (2,774) and less 
than Merck (6,346). While the University may thus be in the same league 
as certain Fortune 100 companies, there are fundamental difference in 
its commercialization strategies. For profit companies focus their 
research in market segments in which they do business. Typically, they 
support internal research and development for the purpose of expanding 
their targeted strategic business interests. Universities not only 
attempt to broaden their research enterprise across all disciplines, 
they do not direct the research objectives of their faculty. Another 
particularly critical point is that the university relies on their own 
faculty to decide if it is best to publish their findings or to seek a 
proprietary position on their discoveries before they are more broadly 
disseminated. Protecting the right of its faculty to select topics on 
which they conduct their research and to publish whatever and whenever 
they see fit are among the basic tenets of academic freedom. 
Consequently, university inventions that may have great potential value 
do sometimes find their way in to the public domain for all to use 
without the exclusionary protection of a patent. If universities were 
to run technology transfer as a business, we would behave very 
differently.
    The mission of the research university is education, the pursuit of 
knowledge, and public service. Basic academic studies of bacteria in 
hot springs in far away places may seem eclectic to some. But imagine 
how a drug for cancer would have been discovered by a major 
multinational pharmaceutical company had it not been for laboratory 
processes that use enzymes isolated from these very bacteria to 
manipulate genes to produce the drugs that now treat patients.
    The primary purpose of technology transfer in a research university 
is to provide a supportive and sustained environment for the researcher 
to flourish. Licensing generates corporate collaborations building 
partnerships with industry. Companies have resources that Universities 
cannot afford that academic scientists need access to for their 
research. Some inventions will stall without corporate involvement. 
Many potential life science-based discoveries need the formulation, 
manufacturing, testing and marketing skills of corporations to turn 
them from an academic discovery to one that can be dispensed from the 
pharmacy. As indicated above, revenues from technology licensing 
represent less than one percent of our total research budget and a 
fraction of a percentage point of total operations. Given the cost of 
technology transfer and the relatively low cash returns, this is an 
ineffective source of operating capital and the University does not 
view its purpose to be one of budget supplementation.
    Universities measure their success by their contribution to the 
spinning catherine wheel. Not only how many inventions has it yielded, 
and how many have made it into the market to provide benefit to the 
public, but also how many graduates has it prepared for the world. 
State universities support and contribute to local economic 
development. Growth of its research enterprise creates jobs in the 
university itself. Sometimes it generates new ventures that grow into 
new companies. The leading biotech companies like Amgen and Genentech 
all grew from academic origins. At the University of California alone, 
more than 200 new companies have been spun out based on new 
technologies invented by its faculty in recent years.

                               CONCLUSION

    In supporting the Bayh-Dole Act and our role in technology 
transfer, universities are faced with a conundrum. On one-hand, some 
believe that we are getting rich using tax payers' support through 
federal grants from NIH and other agencies. Conversely, some argue that 
we should derive a greater financial return on investment and criticize 
us for being incompetent and wasting federal or public funds.
    The reality, however, is revealed when one measures the broader 
value and benefits that emanate from the university academic 
enterprise--namely the fundamental advances in knowledge and technology 
arising directly and indirectly from the creative efforts of hundreds 
of thousands of expert academic scientists and their students. The 
enablement of new products that have changed our world, especially in 
the form of improved understanding of disease, of accurate diagnostics, 
and effective therapeutics that allow the dying to live and improve the 
quality of life of so many.
    What would the world be like today without our knowledge of the 
human genetic code; recombinant DNA tools to splice and correct genes; 
ways to map and fingerprint DNA to convict the guilty and let the 
innocent free? All of these technologies together with vaccines and new 
drugs began in universities that were financed in whole or in part with 
federal funds through the NIH. Imagine a world where our collective 
expertise that has been built over the past 20 years to bring these and 
other innovations forward is eroded and impeded by changing the law 
because a minority feel it's not working--a feeling founded on a lack 
of knowledge and understanding of the complexity of the task.
    The alliance with NIH is working. Guidelines developed and 
promulgated by the agency encourage the broad dissemination of research 
tools developed in universities that can facilitate new research 
discoveries. Giving Universities the opportunity and the right to 
manage their inventions assures that they will be transferred 
diligently and effectively in a manner beyond the capabilities and 
resources of the agency if it were to carry this responsibility alone.
    Mr. Chairman, Subcommittee Members, it is my fervent belief that 
this alliance between the NIH, the universities and the industrial 
sector is working well. We must preserve it, but we must also continue 
to strive to enhance its effectiveness, and to ensure that arbitrary 
impediments are removed for the sake of the public and this Nation. 
With a greater knowledge and understanding of the technology transfer 
process and the accomplishments of NIH and their academic partners, you 
will play a key role in protecting these beneficial outcomes.
    Thank you very much for the opportunity to testify before you 
today.

    Mr. Bilirakis. Thank you, Doctor. And I will say to you all 
when we finish up that we would very much welcome suggestions 
from you in terms of how we can improve the overall process. So 
please be thinking of that. Help us to help you, so to speak.
    Dr. Soderstrom?

               STATEMENT OF E. JONATHAN SODERSTROM

    Mr. Soderstrom. Thank you, Mr. Chairman. And I echo the 
comments of my colleagues here in welcoming the opportunity to 
address what we think is a very important topic for this 
government to face.
    In my role as Managing Director of the Office of 
Cooperative Research, I have exactly the same responsibilities 
that my colleague Andrew Neighbour has. So I won't bother to 
repeat those.
    What I would like to underscore, however, is that in the 
course of fulfilling our research and educational missions, 
university scientists often create intellectual assets that 
have the potential to benefit society and further the 
university's educational goals. Some of these assets, but by no 
means all, may result in patentable inventions.
    As they initially emerge from the university's 
laboratories, however, these inventions are not--and I 
underscore are not--commercial products. Rather, they require 
substantial investment of time, energy, and financial resources 
to unlock their potential. That is not the role of the 
university. That is the role of the private sector. This 
process is best realized through the significant commercial 
sector involvement.
    Under the protection of the license agreement that we 
negotiate with companies, they can confidently invest in 
transforming these intangible assets into tangible products. 
Prior to the enactment of the Bayh-Dole Act, companies faced 
significant hurdles in negotiating such agreements with 
universities. Because the government lacked the resources and 
links with industry needed to develop and market these 
inventions, hundreds of value patents and many new chemical 
entities were sitting unused on the shelves of laboratories 
throughout the United States.
    In addition, U.S. industry was not inclined to brave the 
government bureaucracy to license these patents. Thus, 
technology transfer from universities was primarily 
accomplished from--by publishing the research results, training 
students for the workforce, and, in some cases, with land grant 
universities' agricultural extension services.
    The ability, however, to retain title and, thus, license 
the inventions has been a healthy incentive for universities to 
become much more involved in the technology transfer process, 
and such incentive was needed. We have ample evidence of that, 
since participation prior to that was so underutilized.
    Since then, we have seen that patent and licensing 
activities has encouraged faculty and the universities to get 
involved in a rather time-consuming activity, which has to be 
done in addition to our primary missions of research and 
education. University patenting and licensing efforts under 
Bayh-Dole have fostered the commercialization of many new 
technological advances that impact the lives of millions of 
people across this Nation.
    Numerous pharmaceutical and medical products, 
environmentally friendly, or manufacturing technologies, 
inventions which improve public safety, and information 
technology services have resulted from the transfer of 
federally sponsored research results from academic laboratories 
to the business community and ultimately to consumers.
    In many instances, these products and processes would not 
have reached the public without the incentives that are 
afforded by this Act. Indeed, the British News Weekly--the 
economists recently concluded that the Bayh-Dole Act was 
possibly the most inspired piece of legislation ever to be 
enacted by the American Congress in the past half-century. I 
agree. If you look at the results, I think you will as well.
    Over the last 23 years, nearly 23,000 license agreements 
have been enacted and are currently active. Last year alone 360 
new--I am sorry--in the last 5 years, over 1,500 new products 
have been introduced in the marketplace. Last year 494 new 
companies were formed based on licenses from academic 
institutions. And since 1980, 3,800 new ventures have been 
created. I think those are astounding results. And if I just 
look at my own institution--Yale University, which happens to 
be a substantial recipient of NIH funds--I see the same effect.
    The result of the support of NIH funding has been a wealth 
of new knowledge that has led to discoveries that are 
transforming our understanding of human disease. Translating 
this knowledge into new means of diagnosis, prevention, and 
treatment has yielded new inventions, with the potential for a 
profound and positive effect upon the welfare and health and 
safety of humankind.
    But if I look, in particular, at one issue that hasn't been 
mentioned yet today but I want to draw attention to, which is 
the transformation of the local economy based on this. And 
based just on Yale's strength in the biomedical sciences, we 
have been able to help build a biotechnology industry in and 
around an economically depressed area of New Haven, 
Connecticut.
    The results from the formation--have resulted in the 
formation of 25 new biotechnology companies in the greater New 
Haven area. In the last 2 years alone, those companies have 
attracted $1.5 billion in private sector investment, all of 
which is going into further development of NIH-funded research. 
More importantly, those companies now employ 1,300 people, and 
they have begun the transformation of more urban areas.
    Mr. Chairman, I want to bring to your attention something 
that I think exemplifies the heart of my testimony. I recently 
had a conversation with the Vice Chairman of the NASDAQ stock 
market. In the course of that conversation, he related to me 
that he believed that based on his estimate 30 percent of the 
companies that are currently listed on the NASDAQ exchange owe 
their value to the results of government-sponsored research and 
development.
    Technologies licensed from academia have been instrumental 
in spawning entirely new industries, improving the productivity 
and competitiveness of those companies, and creating new 
companies and jobs. The Bayh-Dole Act continues to be a 
national success story, representing the foundation of a 
successful union among government, universities, and industry, 
and the success of this three-way partnership cannot be 
overstated.
    Thank you, Mr. Chairman.
    [The prepared statement of E. Jonathan Soderstrom follows:]

Prepared Statement of E. Jonathan Soderstrom, Managing Director, Office 
                of Cooperative Research, Yale University

    Mr. Chairman, thank you for the opportunity to testify before your 
Subcommittee on the important topic of translating research from the 
bench to the bedside.
    My name is Jon Soderstrom. I am the Managing Director of the Office 
of Cooperative Research (OCR) at Yale University. The Office of 
Cooperative Research is the patent management organization for Yale 
University. I also serve as the Vice President for Public Policy the 
Association of University Technology Managers known as AUTM. AUTM is a 
nonprofit organization created to function as a professional and 
educational society for academic technology transfer professionals 
involved with the management of intellectual property. AUTM was founded 
in 1974 as the Society of University Patent Administrators. That group 
laid the foundation for the association that exists today--more than 
3,000 members strong representing over 1,500 institutions and companies 
across the globe. Neither Yale nor AUTM have received any federal 
grants, or engaged in any federal contracts or subcontracts that 
require reporting under House rules.

