[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]



 
                  FOSTERING THE U.S. COMPETITIVE EDGE:
                        EXAMINING THE EFFECT OF
                          FEDERAL POLICIES ON
                COMPETITION, INNOVATION, AND JOB GROWTH

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

                                HEARING

                               BEFORE THE

               SUBCOMMITTEE ON TECHNOLOGY AND INNOVATION

              COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                        TUESDAY, MARCH 27, 2012

                               __________

                           Serial No. 112-71

                               __________

 Printed for the use of the Committee on Science, Space, and Technology


       Available via the World Wide Web: http://science.house.gov




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              COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY

                    HON. RALPH M. HALL, Texas, Chair
F. JAMES SENSENBRENNER, JR.,         EDDIE BERNICE JOHNSON, Texas
    Wisconsin                        JERRY F. COSTELLO, Illinois
LAMAR S. SMITH, Texas                LYNN C. WOOLSEY, California
DANA ROHRABACHER, California         ZOE LOFGREN, California
ROSCOE G. BARTLETT, Maryland         BRAD MILLER, North Carolina
FRANK D. LUCAS, Oklahoma             DANIEL LIPINSKI, Illinois
JUDY BIGGERT, Illinois               DONNA F. EDWARDS, Maryland
W. TODD AKIN, Missouri               BEN R. LUJAN, New Mexico
RANDY NEUGEBAUER, Texas              PAUL D. TONKO, New York
MICHAEL T. McCAUL, Texas             JERRY McNERNEY, California
PAUL C. BROUN, Georgia               TERRI A. SEWELL, Alabama
SANDY ADAMS, Florida                 FREDERICA S. WILSON, Florida
BENJAMIN QUAYLE, Arizona             HANSEN CLARKE, Michigan
CHARLES J. ``CHUCK'' FLEISCHMANN,    SUZANNE BONAMICI, Oregon
    Tennessee                        VACANCY
E. SCOTT RIGELL, Virginia            VACANCY
STEVEN M. PALAZZO, Mississippi       VACANCY
MO BROOKS, Alabama
ANDY HARRIS, Maryland
RANDY HULTGREN, Illinois
CHIP CRAVAACK, Minnesota
LARRY BUCSHON, Indiana
DAN BENISHEK, Michigan
VACANCY
                                 ------                                

               Subcommittee on Technology and Innovation

                  HON. BENJAMIN QUAYLE, Arizona, Chair
LAMAR S. SMITH, Texas                DONNA F. EDWARDS, Maryland
JUDY BIGGERT, Illinois               FREDERICA S. WILSON, Florida
RANDY NEUGEBAUER, Texas              DANIEL LIPINSKI, Illinois
MICHAEL T. McCAUL, Texas             BEN R. LUJAN, New Mexico
CHARLES J. ``CHUCK'' FLEISCHMANN,    SUZANNE BONAMICI, Oregon
    Tennessee                        VACANCY
E. SCOTT RIGELL, Virginia            EDDIE BERNICE JOHNSON, Texas
RANDY HULTGREN, Illinois
CHIP CRAVAACK, Minnesota
RALPH M. HALL, Texas


                            C O N T E N T S

                              Hearing Date

                                                                   Page
Witness List.....................................................     2

Hearing Charter..................................................     3

                           Opening Statements

Statement by Representative Benjamin Quayle, Chairman, 
  Subcommittee on Technology and Innovation, Committee on 
  Science, Space, and Technology, U.S. House of Representatives..     8
    Written Statement............................................     9

Statement by Representative Donna Edwards, Ranking Minority 
  Member, Subcommittee on Technology and Innovation, Committee on 
  Science, Space, and Technology, U.S. House of Representatives..    10
    Written Statement............................................    11

                               Witnesses:

Mr. Ron Cohen, President and CEO, Acorda Therapeutics
    Oral Statement...............................................    13
    Written Statement............................................    15

Mr. Mick Truitt, Vice President, Ludlum Measurements, Inc.
    Oral Statement...............................................    28
    Written Statement............................................    31

Mr. Thomas M. Brandt, Jr., Senior Vice President and CFO, 
  Telecommunications Systems, Inc.
    Oral Statement...............................................    47
    Written Statement............................................    50

Mr. Richard Bendis, Interim CEO, Biohealth Innovation, Inc., and 
  President and CEO, Innovation America
    Oral Statement...............................................    63
    Written Statement............................................    66

Discussion                                                           71

             Appendix 1: Answers to Post-Hearing Questions

Mr. Ron Cohen, President and CEO, Acorda Therapeutics............    83

Mr. Mick Truitt, Vice President, Ludlum Measurements, Inc........    89

Mr. Thomas M. Brandt, Jr., Senior Vice President and CFO, 
  Telecommunications Systems, Inc................................    93

Mr. Richard Bendis, Interim CEO, Biohealth Innovation, Inc., and 
  President and CEO, Innovation America..........................    95

             Appendix 2: Additional Material for the Record

TechAmerica: Technology Roadmap for America......................   102


                  FOSTERING THE U.S. COMPETITIVE EDGE:
                        EXAMINING THE EFFECT OF
                          FEDERAL POLICIES ON
                COMPETITION, INNOVATION, AND JOB GROWTH

                              ----------                              


                        TUESDAY, MARCH 27, 2012

                  House of Representatives,
         Subcommittee on Technology and Innovation,
               Committee on Science, Space, and Technology,
                                                    Washington, DC.