       TRANSLATING UNIVERSITY INVENTIONS INTO COMMERCIAL PRODUCTS

    In the course of fulfilling our research and educational missions, 
university faculty often create intellectual assets that have the 
potential to benefit society and further the university's educational 
goals. These assets may include patentable inventions, copyrightable 
works or ideas that form the basis for commercializable intellectual 
property. As they initially emerge from the university's laboratories, 
these inventions are not mature commercial products. Rather, they 
require significant investment of time, energy and financial resources 
to unlock their potential. This process is best realized through a 
strategy of attracting commercial sector involvement. Under the 
protection of a license agreement, companies can confidently invest in 
transforming these intangible assets into tangible products. Prior to 
the enactment of the Bayh-Dole Act (P.L. 96-517), the ``Patent and 
Trademark Act Amendments of 1980'' on December 12, 1980, companies 
faced significant hurdles in negotiating such agreements with 
universities.
    The Bayh-Dole Act created a uniform patent policy among the many 
federal agencies that fund research. The Act enables small businesses 
and nonprofit organizations, including universities, to retain 
ownership of inventions resulting from federally funded research and to 
manage the licensing of them to industry for commercial product 
development in the public interest. Prior to the Act, ownership of 
patents resulting from university discoveries was largely controlled by 
the federal agencies that sponsored the research. Because the 
Government lacked the resources and links with industry needed for 
development and marketing of the inventions, hundreds of valuable 
patents were sitting unused on the shelf. Government policy at that 
time was generally to offer non-exclusive licenses under all inventions 
that it owned--a licensing stance administered under some 24-26 
different non-uniform agency policies, which proved to be highly 
unsuccessful. Under these conditions, U.S. industry was not inclined to 
brave government bureaucracy to license patents. Thus, technology 
transfer from universities was accomplished primarily by the publishing 
of research results, training of students for the workforce and some 
extension programs established by the land-grant universities. The 
benefit to U.S. industry of such an unstructured process is 
undocumented and highly speculative. As the authors of the Act, former 
Senators Birch Bayh and Robert Dole, recently noted 1:
---------------------------------------------------------------------------
    \1\ Birch Bayh and Robert Dole, ``Our Law Helps Patients Get New 
Drugs Sooner,'' Letter to the Editor, Washington Post, April 11, 2002; 
Page A28
---------------------------------------------------------------------------
        Government alone has never developed the new advances in 
        medicines and technology that become commercial products. For 
        that, our country relies on the private sector. The purpose of 
        our act was to spur the interaction between public and private 
        research so that patients would receive the benefits of 
        innovative science sooner.
    The ability to retain title to and license their inventions has 
been a healthy incentive for universities to become involved in 
transfer of technology from their laboratories to the marketplace. Such 
incentive is needed, since participation in patent and licensing 
activities is time consuming for faculty, and must be done in addition 
to our primary research and teaching missions. University patenting and 
licensing efforts under the Bayh-Dole Act have fostered the 
commercialization of many new technological advances that impact the 
lives of millions of people across the nation. Numerous pharmaceutical 
and medical products, environmentally friendlier manufacturing 
technologies, inventions which improve public safety, and information 
technology services have resulted from the transfer of federally 
supported research results from academic laboratories to the business 
community and, ultimately, consumers. In many instances, these products 
and processes would not have reached the public without the incentives 
and procedures afforded to higher education institutions by the Act. As 
a recent article in The Economist noted 2:
---------------------------------------------------------------------------
    \2\ The Economist, ``Innovation's golden goose,'' December 14, 2002
---------------------------------------------------------------------------
        Possibly the most inspired piece of legislation to be enacted 
        in America over the past half-century was the Bayh-Dole act of 
        1980. Together with amendments in 1984 and augmentation in 
        1986, this unlocked all the inventions and discoveries that had 
        been made in laboratories throughout the United States with the 
        help of taxpayers' money. More than anything, this single 
        policy measure helped to reverse America's precipitous slide 
        into industrial irrelevance.
    A recent national survey conducted by AUTM 3 reports 
that 70% of the active licenses of responding institutions are in the 
life sciences--yielding products and processes that diagnose disease, 
reduce pain and suffering, and save lives (Attachment 1: AUTM Licensing 
Survey, FY 2001). Most of these inventions involved were the result of 
federal funding from the National Institutes of Health. While it would 
be impossible to list all such inventions, a few examples of 
technologies and products originating from federally funded university 
discoveries include:

    \3\ The Association of University Technology Managers, ``AUTM 
Licensing Survey, FY 2001: A Survey Summary of Technology Licensing 
(and Related) Performance for U.S. and Canadian Academic and Nonprofit 
Institutions, and Patent Management Firms.'' AUTM: Northbrook, IL, 
2002.
---------------------------------------------------------------------------
 Artificial lung surfactant for use with newborn infants, University 
        of California
 Cisplatin and carboplatin cancer therapeutics, Michigan State 
        University
 Citracal ' calcium supplement, University of Texas 
        Southwestern Medical Center
 Haemophilus B conjugate vaccine, University of Rochester
 Neupogen ' used in conjunction with chemotherapy, Memorial 
        Sloan Kettering Cancer Institute
 Process for inserting DNA into eucaryotic cells and for producing 
        proteinaceous materials, Columbia University
 Recombinant DNA technology, central to the biotechnology industry, 
        Stanford University and University of California
 TRUSOPT ' (dorzolamide) ophthalmic drop used for glaucoma, 
        University of Florida
    These examples of successful new technologies demonstrate that a 
strong national infrastructure to support technology transfer has been 
established at academic institutions across the nation since passage of 
the Bayh-Dole Act. The royalties received from the licensed inventions 
support such an infrastructure. The Act requires that royalties 
received by universities from federally-funded inventions be reinvested 
for research and education purposes, after payment of a share to the 
inventor and payment of incidental legal expenses associated with 
patenting and licensing of the invention.
    University use of royalty income is complex and diverse. Most 
frequently royalty income is used for research and educational expense 
of graduate students, start-up research costs for new or junior 
faculty, seed money for innovative new projects or initiatives (often 
provided through an intramural research competition), computer 
equipment and laboratory facilities renovation. Universities have used 
royalty income for a variety of innovative programs or initiatives. 
Examples include summer programs for female undergraduate students 
interested in science careers, technical assistance programs which 
provides high technology urban planning and architectural visualization 
services to inner city communities based on the agricultural extension 
service model, and new laboratory buildings to support the demands of 
21st century medical research.
    For most universities royalty income does not represent a 
significant source of revenue when compared with their federal funding 
or sponsored research expenditures. The Council on Government Relations 
(COGR) estimates that overall the aggregate university share of royalty 
revenues is in the range of 3% of total federal funding and of total 
research expenditures 4. Some universities do better than 
others in terms of royalty income received. Most universities, however, 
do not derive substantial revenue from royalties by almost any standard 
of comparison. For those universities that derive substantial income 
from royalties, that success often tends to be associated with one 
particular invention. There is considerable annual fluctuation in 
income received, and one-time occurrences (e.g. settlement of a legal 
dispute over rights to an invention) can result in very large 
perturbations in income amounts. Thus, relatively few universities 
derive substantial revenues from royalties, and universities as a whole 
are not reaping ``windfall profits.''
---------------------------------------------------------------------------
    \4\ Letter from Katharina Phillips, President, Council on 
Government Affairs to Dr. Wendy Baldwin, Deputy Director Extramural 
Research, National Institutes of Health, June 5, 2001.
---------------------------------------------------------------------------
    Nevertheless, in 1980 there were approximately 25-30 universities 
actively engaged in the patenting and licensing of inventions. It is 
estimated that there has been close to a ten-fold increase in 
institutional involvement since then. The AUTM survey reflects the 
impact of this growth in activity:

 Over 4,000 new license and option agreements were executed with 
        nearly 23,000 such agreements currently active.
 Nearly 360 new commercial products were brought to the market under 
        license to a commercial partner. Since 1998, more than 1,500 
        new products have been introduced to the marketplace.
 494 new companies were formed based on a license from an academic 
        institution. Since 1980, over 3,800 such ventures have been 
        created.
 Approximately $30 billion of economic activity each year, supporting 
        250,000 jobs can be attributed to the commercialization of new 
        technologies from academic institutions.
    Technologies licensed from academia have been instrumental in 
spawning entirely new industries, improving the productivity and 
competitiveness of companies, and creating new companies and jobs. In 
summary, the Bayh-Dole Act and its subsequent amendments created 
incentives for the government, universities, and industry to work 
together in the commercialization of new technologies for the public 
benefit. The success of this three-way partnership cannot be 
overstated.

                           YALE'S EXPERIENCE

    Yale's Office of Cooperative Research was created in 1982 in 
response to the passage of the Bayh-Dole Act that encouraged 
universities to seek commercial partners to move their discoveries out 
of the laboratory and into the marketplace. The OCR was charged with 
extending and expanding Yale University's interaction with the private 
sector. The duties of the OCR include oversight for patenting and 
licensing activities, as well as development of university inventions. 
OCR staff work with Yale researchers to identify inventions that may 
ultimately become commercial products and services useful to the 
public.
    In FY 2002, approximately $335 million or 80% of Yale's sponsored 
research and training was supported federal agencies such as the 
National Institutes of Health (NIH), National Science Foundation (NSF), 
Department of Defense (DOD) and Department of Energy (DOE). The largest 
federal sponsor is the NIH, which provided $257 million of grants and 
contracts during 2002. The result of this support has been a wealth of 
new knowledge that has led to discoveries that are transforming our 
understanding of human disease. Translating this knowledge into new 
means of diagnosis, prevention and treatment has yielded new inventions 
with the potential for a profound and positive effect upon the welfare, 
health and safety of humankind. Researchers in the Department of 
Pharmacology of the Yale School of Medicine, for example, together with 
their research collaborators at other institutions, have played 
significant roles in developing two key ingredients of the so-called 
drug cocktail: the reverse transcriptase inhibitor d4T, known 
commercially as Zerit, and 3TC, known as Epivir. These medicines have 
fundamentally changed the nature of AIDS therapy during the past 
decade.
    William Prusoff, Ph.D., Professor Emeritus of Pharmacology, has 
spent a 45-year career at Yale investigating potential antiviral and 
anticancer compounds, part of the traditional, small-molecule approach. 
In the late 1950s he synthesized idoxurine, an analog of thymidine, 
which was the first antiviral compound approved by the FDA for therapy 
in humans. It was used to treat herpes infection of the eye. Dr. 
Prusoff and his long-time collaborator, the late Tai-Shun Lin, Ph.D., 
discovered in the 1980s that a thymidine analog, reported in scientific 
literature by researchers from Wayne State University as a poor 
anticancer agent, was very effective in slowing the production of HIV. 
This compound is known as d4T or stavudine. Bristol-Myers Squibb 
developed the drug under the trade name Zerit and brought it to market 
in 1994.
    Yung-Chi (Tommy) Cheng, Ph.D., the Henry Bronson Professor of 
Pharmacology, has worked on a parallel course. While Drs. Prusoff and 
Lin found drugs that work against AIDS, Dr. Cheng has sought ways to 
reduce their toxicity. Long-term usage of anti-retroviral AIDS drugs 
leads to a decline in the mitochondrial DNA of certain organs, 
impairing their ability to function properly. After a month or two of 
use, these agents can cause problems in nerves, the pancreas, muscles 
and the liver. Dr. Cheng's laboratory team studies drugs that will be 
active against the virus but will have no toxicity to the mitochondrial 
DNA.
    One such drug turned out to be 3TC, a compound with positive and 
negative forms that mirror one another. Originally synthesized by a 
Canadian researcher and identified as an antiviral agent, samples were 
sent to Dr. Cheng for study of the drug's toxicity. He found that 3TC's 
negative form reduced side effects when used in combination with AZT. 
The combination increases 3TC's efficiency at inhibiting an enzyme HIV 
uses to reproduce its genetic material. Dr. Cheng identified 3TC as an 
agent that would be less toxic to mitochondrial DNA than other 
retroviral drugs.
    A new approach to combating AIDS may grow out of work led by John 
K. Rose, Ph.D., Professor of Pathology and Cell Biology. The agent he 
developed, based on a common virus found in cattle, has killed HIV-
infected cells in culture. He also sees the possibility of developing 
an AIDS vaccine, using recombinant form of the virus as a vaccine 
vector. Researchers hope the vaccine will stimulate both parts of the 
immune system: antibodies to neutralize any free-floating HIV and 
specialized immune cells to kill any cells that HIV does manage to 
infect. Early results using a form of the engineered virus showed 
promise against SIV, the simian form of HIV, for use in animal trials. 
Dr. Rose is working together with scientists at Wyeth Pharmaceuticals 
in conducting further animal tests. If it is proven safe and effective 
in animals, human trials could follow.
    These are only a few examples of the life-changing discoveries 
resulting from Yale's scientific endeavors. Currently, Yale's has 
licensed eight (8) novel therapeutic drugs being tested in thirteen 
(13) different clinical trials for such life-threatening diseases as 
various types of cancer, Hepatitis B and AIDS (see attachment 2: Yale 
Pharmaceutical Pipeline). The benefit to the public derived from these 
and other inventions created through the research at Yale and other 
academic research institutions is incalculable.

                THE IMPACT ON LOCAL ECONOMIC DEVELOPMENT

    In many communities around the country, the scientific research 
undertaken by universities has been a powerful engine of local economic 
development. As President Richard C. Levin recently pointed out 
5, without critical mass in electrical engineering and 
computer science, Yale--and consequently New Haven--missed out on the 
technological revolution that spurred the development of Silicon Valley 
and Boston's Route 128. But Yale has impressive strength in biomedical 
sciences with unexploited potential to build a biotechnology industry 
in and around New Haven. With the administration of President Levin, 
which started in 1993, Yale heightened its involvement in community 
economic development through specific operations backed by financial 
investments and increased professional staffing. The results include:

    \5\ Richard C. Levin, ``Universities and Cities: The View from New 
Haven,'' Inaugural Colloquium, Case Western Reserve University, January 
30, 2003.
---------------------------------------------------------------------------
 A commitment to spend over $500 million to renovate every science 
        laboratory on campus as well as construct 5 new state-of-the-
        art research and educational buildings.
 A commitment to spend an additional $500 million to renovate the 
        laboratories at the Medical School including the construction 
        of a recently opened 457,000 square foot building for disease-
        based research that increased the total lab space by 25%.
 Twenty-five new biotechnology companies have been established in the 
        greater New Haven area, seventeen within the city limits. These 
        firms have attracted over $1.5 billion in capital and together 
        they now employ 1300 people.
 Attracting Winstanley Enterprises of Concord, Massachusetts to 
        purchase the 550,000 square foot former headquarters of the 
        Southern New England Telephone Company one block from the 
        Medical School that it transformed into the George Street 
        Technology Center housing eight biotechnology spin-offs from 
        Yale.
 Working with the State of Connecticut and City of New Haven to 
        attract Lyme Properties (the developers of Kendall Square in 
        Cambridge, Massachusetts) to convert 1 million square feet of 
        former factory space at Science Park into labs, offices and 
        restaurants for additional spin-offs from Yale.
    Although these results are just from New Haven, Connecticut, 
similar scenarios are being replicated at numerous sites across the 
country. On a nation-wide basis, the results support the conclusion 
that the Bayh-Dole Act has promoted a substantial increase in 
technology transfer from universities to industry, and ultimately to 
the public. There has been a tremendous acceleration in the 
introduction of new products through university technology transfer 
activities. These benefits have been significantly enhanced by the 
adoption of federal policies encouraging technology transfer. Such 
policies have led to breathtaking advances in the medical, engineering, 
chemical, computing and software industries, among others. The 
licensing of new technologies has led to the creation of new companies, 
thousands of jobs, cutting-edge educational opportunities and the 
development of entirely new industries. Today, the Vice Chairman of the 
NASDAQ Stock Market,6 estimates that 30% of the companies 
listed owe their value to the results of government sponsored research 
and development. Accordingly, the Bayh-Dole Act continues to be a 
national success story, representing the foundation of a successful 
union among government, universities, and industry.
---------------------------------------------------------------------------
    \6\ Personal communication with .
---------------------------------------------------------------------------
    Mr. Chairman, thank you again for your time and attention. If there 
are any questions, I will be pleased to answer them.
    [Attachment 1 is available at www.autm.net]

                                   Attachment 2: Yale Pharmaceutical Pipeline
----------------------------------------------------------------------------------------------------------------
              AGENT                    LICENSEE           INDICATION             STAGE         PATENT EXPIRATION
----------------------------------------------------------------------------------------------------------------
Zerit .........................  Bristol-Myers       HIV/AIDS..........  Marketed..........  June 2008
                                   Squibb.
Coviracil .....................  Triangle            Hepatitis B.......  Phase III.........  January 2010
                                   Pharmaceuticals.
Pexelizumab TM..................  Alexion             Cardiopulmonary     Phase III.........  Pending
                                   Pharmaceuticals.    Bypass.
Troxatyl ......................  Shire               Acute Myelogenous   Phase II..........  April 2017
                                   Pharmaceuticals.    Leukemia.
Troxatyl ......................  Shire               Solid Tumors        Phase II..........  April 2017
                                   Pharmaceuticals.    (pancreatic
                                                       cancer).
Triapine TM.....................  Vion                Leukemia..........  Phase II..........  January 2011
                                   Pharmaceuticals.
Triapine TM.....................  Vion                Metastatic Breast   Phase II..........  January 2011
                                   Pharmaceuticals.    Cancer.
Clevudine TM....................  Triangle            Hepatitis B.......  Phase II..........  December 2013
                                   Pharmaceuticals.
Elvucitabine TM.................  Achillion           Hepatitis B.......  Phase II..........  May 2014
                                   Pharmaceuticals.
Elvucitabine TM.................  Achillion           HIV/AIDS..........  Phase II..........  May 2014
                                   Pharmaceuticals.
TAPET TM........................  Vion                 Anticancer.......  Phase I...........  March 2013
                                   Pharmaceuticals.
TAPET-CD........................  Vion                Anticancer........  Phase I...........  March 2013
                                   Pharmaceuticals.
VNP40101M.......................  Vion                Anticancer (Solid   Phase I...........  March 2010
                                   Pharmaceuticals.    Tumors).
VNP40101M.......................  Vion                Anticancer          Phase I...........  March 2010
                                   Pharmaceuticals.    (Leukemia).
IoddU...........................  Achillion           Epstein-Barre       Pre-clinical......  Pending
                                   Pharmaceuticals.    Virus.
ACH0630.........................  Achillion           Hepatitis B and C.  Pre-clinical......  Pending
                                   Pharmaceuticals.
VSV Vaccine.....................  Wyeth               HIV/AIDS..........  Pre-clinical......  Pending
                                   Pharmaceuticals.
----------------------------------------------------------------------------------------------------------------


    Mr. Bilirakis. Thank you, Doctor. You know, we talk about 
the Bayh-Dole Act and its accomplishments, and think back how 
much medicine might have progressed if that Act had taken place 
earlier. And I am told by staff, and I guess some of you all 
can verify this, that it took about 20 years of discussions 
before we could get to that particular point. So, my God----
    Mr. Soderstrom. That is absolutely correct, sir.
    Mr. Bilirakis. Well, Dr. Sigal, please proceed.

                   STATEMENT OF ELLEN V. SIGAL

    Ms. Sigal. Mr. Chairman, members of the committee, I am 
very happy to be here today. I am here in two capacities--one 
personally and one as Chairman of the Friends of Cancer 
Research.
    As a personal story, I think you should know that everyone 
in my family has died of cancer. Everyone. My mother just 
recently died of pancreatic cancer. My sister died at 40 years 
old, leaving a 4-year-old child. And my father died of prostate 
cancer. So I have devoted my life to making a difference in 
these matters.
    Friends is a coalition of all of the major groups in cancer 
research. It has the professional organizations, the American 
Cancer Society, ASCO, AECR, it has all of the patient groups, 
lymphoma, breast cancer, prostate cancer, and many individuals 
who care and make a difference.
    The investment in the NIH and the results and what we have 
gotten out of it has been staggering to the patient. It has 
been enormous and well-spent money, and it will--it has made a 
difference, and in the future it will make an enormous 
difference.
    Patients gain when scientific knowledge and understanding 
grows, is rapidly disseminated. Patients benefit when they have 
improved access to meaningful information about their diseases 
and conditions, and their options for treatment are 
participation in clinical trials. Patients benefit when the 
discoveries of the NIH scientists and those researchers 
supported by the NIH are transferred to the private sector for 
the complex, risky, and expensive process of development into 
commercial products.
    The United States technology transfer policies are the envy 
of the world, because the NIH, under the direction of Congress, 
has made the creation of new products a central goal of the 
American biomedical research. The most important benefit is it 
benefits patients and people.
    Since Bayh-Dole, Congress has implemented a policy 
structure that recognizes and builds upon the fact that the 
marketplace can be a powerful tool in promoting innovation. It 
is private sector firms that produce the overwhelming 
percentage of goods and services that underlie the dynamic 
American economy in the United States.
    However, the government, in this case the NIH, plays an 
important role in expanding the basic understanding of science. 
It is the knowledge explosion that has been facilitated by 
dramatic increases in Federal funding for biomedical research. 
But as Congress after Congress has recognized, the faster, more 
easily technology can get into the hands of the private sector, 
the greater the likelihood that a product will be developed and 
marketed.
    As a patient representative and advocate, I want to discuss 
one concern that arises in discussions of technology transfer. 
Some well-intended policymakers have urged the government to 
impose price controls as a pre-condition to private sector 
licensing or government discoveries. This has been urged in 
explicit ways and through policies that have a similar net 
effect.
    I can tell you from experience that seeking to guarantee 
access at a fair price to products using the mechanism is 
troubling and will not work and will not help the patient, who 
is the most important part of this equation.
    First, reasonable pricing clauses of the NIH have not 
worked in the past. The number and quality of discoveries that 
were licensed declined during a 5-year period when such a 
policy was in effect. Companies who can undertake the risky and 
expensive process of drug development estimated at over $800 
million per product, do not want vague agreements that have 
disadvantaged terms when they can invest those resources to 
pursue a product without strings attached.
    Second, companies do not--cannot bear the risk of not 
knowing what price will be considered reasonable. Government 
discoveries are licensed so early in the product development 
that the stage--very little knowledge is known about the 
potential product. Therefore, it is impossible to define what a 
reasonable price will be.
    Any steps to assure fair prices should be applied uniformly 
to all products, rather than penalize products created from the 
NIH. Second, narrowly crafted measures in Medicaid and certain 
other special Federal programs now are assuring fair prices. 
Finally, the Congress should recognize that drug price 
competition is stimulated by policies that advance the 
development of new products.
    It is in the interest of the patients to have more than one 
therapy on the market. This is critical. This is how we gain 
knowledge, and this is how we get better products. Recently, 
yesterday, Friends of Cancer Research announced a public-
private partnership with five pharmaceutical companies of the 
National Cancer Institutes to really work on clinical trials, 
early stage trials, in the community for underserved patients 
and geriatric patients.
    It is a model of the way a partnership should work between 
the government and the private sector. Five competing companies 
came together for this knowledge to help the government, and 
we, at the National Cancer Institute, work with them for the 
benefit of patients in the community. That is a positive model 
of public-private partnerships.
    This kind of partnership celebrated yesterday was symbolic 
of the kinds of relationships that government and the Congress 
should be fostering. We cannot expect the government to do 
everything, but neither can we expect the private sector to 
fund every bit of fundamental research. We need to support and 
grow partnerships between the government and the private 
sector, so that patients can be assured that both are pursuing 
the common good of expanding access to clinical trials by 
patients, and the developments of new products to treat and 
cure serious and unmet medical needs.
    As the Committee on Energy and Commerce continues its 
hearings on the National Institutes of Health on behalf of 
patients and patient advocacy groups, I urge you to keep the 
following fundamental principles in mind. First, do no harm. 
The current system of knowledge and management, information, 
dissemination, and technology transfer at the NIH works 
remarkably well. Please do not be tempted to undertake actions 
that would fundamentally jeopardize the record of success and 
the patient.
    Second, as you contemplate the NIH, please keep in mind the 
necessity of positive partnerships and collaborations between 
government and the private sector. Patients can ill afford a 
public process that demonizes either the pharmaceutical 
companies, biotechnology companies, and the industry, and the 
outstanding scientists and researchers at the NIH.
    Thank you very much for the opportunity to participate, and 
I am happy to take questions.
    [The prepared statement of Ellen V. Sigal follows:]

 Prepared Statement of Ellen V. Sigal, Chairperson, Friends of Cancer 
                                Research

Summary:
    Health care progress in the United States over the past 50 years 
has been remarkable. A key ingredient in many of those improvements has 
been the evolution and growth of the National Institutes of Health. The 
success story of the NIH has many sources, especially the vital support 
given to the NIH by the Congress and this Committee. Another building 
block relied on by the NIH has been a series of policy decisions that 
have, in the main, facilitated dissemination of knowledge and 
appropriate transfer of technology. Patients gain when scientific 
knowledge and understanding grows and is rapidly disseminated. Patients 
benefit when they have improved access to meaningful information about 
their diseases and conditions and their options for treatment or 
participation in clinical trials. Patients benefit when the discoveries 
of NIH scientists, and those of researchers supported by the NIH, are 
transferred to the private sector for the complex, risky and expensive 
process of development into commercial products. The United States 
technology transfer policies are the envy of the world because the NIH, 
under the direction of the Congress, has made the creation of new 
products a central goal of the American biomedical enterprise.
Background about the Friends of Cancer Research:
    Friends of Cancer Research, a Washington, D.C. based not-for-profit 
focused on public education about the importance of federal investment 
in cancer research. Friends of Cancer Research has played a leading 
role, along with our colleagues in the cancer and patient advocacy 
communities, to advocate on behalf of the NIH and expanded funding for 
cancer research. The Friends of Cancer Research consists of members of 
the patient community, government leaders, and firms and institutions 
in the for profit and non-profit private sector.

Background about Federal Technology Transfer Policy:
    In broad historical terms the Congress has--over the past 20 to 25 
years--committed itself, in a broad, bi-partisan way to new and 
improved ways of facilitating technology transfer. For many of the 
early years in the post-World War II era there was a sense that 
government research should be owned by the government and that any 
transfer to the private sector should be avoided. Beginning with work 
in the Carter Administration and the legislative work of legislative 
leaders like Senators Dole, Bayh (Birch Bayh), Congressmen Wydler, 
Kastenmeier, Railsback, Moorhead, and Senator Stevenson the Congress 
enacted a series of laws to expand the technology transfer of 
government funded research and development efforts. This testimony is 
not the time or place to review all these laws, but it is appropriate 
to comment on the fundamental underlying philosophic premise of these 
efforts.
    Congress has consistently acted over the past several decades to 
implement a policy structure that is designed to recognize that the 
marketplace can be a powerful tool in promoting innovation. It is after 
all private sector firms that produce the overwhelming percentage of 
goods and services that underlie the dynamic American economy. It is 
not the government that produces wealth or develops and markets new 
products. The government--and in this case the NIH--plays an important 
role in expanding the basic understandings of science. It is that 
knowledge explosion that has been facilitated by dramatic increases in 
federal funding for biomedical research. But, Congress after Congress, 
for decades has recognized the faster and more easily technology can 
get into the hands of the private sector the greater the likelihood 
that a product will be developed and marketed.
    As a patient representative and advocate let me address one 
persistent red herring issue that arises in discussions of technology 
transfer policy. Some well-intended policy makers have urged that the 
government either engage in explicit government imposed price control 
measures as a condition to be imposed before any government discoveries 
be licensed, or policies that have a similar net effect. I can tell you 
from experience that seeking to guarantee access at a ``fair'' price to 
products using this mechanism is misguided and will not work.
    First, we have some considerable experience with ``reasonable 
pricing'' clauses at the NIH. A policy of that nature was in effect for 
about 5 years and the number and quality of discoveries that were 
licensed declined. Companies who can undertake the risky and expensive 
process of drug development (according to recent independent research 
by Tufts University the cost, fully loaded, and including the cost of 
failed research and opportunity costs, exceeds $ 800 million per 
product) do not want vague agreements which create disadvantageous 
terms and conditions compared to other opportunities, including pursuit 
of internally developed drug and biological candidates.
    The second reason that companies did not favor licenses with a 
``reasonable price'' clause was the inherent ambiguity of interpreting 
what is reasonable. At the time of a technology transfer license is 
entered into so little is known about a potential new product clarify 
in defining reasonableness is impossible. The likelihood of a compound 
making it through the screening process into human clinical trials is 
daunting (often fewer than 1 out of 5,000 chemicals finish this 
process). Even those products which enter human clinical trials few 
(less than 1 out of 100), make it all the way through to marketing. 
Even the products that make it on to the market are not guaranteed to 
make money. In fact, according to independent research by Tufts 
University, only 3 out of 10 marketed products make a positive return 
and only 1 out of ten generate a substantial return. If, as happened, 
under the discredited ``reasonable price'' regime the government waits 
to determine reasonableness until after the product is developed and 
marketed there is an inherent bias against successful product 
development.
    If the government wants to obtain a fair price for a product it 
should act broadly, and fairly, with respect to all drug products and 
not impose special and onerous rules only on products created from an 
NIH supported technology transfer process. The Congress has effectuated 
a series of measures that do, in fact, assure fairness to the 
government in pharmaceutical purchases. First, the Congress has already 
underway effective means to securing fair prices to the government 
through the promotion of a process for the approval of generic drugs. 
Unlike most other developed nations the United States has a vibrant 
process of using generic drugs to assure savings to the government and 
the patient community. The recently adopted amendments to the Medicare 
bill on generic drugs further the policies embedded in existing federal 
law and FDA practice.
    Second, the Congress has also crafted measures in Medicaid and 
certain other special federal programs to assure fair prices. Finally, 
there needs to be broader realization that price competition for drug 
therapies is stimulated by policies that advance the development of new 
products. It is after all in the interest of patients to have more than 
one therapy on the market for a disease or condition. The second, 
third, fourth or fifth product approved in a particular class of 
products offer patients the opportunity of improved health outcomes, 
increased ease of administration, better compliance or often price 
competition within a particular disease sector. There is no need for 
the government to either expand the government pricing programs or to 
create a new, counterproductive scheme within the NIH to review prices 
for yet undeveloped products.

Comments about Government Private sector partnerships:
    On July 9, 2003 the NIH Foundation, in cooperation with the 
Department of Health and Human Services announced awards for 
partnerships with the private sector. The companies and partners 
recognized included Aventis, Bristol-Myers Squibb, Eli Lilly and 
Company, GlaxoSmithKline, Novartis, as well as the Association of 
American Cancer Institutes and the National Cancer Institute. This 
partnership is designed to speed cancer drugs to the market by 
improving the ways in which early stage cancer trials are designed and 
conducted. This partnership is geared towards underserved and geriatric 
patients in the community. Today, only 3-4% of all cancer patients 
participate in clinical trials and most of those are children. Of 
children with cancer about 60-70% of them participate in clinical 
trials. One goal of these partnerships is to dramatically increase 
access to early stage clinical trials for adults with cancer.
    The kind of partnerships celebrated yesterday are symbolic of the 
kinds of relationships that the government and the Congress should be 
fostering. We can not expect the government to do everything. We can 
not expect the private sector to fund every bit of fundamental 
research. We need to support and grow partnerships between the 
government and the private sector so that patients can be assured that 
both are pursuing the common ground of expanding access to clinical 
trials by patients and the development of new products to treat and 
cure serious and unmet medical needs.

Conclusions:
    As the Committee on Energy and Commerce continues its hearings on 
the National Institutes of Health, on behalf of patients and patient 
advocacy groups, I would urge you to keep some fundamental principles 
in mind. First, do no harm. The current system of knowledge management, 
information dissemination and technology transfer at the NIH works 
remarkably well. Please do not be tempted to undertake actions that 
would fundamentally jeopardize that record of success. Second, as you 
contemplate the NIH please keep in mind the necessity of positive 
partnerships and collaborations between the government and the private 
sector. Patients can ill afford a public process that demonizes either 
the pharmaceutical and biotechnology industry, or the outstanding 
scientists, researchers and administrators at the NIH. Finally, the NIH 
has been successful in recent years because of its outstanding senior 
management, including the outstanding NIH Directors, Varmus and 
Zerhouni, and Institute Directors. While it is appealing to some to 
seek a centralization of control within the Department of Health and 
Human Services, considerable care should be exercised. There is a risk 
that by undermining the relative independence and autonomy of the NIH 
and its institutes morale will deteriorate and the biomedical 
enterprise will suffer.
    Thank you for the opportunity to participate in this hearing. On 
behalf of the Friends of Cancer Research and the entire patient 
advocacy community, we wish you well in your important oversight and 
policy making role. You can, and should be, justifiably proud of your 
role in creating and nurturing the greatest advances in human health in 
history.

    Mr. Bilirakis. Thank you, Dr. Sigal. Thank you for being 
here, for sharing that with us, and for your courage and your 
dedication.
    Well, I--frankly, virtually every question has been 
answered already by your testimony. I would ask--in terms of 
university research partnerships, how do--is there a difference 
in how, and what is the difference between working with the 
Federal Government versus the private sector?
    Mr. Neighbour. A complex question, but I think an 
interesting one. With funding from the Federal Government, we 
are obviously very concerned about basic knowledge, and we are 
a lot freer to push the boundaries of knowledge to explore new 
areas that we think may have 1 day a potential of being a 
platform for the development of product.
    We typically focus on mechanisms, on systems, and 
understanding diseases, not specifically on creating little 
white powders that will become drugs to be injected or given to 
patients. So the nature of the research from the outset is 
quite different.
    The second, probably most fundamental issue that consumes a 
lot of my time, are the intellectual property issues. As soon 
as we begin to work with a company, the company has to protect 
its business. And, consequently, significant concerns about 
ownership of inventions, access by that company to that 
intellectual property, become a fundamental part of the 
negotiation between us and the company.
    And we need to maintain certain basic academic tenets which 
are important to the university, particularly freedom to 
publish, protection of our institution, and an opportunity to 
use the results of our research to support other researchers 
and other activities in the future.
    The company tends, of course, to want to establish a 
monopoly position and take that knowledge forward, invest in 
it, and develop the product. So there are some fundamental 
differences, but I think we have learned since the emergence of 
Bayh-Dole how to manage those differences and create 
partnerships that serve everyone's needs quite well.
    Mr. Bilirakis. Thank you, Doctor.
    Dr. Soderstrom? Dr. Gardner? Whatever.
    Mr. Soderstrom. I would just like to add one thing to----
    Mr. Bilirakis. Sure.
    Mr. Soderstrom. [continuing] my colleague, Andrew's 
comments, because I was actually going to ask--the answer I was 
going to give you was going to be fairly glib. I was going to 
say, ``Quite well. Thank you.'' In part because over the last 
20 years, as Andrew was pointing out, we have begun to develop 
norms of behavior and activities, which are mutually 
supportive.
    I want to use one example from Yale that I think 
illustrates this point, and I actually mention it in my written 
testimony, so I will refer back to that. But one of the things 
that the National Cancer Institute has done is funded a number 
of laboratories around the country that are specializing in 
certain types of biological assays, which can then be used to 
test different compounds for activity against a particular 
disease.
    In the case of Yale, the laboratory of Dr. Young Ji Chang 
is world-famous for screening against things like Hepatitis-B. 
Also, he was one of the original for setting up--original 
investigators setting up assays against HIV as well. In the 
context of that, we receive many compounds from small biotech 
companies and major pharmaceutical companies, which we then 
test against these assays, which the NIH funded the development 
of.
    Out of that, we are able to discern things like which ones 
will have the lower levels of toxicity, less side effects, 
etcetera, and we are able to give that information back to the 
companies. That type of partnership I think is particularly 
effective if we look at just one drug--3TC, which we all 
recognize as Epovir.
    Epovir, the original formulation of 3TC, had many different 
analogs. But using the techniques that Dr. Chang and his 
colleagues at Emory University had developed, we were able to 
identify the specific version of the compound that would have 
the lowest profile of toxicity, and the most efficacy, 
particularly when combined with AZT. I think that is an 
exciting partnership which was afforded by the abilities that 
we have under Bayh-Dole.
    Mr. Bilirakis. Dr. Gardner?
    Ms. Gardner. I would just like to add that the vast 
majority of funding at most research-intensive universities 
comes from the Federal Government, and that is the kind of 
funding that fits more with the core values of a university 
endeavor. The core values of a university endeavor are to 
pursue fundamental knowledge and disseminate information 
freely, in the course of that educating the next generation of 
scientists.
    I have worked in both sectors. The core values in industry 
are product development, and in that context intellectual 
property and confidentiality are extremely important. So you 
can see there is a divergence in the core values.
    The partnership of the NIH and universities is profoundly 
successful and very good, because they have similar core 
values. And my--and this isn't to say that--to knock either 
set. They are both important, but it does go to the question 
of, how valuable is the license that comes from NIH or 
federally funded research through a university or from NIH to a 
pharmaceutical company?
    By nature of the core value of this kind of research, 
fundamental knowledge, early knowledge dissemination, there are 
very early stage ideas, nascent ideas. They have not gone 
through formulation or any of the stages of product development 
that are so expensive. So it is understanding that that should 
help to diverge away arguments of high royalty rates or price 
controls on drugs that have a very early stage or small part 
from the NIH, important as it is.
    Mr. Bilirakis. Well, thank you. Dr. Lindberg is still in 
the room. And I don't know whether any of the other people are 
here, but I know they are certainly represented here, by 
request. And I know that they all feel good about what they 
have heard you say.
    I didn't hear any criticisms from you or bureaucratic 
things that can be cleared up, so hopefully if there are you 
might furnish them to us in writing later on or possibly even 
mention them during the further questioning.
    The chair now recognizes the gentlelady from California, 
Ms. Eshoo, for inquiry for 5 minutes.
    Ms. Eshoo. Thank you, Mr. Chairman.
    I want to thank the panelists and welcome you here today. I 
think it was President Kennedy that said that--when he made the 
remarks about the Nobel Prize winners that were gathered in the 
White House that only one other time had there been such great 
intellect--I am paraphrasing, of course--that was gathered 
there, other than the time that Thomas Jefferson dined alone.
    So I am reminded of that today, because you are a very 
distinguished panel, and I think that you have informed the 
committee very well about your work.
    I want to extend a special welcome to Dr. Phyllis Gardner, 
who, Mr. Chairman, is my constituent and serves with great 
distinction as the Senior Associate Dean for Education and 
Student Affairs at Stanford University.
    But the background that she just spoke of I think is very 
important, because there is an enormous linkage and, really, a 
symbiotic relationship between the universities, both public 
and private, in our country and then what flows out to the 
private sector. Dr. Gardner was the President of Research at 
ALZA Corporation. ALZA, of course, has been acquired now by 
Johnson & Johnson. But that speaks to a part of it, and so how 
we fund this research, and how it works through our 
universities, both public and private, is one of the great 
stories of America.
    This is a unique American story, and I think that if there 
is anything that--and I said this to some of the panelists 
before we began--that we somehow have come to a place of such, 
happily, full appreciation or near full appreciation of this. 
But I think that we have this pettiness about--that we will 
always have this, that somehow this is always going to remain.
    We have a very full and serious obligation to protect this, 
to keep the investment in it going, and to do everything that 
we can relative to the technology transfer that does take 
place, to Dr. Sigal and her courage. When she said that 
everyone in her family has died of cancer, that is our 
challenge. That is our collective challenge. And I think that a 
society, obviously, is measured by how it takes care of its 
people, and that is what you are here to talk about today.
    Dr. Gardner, what do you think Stanford's technology 
transfer program has done for the Bay area? Of course, that is 
a softball to you.
    But I think that it is an important story. And how are the 
technology transfers helping regions, outside of the obvious 
benefits to health care?
    And then, my second question to you is is that a number of 
my colleagues have asked why the Federal Government doesn't 
recoup more of its investment in research that leads to 
products. Why do you think more royalties on products should 
not be returned to the government? And then, to the full panel, 
what do you think an appropriate return on investment is for 
the government?
    Now, I have a little different take on this than some of my 
colleagues on the committee. But I think that it is still--
these are still worthwhile questions, so thank you----
    Mr. Bilirakis. Very worthwhile questions.
    Ms. Eshoo. [continuing] all of you.
    Mr. Bilirakis. I wish you had given the panel 5 minutes in 
order to answer those questions.
    Go ahead, Dr. Gardner.
    Ms. Gardner. First of all, the Bay area is a thriving 
economy, both in the high tech and the biotech sectors--the 
high tech sector, starting with Fred Terman and funding Varian, 
Hewlett-Packard, etcetera, through some government funds, and 
then proceeding thereon. And then, with the Bayh-Dole Act, also 
the Cohen-Boyer patent, which brought in a quarter of a billion 
dollars total to the university at a royalty rate of a tenth of 
a percent.
    That has set--that put forth this thriving economy in the 
Silicon Valley area. That is the envy of the world that brings 
people from all over the world to try to imitate it. It is even 
the envy of many parts of the Nation, and there are other 
centers that are important. Certainly, San Diego, the research 
triangle in North Carolina, certainly Ohio State is trying to 
get there.
    I am on the board of a company where they are pushing hard, 
but we are--we have been at the forefront, and the numbers of 
jobs created, the affluence created in the local economy, is 
profound, and that is one of the reasons why I would--not only 
do we recoup investment from savings--from the better health 
care that people have, which is a profound savings, and the 
estimates are in trillions of dollars because of better health 
of workers.
    And not only do we get that, but we also have the stimulus 
to the economy, to the knowledge-based economy that the rest of 
the world is trying to imitate. And I just hope that we do not 
rock that boat, because I believe it comes back to the Federal 
Government in spades through those two mechanisms.
    Mr. Neighbour. Mr. Chairman, if I could add that one return 
that has not been mentioned, and is often not measured or 
talked about by critics of drug pricing, is taxes. It seems to 
me that at the end of the cycle, the successful drug company 
that has to cover its manufacturing costs, its development 
costs, the winners and the losers ends up with a profit that 
generates taxes that come back into the economy and support NIH 
appropriations.
    They also sustain a health that employs a large number of 
employees who, like you and I, are taxpayers. And so that 
measurable benefit is a very real one and is the basis on which 
this society is built. So I think return on investment, if one 
is focusing on dollars, if you do the math, will actually come 
out ahead.
    But I think the more important thing is to not do the math. 
I think the most important thing is to think about the quality 
of life and what we would not have if companies and 
universities and NIH and the other Federal agencies were not 
sustaining this incredible research enterprise, which, as has 
been stated, is the envy of the world. There is hardly a day or 
a week in my office that I am not hosting a visitor from Chile, 
Korea, Japan, Italy, Germany, the great--Great Britain--
Freudian slip there--that wants to know how it is done.
    And we know how it is done. We have done it right. And I 
think anything that would interfere with that process, other 
than creative improvement, would be a deficit for this Nation.
    Mr. Bilirakis. I just wish the entire subcommittee were 
here to----
    Ms. Eshoo. I do, too.
    Mr. Bilirakis. [continuing] listen to these comments. Dr. 
Soderstrom?
    Ms. Eshoo. This is extraordinary.
    Mr. Soderstrom. I am going to add one more to that which--
the list, and I alluded to it earlier, which is increased 
productivity, which we all know that Chairman Greenspan has 
pointed to as being the engine of the economy right now.
    Anyone who read The Wall Street Journal yesterday knows 
what happens if we don't have healthy workers in our businesses 
driving our economy. We can only look at Africa, where 
President Bush is today, and see what happens. We don't face 
that today. We don't face that because of many of the 
discoveries that were made with NIH funds that have been 
translated from academic research into the biotech and 
biopharmaceutical industry. And I think that is one of the 
costs--I am not an economist, but I would add--has to be 
factored in.
    Mr. Bilirakis. I don't know whether you have anything to 
add to that, Dr. Sigal, but----
    Ms. Sigal. Just very briefly. I think it is very clear that 
the mission of the NIH must be innovation, discovery, and 
knowledge for the public good. Once we start getting involved 
in returns of investment, we are really going to be in trouble. 
The return on investment is the public health of the people all 
over the world.
    Mr. Bilirakis. Amen to that. Thank you.
    Ms. Eshoo. Thank you, Mr. Chairman.
    Thank you to the distinguished panelists.
    Mr. Bilirakis. Mr. Allen, would you like to inquire?
    Mr. Allen. Thank you, Mr. Chairman.
    I very much appreciate the comments of the panel today. And 
though I have been a frequent critic of pharmaceutical industry 
drug pricing, there is--I agree with much of what you have to 
say. But because I am a little concerned that what you say may 
be taken in a broader context than what you actually said, I 
want to make a couple of comments.
    The passion that drives Dr. Sigal, the cancer in her 
family, is something we feel in many of our constituents, 
because there are two parts to this equation about the 
availability of prescription drugs. One part is innovation, and 
I don't believe there is a single person in the Congress who 
wants to shut down that innovation. And in that sense, you have 
all of our support.
    But the other half of the problem is distribution. And in 
Maine, I can't tell you--there are thousands and thousands of 
my constituents who can't possibly afford to take the drugs 
that their doctors tell them they have to take. And we are next 
to Canada. Women who are fighting for their lives with breast 
cancer in Maine have finally learned that Tomoxifen costs one-
tenth as much in Canada as it does in the United States, and I 
assure you the industry is still making a profit up there.
    And so what we are--what we try to do is figure out how to 
deal with this particular problem. And many of you talked about 
the disadvantages--and I agree with this--of trying to price a 
product somehow while it is not--while it is still within the 
NIH framework or in that sort of early research framework. And 
I don't think we buy that at all.
    But we do have a serious problem with Medicare, and it 
seems to many of us wrong that Medicare beneficiaries should 
pay the highest prices in the world. They are in the biggest 
health care plan in the country. If they were organized, that 
plan would provide them, as Aetna beneficiaries and Cigna 
beneficiaries and United beneficiaries, with some discount in 
the price that they pay. But they don't get that, because 
essentially they have to pay whatever the industry would 
charge.
    And so just a comment to set this in context--that is the 
issue that I think many of us are struggling with. We don't 
quarrel with the importance of innovation. We believe in Bayh-
Dole. We think that this partnership with the--between the 
universities and NIH is extraordinarily valuable. But we have 
to figure out how to make sure the people who need 
pharmaceutical products can actually get them.
    I think it was Dr. Soderstrom mentioned a couple of other 
comments. I think you mentioned Africa and diseases in Africa. 
It has always seemed to me that we ought to expect the private 
sector to do what the private sector, with the assistance of 
universities, does best. That is, develop innovative new 
products.
    It is not so good at producing products that don't yield a 
return. Whether it is sleeping sickness or malaria, or 
whatever, many of the diseases other than AIDS that are 
afflicting Africa are not getting the attention they deserve.
    And, Dr. Sigal, one quick comment. Because in your written 
testimony you had a reference to the study done at Tufts, I 
simply can't resist making a couple of comments about that 
study. The $800 million that the industry has repeated over and 
over again is the total cost to bring a new drug to market is 
based on the study at Tufts.
    I view that study as flawed. First of all, half of that 
$800 million--half of that $800 million, according to the 
study, is opportunity cost. That is what the money could have 
earned by being invested somewhere else, but there is no more 
profitable industry in the country than the pharmaceutical 
industry. So there are reasons why the investment is so heavy 
in R&D in the pharmaceutical industry.
    The second thing I would say is I think they looked at 
about 66 different drugs, none of which--none of which--were 
funded initially by NIH. And so the drugs that they took as--
for a sample are--is wildly different from the way most drugs 
come to the market. That is, most drugs come with some at least 
initial research that is government-funded through the NIH. And 
so for those reasons, many of us quarrel with that study a good 
deal.
    But we are with you completely on the need to keep this 
industry going. We respect, Dr. Gardner, the differences 
between biotech and pharma, and we simply have to find a way to 
deal responsibly with the other half of the problem, which is 
how we get the drugs to people who need them.
    I have taken all of my time. I haven't given you time to 
respond. I apologize.
    Mr. Bilirakis. Yes, time is up. You know, I have been 
hoping that this hearing would focus on bench to bedside, which 
is certainly very, very significant. And for the most part, it 
has.
    I thank you so very much. I know it makes me feel an awful 
lot better from the standpoint of research, and what it 
accomplishes, and so many things, the byproducts of research 
that you all went into, which is just terrific, in addition to 
the health and the quality of health care, the byproducts 
economically.
    I thank you very much for being here. We will have 
questions to you in writing. We would appreciate your 
responses.
    And, again, please feel free to let us know--if there are 
things that you suggest that NIH should do, or FDA or National 
Institute of Cancer, or whatever, Cancer Institute, or 
whatever, that you think that maybe we should address or take a 
look at or ask--raise questions about, or whatever, please let 
us know.
    Dr. Sigal, you are shaking your head, so please feel free 
to do that. You have got an open invitation.
    Thank you so very much for a great hearing. Hearing 
adjourned.
    [Whereupon, at 1:10 p.m., the subcommittee was adjourned.]
    [Additional material submitted for the record follows:]

  Prepared Statement of Susan Braun, President and CEO, The Susan G. 
                     Komen Breast Cancer Foundation

    Chairman Bilirakis, Rep. Brown, and distinguished Members of the 
Subcommittee, thank you for the opportunity to submit testimony about 
the importance of moving research from the bench to the bedside. The 
Komen Foundation acknowledges and thanks you for your continued 
leadership and support for improving the quality of care cancer 
patients receive.
    I am privileged to serve as president and chief executive officer 
of the Susan G. Komen Breast Cancer Foundation. Nancy Brinker 
established the Komen Foundation in 1982 in honor of her older sister, 
Suzy Komen, who died of breast cancer at the age of 36. Our mission is 
to eradicate breast cancer as a life-threatening disease. To this end, 
we have had to change both the clinical and cultural landscape of 
breast cancer, and we have.
    Today, the Komen Foundation includes more than 75,000 volunteers 
working through a network of Affiliates and events like the Komen Race 
for the Cure ' to eradicate breast cancer by advancing 
research, education, screening, and treatment. The Komen Foundation has 
become the largest private funding source of breast cancer research and 
community outreach programs in the United States. Since its inception, 
the Foundation has raised nearly $600 million in the fight against 
breast cancer. The Komen Foundation continues to forge many public-
private partnerships to produce real clinical results and a better 
quality of life for thousands of women and men living with breast 
cancer. The Foundation has awarded more than 850 grants totaling $112 
million for innovative research. Through funding of programs and 
resources like the Komen Foundation Award and Research Grant Program, 
the Komen Affiliate Grant Program, the Komen National Toll-Free Breast 
Cancer Helpline, the Komen Foundation Website, and other educational 
materials, the Komen Foundation today is the recognized leader in the 
fight against breast cancer.

                             I. BACKGROUND

    As the Committee recognizes by holding this hearing, diseases 
cannot be cured in the lab alone. Eradicating disease requires 
translating research discoveries into innovative, high-quality patient 
care. If there is to be any meaningful advancement in eliminating 
cancer and other diseases, what we learn from biological bench research 
must be translated to the clinical setting and, ultimately, delivered 
to patients to advance integrated care and improve quality of life. In 
addition, these advances must be available expeditiously and in the 
appropriate manner. Given the Komen Foundation's experience as a 
supporter of breast cancer research and a champion for early detection 
and treatment innovations, we believe that our experience can provide 
the Committee with a ``case study'' for understanding what is working 
and what is not in translating research from the bench to the bedside.
    Each year in the United States, more than 200,000 women and men are 
diagnosed with invasive breast cancer. In 2003, approximately 40,600 of 
breast cancer patients will lose their lives to the disease. Even 
though breast cancer mortality has declined, the incidence (i.e., the 
number of individuals diagnosed with the disease each year) remains 
steady. Research, awareness and education are primarily responsible for 
lowering the mortality rate because of improvements in screening, 
diagnosis and treatment.
    The Komen Foundation strongly believes that more research will lead 
to curative interventions in the future. Although research has yet to 
produce a cure, it has provided important progress in our fight against 
this deadly disease, and many important innovations hover on the 
horizon. These advances--once translated to treatment options--will 
help to lower mortality rates even further and lead to improved and 
more efficient care and thus a better quality of life for those 
diagnosed with breast cancer.
    In the area of breast cancer, there have been enormous research 
discoveries that offer a great deal of promise. Yet, breast cancer 
patients have not been able to realize the full potential of these 
discoveries because of a widening gap between research and patient 
care. It is imperative that society eliminates (or at least minimize as 
much as possible) this gap immediately. To achieve this goal, we must 
first understand what the gap is; second, consider the impact of access 
to care issues on the gap; and third, work toward its elimination.

 II. UNDERSTANDING THE GAP BETWEEN RESEARCH DISCOVERIES AND TREATMENTS 
                              FOR PATIENTS

    Barely a day goes by when there is not some exciting new research 
development announced. Patients hear these announcements and want 
access to the treatments promised. And yet, bringing that promise to 
patients is becoming much harder. As the gap between research 
discoveries and patient care widens, the worst imaginable situation 
becomes possible: curable innovations are developed but patients cannot 
get them.
    Because of our role in funding innovative research related to 
breast cancer, the Komen Foundation is particularly concerned about 
ensuring that bench results translate as quickly as possible into 
bedside treatment. Although it is true that recent research discoveries 
have outpaced the ability of scientists and physicians to develop 
treatments related to them, we believe the widening gap, more 
importantly, results from two systemic problems within the research and 
medical fields: (1) challenges created by the existing process by which 
bench research is translated into clinical treatments, and (2) the 
decline in the number of physicians who understand how to integrate 
innovative treatments into their practices or cannot do so because of 
problems within the insurance reimbursement system.

A. The Fast Pace of Research Discoveries
    One important reason for the widening of the gap between innovation 
and patient care is due to a positive development--the explosion of 
advancements in human genomics. Since James Watson and Francis Crick 
discovered the structure of DNA, researchers have worked diligently to 
determine how it functions. We achieved a major milestone when public 
and private scientists finished mapping the human genome ahead of 
schedule. Advances in our understanding of human genomics offer the 
promise of new ways to attack disease. For example, we can now evaluate 
diseases in terms of specific, molecular-level changes and propose 
molecular-level interventions. The genome map opens a new world in 
terms of defining inherited diseases. Microarray technology will allow 
for rapid testing of compounds that can target specific proteins or 
molecular structures in cells, permitting doctors to use new drugs to 
treat specific kinds of breast cancers/tumors, eliminate painful side 
effects, and promise longer survival. And, as we learn more about the 
genetic causes of disease, we will also gain a better understanding of 
how the environment contributes to diseases and perhaps one day, find a 
way to prevent certain diseases altogether.
    The promises of the advances are extraordinary with researchers 
working feverishly to apply the new information into treatment 
contexts. For example, researchers at M.D. Anderson Cancer Center used 
pharmacogenomics (the study of an individual's genetic expression 
patterns to tailor treatments for him/her) to analyze tumors' specific 
genetic make-up to guide treatment decisions. They were able to predict 
with 75 percent accuracy whether chemotherapy would eradicate tumor 
cells. Eventually, pharmacogenomics may provide information on the 
probability of metastasis and the likelihood of a patient developing a 
recurrence of cancer, as well as predict medical outcomes for the 
individual.
    However, these incredible discoveries are not the problem when it 
comes to translating research results into treatments. Researchers face 
some difficult systemic challenges that must be resolved quickly to 
ensure that patients benefit from these advances.

B. Barriers Created by the Existing Clinical Trial Process
    One troubling barrier to eliminating the widening gap between 
research and treatment are challenges inherent in the existing clinical 
trial process. As you are aware, obtaining a positive result in a 
laboratory is only the first step of a long process toward producing a 
medically acceptable treatment. The Food and Drug Administration (FDA) 
oversees this process. Once a researcher makes an important laboratory 
discovery, he/she must determine whether it can be translated into 
medical practice. Often initial discoveries are found using animal 
models. However, not all animal model results can be translated into 
human treatments. After all, as researchers are fond of saying, ``mice 
are not men!''
    If a result can be moved from an animal model to a human context, 
the researcher must shepherd it through the FDA's clinical trial 
process, in the case of new drugs or devices. This process requires 
many clinical trials and studies. In addition to the logistical issues 
involved in developing and conducting an appropriate clinical trial, 
many researchers are finding it difficult to obtain the appropriate 
number of research subjects. Participation in clinical trials remains 
low; less than 5 percent of adult cancer patients currently participate 
in clinical trials. This may be due to several reasons, including the 
failure of insurance companies to cover the treatment costs associated 
with participation in such trials, physicians' lack of time and or 
resources to administer such trials, and patient barriers ranging from 
a fundamental mistrust/misunderstanding of the clinical trial process 
to access issues (i.e., transportation, child care, etc.). Whatever the 
reason, low enrollment in trials delays the finding of results and 
often renders the results obsolete (e.g., if the trial protocol is no 
longer the current standard of care due to scientific progress). If the 
results of a clinical study are positive, the FDA will consider a new 
treatment for approval. The timing for approval varies significantly 
from treatment to treatment. And, of course, completing this process 
takes money.
    Even if a discovery is not ``successful'' in terms of translating 
into a new treatment, reporting a negative result is just as important 
as reporting a positive one. However, with the idea of ``publish-or-
perish'' dominating most laboratories, many researchers are reluctant 
to publish negative results. This leads to duplication of efforts and 
resources and hinders progress toward the ultimate goal of curing 
diseases.
    Another problem is that the current clinical trials system is 
simply not designed to handle the results of the genomic revolution. 
For example, the results of mapping the human genome are already being 
used to shift clinical practice toward individualized medicine. Yet, 
the existing clinical trial process still requires large numbers of 
patients to participate in studies that will lead to FDA approval. 
Although we appreciate the need to ensure statistically significant 
results, the process must take account of the fact that in the realm of 
individualized medicine, it will not be possible nor is it appropriate 
to conduct trials using the same old parameters.
    Another important concern arises from the ability to categorize an 
individual's disease more specifically. For example, patients today who 
have ``breast cancer'' may in the future be diagnosed as having a BRCA 
1 or 2 cancer, an environmental cancer, or another subspecies of 
cancer. Cancers will be treated based on their genetic make-up, rather 
than their location. As diseases are broken down even further, the 
financial incentives to conduct these expensive trials will also break 
down, potentially reducing the willingness of private companies to 
accept the continuation of the existing system.
    Finally, the current clinical trial process takes a long time to 
complete and is overwhelmed with applications. There is an enormous 
backlog within the FDA. In 2001, more than 400 cancer drugs were in the 
development ``pipeline'' at various stages of the approval process. 
Although we support and recognize the need to maintain a process that 
ensures safety and efficacy, the process should not be so time-
consuming and onerous so as to inappropriately restrict access to life-
saving treatments.

C. Barriers to Adoption of New Treatments by Physicians
    Once approved, a new treatment still may not make it to the bedside 
immediately. Translating bench results into clinical treatments also 
requires physicians to integrate innovative treatments into their 
practices. Because of the complex nature of the research, more 
specialty knowledge is required. However, professionals who treat many 
diseases become highly specialized. For example, in the oncology 
specialty, there is a tendency to focus on certain types of cancer in 
order to keep current and provide the most recent treatment innovations 
to patients. Gone are the days when a cancer patient walked into 
several oncologists' offices for treatment. Now, the patient is more 
likely to receive care from a physician who specializes in a particular 
kind of cancer. Compounding this problem is the decline in the number 
of physicians entering the oncology specialties.
    Incentives must be available to keep health care providers 
knowledgeable, trained and willing to provide care to all patients. For 
example, more funding is needed for provider education programs, such 
as the Komen Foundation's Interdisciplinary Breast Fellowship Program. 
This program prepares highly motivated, talented and compassionate 
physicians for careers devoted to serving the multi-specialty needs of 
breast cancer patients. The Program awards individuals grants of up to 
$30,000 over a two-year period for dissertation research. Three-year 
grants of $45,000 per year for postdoctoral fellowships are also 
available. The Program also enhances physicians' understanding of 
patients and seeks to develop a better treatment environment for future 
patients. Through this program, physicians develop the skills they need 
to integrate new treatments into their clinical practices. However, 
more programs like this are needed.
    In addition to doctors and patients learning about new treatments 
and their willingness to adopt them, reimbursement issues must also be 
resolved. Before a treatment is used widely, Medicare and other third-
party insurers must accept the treatment and provide adequate 
reimbursement for it. Generally speaking, there is a lag between the 
availability of a treatment and its approval for reimbursement. Even if 
an insurer agrees to pay for an innovative treatment, it will often 
establish complex reimbursement requirements that physicians find 
burdensome, decreasing the likelihood that the treatment will be used. 
This issue is not trivial. A recent Lewin Group survey found that 
increased reimbursement documentation is of more concern to oncologists 
than is the stress of dealing with the issues of death and dying. 
Without adequate and straightforward reimbursement policies in place, 
physicians are likely to avoid integrating innovative treatments into 
their practices.
    We are concerned about recent trends toward cutting reimbursement 
rates for necessary, life-saving cancer treatments. For example, both 
the House and Senate versions of the Medicare prescription drug benefit 
would cut cancer care reimbursement by 30 percent! Without adequate 
reimbursement rates, patients who cannot afford to pay out of pocket 
for their treatments will not be able to receive innovative therapies 
and the dollars poured into research will have been for naught.

              IV. THE IMPACT OF ACCESS TO CARE ON THE GAP

    Even if we overcome these systemic challenges, additional barriers 
continue to block research discoveries from reaching a patient's 
bedside. Of most concern to the Komen Foundation is the issue of access 
to quality care. While the Komen Foundation greatly appreciates the 
Federal government's commitment to funding cancer research, we are 
concerned that the War on Cancer appears to be morphing into the War on 
Cancer Care as funding for programs directed toward improving access to 
care are left to wither with little to no funding increases or 
experience cuts. To ensure the translation of research innovations into 
treatment advancements, it is essential to ensure that every American 
has access to these improved clinical practices.
    The access problem does not lie with patients. They are eager to 
apply the new medical advances. Rather than focusing on their doctor's 
advice alone, patients now come to visits armed with data and expecting 
high quality care. The news of scientific achievements is fast 
breaking, and the Internet helps disseminate information about new 
innovations faster than ever before. Eight years ago, there were 124 
cancer drugs in the pipeline of biotechnology and pharmaceutical 
companies. Today, there are 402. Patients are demanding that these 
innovations be made available rapidly.
    Until a cure is available or until cancer can be prevented, 
patients are demanding quality cancer care today, and they won't settle 
for anything less. For Americans with breast cancer, quality cancer 
care means a great many things. It means hope. It means a chance at 
survival. It means receiving guidance to make the best decisions about 
comprehensive and integrative treatment. Concurrently, patients use 
complementary methods of care and advanced spirituality to improve 
outcomes, to manage side effects, to sustain their ``wholeness'' and to 
advance their healing. Numerous surveys indicate that breast cancer 
patients are among the most frequent users of complementary and 
alternative therapies during the course of their cancer care. Cancer 
care is not quality care if it does not include the proven range of 
essential conventional, complementary and integrative services that 
help breast cancer patients battle their disease.
    Yet, their excitement and enthusiasm for these new treatments is 
quashed when they learn that they will not be able to access these 
innovative treatments. As already described, before patients have 
access to new treatments, physicians must be willing to provide them, 
and reimbursement for them must be adequate. If not resolved, these 
problems will only lead to an even wider gap.
    In addition, outreach programs must be adequately funded to ensure 
that all Americans have access to these therapies. The under- and 
uninsured are truly disadvantaged by the current system. For the breast 
cancer community, the National Breast and Cervical Cancer Early 
Detection Program (NBCCEDP) works to remedy this gap. But, for it to 
succeed, it must be funded at adequate levels. The Komen Foundation is 
a strong supporter of NBCCEDP, but also a realistic one. While the 
program has helped hundreds of women, even more have been turned away 
because of a lack of funding. Other outreach programs are suffering 
from similar funding concerns.
    The Komen Foundation recognizes, however, that outreach and 
education are not jobs for the Federal government alone. We also 
provide funding and support for outreach and educational efforts at 
both the National and Affiliate levels. Patients must learn about what 
standard of care they should receive and what questions they should ask 
of their providers. The Komen Foundation helps to address this void 
through its Helpline, Website, and educational materials and programs 
for both patients and providers. Komen Affiliates nationwide address 
this void through their support of unique local outreach programs that 
meet the specific needs of their communities.

                    V. ELIMINATING THE WIDENING GAP

    The promises of treatment innovations should not be overshadowed by 
the concerns raised today. We must continue to work to bring the 
promises of research to cancer patients. A quick fix will not eliminate 
this widening gap. Therefore, we suggest that the Subcommittee focus on 
(1) understanding the problems that have led to the gap through formal 
studies and evaluations; (2) examining the current clinical trial 
process with an eye toward revising it to take account of new 
biomedical advances; (3) providing adequate reimbursement rates for 
cancer care; and (4) calling for adequate Federal funding for physician 
training programs and patient outreach and educational programs.
    As the Subcommittee considers how to minimize the gap between 
research developments and clinical treatments, it is important to 
understand the problems that have led to the gap. First, we must learn 
more about how bench research translates into bedside practice. At a 
minimum, it is essential to ask:

 What is the strategic direction for the research? Who sets it?
 How is collaboration fostered and duplication avoided?
 How does the research process help or hinder elimination of the gap?
 How is a research idea translated to a research project, then to 
        clinical trials, and then to approval by the FDA?
 How does a clinically proven treatment become a standard of care?
 Where does this process break down?
    Second, it will be necessary to review and assess in a 
comprehensive manner the existing clinical trial process and the FDA's 
role in approving new treatments. This means:

 Evaluating the existing clinical trial process to determine what 
        changes must be made to make it more responsive;
 Increasing participation in clinical trials;
 Educating patients and physicians about clinical trials;
 Reviewing reimbursement policies related to care provided to clinical 
        trial participants;
 Ensuring that the clinical trial process is appropriately structured 
        to address issues related to individualized medicine; and
 Assessing the FDA's structure and funding to determine how to 
        eliminate the existing backlog of ``pipeline'' drugs.
    Third, it is necessary to evaluate reimbursement amounts in both 
the private and public insurance markets. Medicare reimbursement 
amounts often set the standard for private insurance rates. Therefore, 
it is critical that these amounts provide physicians with adequate 
reimbursement for their services. We encourage the Committee to examine 
reimbursement policy to ensure adequate coverage for innovative 
treatments, especially in cancer.
    Also important is reducing the paperwork burden and the ``audit 
fear factor'' in reimbursement procedures and streamlining the 
processes for providing reimbursement codes for new technology. There 
should also be incentives to ensure that the newer, targeted biological 
innovations are available quickly to patients for whom other treatment 
options have been exhausted.
    Fourth, for research to continue to produce the innovations at the 
speed that modern knowledge will allow, sustained support of the 
Federal research budget is mandatory. In addition, funding for 
physician training programs should focus on expanding specialist 
education opportunities, both within medical training programs and 
continued medical education. Funding for patient outreach and 
educational programs must be increased to eliminate access to care 
barriers that block research advances from reaching the bedside.
    As a first step, the Komen Foundation urges you to call for a study 
by the Institutes of Medicine (IOM) to measure the disincentives that 
block rapid dissemination of proven innovations, using breast cancer as 
a ``pilot area'' from which further research can be designed. A 
Federally sponsored demonstration project focusing on integrated care 
and its effect on quality care, quality of life, efficiency and cost 
effectiveness would also provide important information about how the 
research and treatment gap can be diminished. The Komen Foundation 
would welcome the opportunity to work with you on developing such a 
demonstration project.
    This process will be difficult and time consuming, but valuable. We 
applaud the Subcommittee's willingness to undertake this review, as 
well as its desire to work with the scientific, medical and patient 
communities to eliminate this troubling gap.
    Please be assured that the Komen Foundation will continue its 
commitment to not only fund ground-breaking research to help put an end 
to breast cancer for future generations, but also to support those 
currently fighting breast cancer who must use the technology of today 
in their efforts. We appreciate the opportunity to submit this 
testimony, and thank you very much.

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