    The Subcommittee met, pursuant to call, at 10:15 a.m., in 
Room 2318 of the Rayburn House Office Building, Hon. Benjamin 
Quayle [Chairman of the Subcommittee] presiding.

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    Chairman Quayle. The Subcommittee on Technology and 
Innovation will come to order. Good morning. Welcome to today's 
hearing entitled ``Fostering the U.S. Competitive Edge: 
Examining the Effect of Federal Policies on Competition, 
Innovation and Job Growth,'' which is being held to examine the 
effect of federal policies on U.S. competitiveness and 
innovation. In front of you are packets containing the written 
testimony, biographies and Truth in Testimony disclosures for 
today's witnesses. I now recognize myself for five minutes for 
an opening statement.
    Today's discussion is the fourth in a series focused on 
advancing U.S. innovation in a constrained budget environment, 
following hearings on cloud computing, startup companies, and 
principles of effective standards development.
    At the Committee on Science, Space, and Technology, we are 
fortunate that we have the opportunity to influence the Federal 
Government's investments in basic research, which can result in 
game-changing innovations 10, 20, even 30 years down the line. 
We also influence science education policy, helping to ensure 
our Nation's future workforce remains competitive in the global 
economy.
    While these policy areas are vital to U.S. competitiveness 
and innovation, there are several other policy areas that 
affect our country's competitive standing.
    These areas include taxes, regulation, trade, protection of 
intellectual property, and human capital, among many others. 
According to House Rule X, Clause 2(c): ``Each standing 
committee shall review and study on a continuing basis the 
impact or probable impact of tax policies affecting subjects 
within its jurisdiction.''
    As part of carrying out our oversight responsibilities, the 
Committee reviews laws, programs, and government activities 
that affect the country's competitiveness and innovation. 
Therefore, as we hear a range of policy recommendations from 
our witnesses today, it is imperative that we understand how 
these many issues affect our Nation's economic competitive 
position.
    As of April 1, the United States will have the dubious 
honor of having the highest marginal corporate income tax in 
the industrialized world. This tax rate harms competitiveness 
by taking money away from companies that could be better used 
to conduct research, develop new innovations and create jobs. 
And it encourages companies to look for more favorable business 
environments abroad.
    Policy uncertainty can also make private sector business 
and investment decisions more difficult. For instance, the 
Research and Development Tax Credit has expired 14 times since 
it was first authorized under President Reagan in 1981. While 
the Congress has repeatedly extended this credit, it generally 
has not done so until the end of each year, adding a layer of 
uncertainty to company investment decisions.
    Excessive regulations and red tape increase the cost of 
doing business and create uncertainty for private sector 
companies. A study commissioned by the Small Business 
Administration in 2008 calculated that small businesses faced 
annual regulatory costs of $10,585 per employee. In the first 
three years of the Obama Administration, the Federal Government 
imposed 106 new major regulations with annual costs of more 
than $46 billion. By piling on new hoops for employers to jump 
through, we are simply increasing costs that are passed on to 
consumers.
    Finally, our country's deficit is projected to exceed $1 
trillion for the fourth straight year, and our gross national 
debt exceeds $15 trillion. This fiscal path is unsustainable. 
It is bad for business, and it is just plain wrong. Clearly, we 
must do better. As policy-makers, we need to foster an 
environment that allows U.S.-based innovators to compete and to 
flourish. We should enact policies that ensure this country 
remains the best place to launch or expand a business.
    Today, we will be examining how federal policies and 
regulations affect competition, innovation and job growth and 
we will be hearing recommendations from leaders of innovative 
companies and technology transfer organizations on ways to 
improve federal economic and regulatory policy.
    We thank our witnesses for being here today, and we look 
forward to your testimony.
    At this time, I am going to submit for the record Tech 
America's Technology Roadmap for America. Without objection, so 
ordered.
    [The prepared statement of Mr. Quayle follows:]

      Prepared Statement of Subcommittee Chairman Benjamin Quayle

    Good morning, I'd like to welcome everyone to today's hearing, 
which is being held to examine the effect of federal policies on U.S. 
competitiveness and innovation.
    Today's discussion is the fourth in a series focused on advancing 
U.S. innovation in a constrained budget environment, following hearings 
on cloud computing, start-up companies, and principles of effective 
standards development.
    At the Committee on Science, Space and Technology, we are fortunate 
that we have the opportunity to influence the Federal Government's 
investments in basic research, which can result in game-changing 
innovations 10, 20, even 30 years down the line. We also influence 
science education policy, helping to ensure our Nation's future 
workforce remains competitive in the global economy.
    While these policy areas are vital to U.S. competitiveness and 
innovation, there are several other policy areas that affect our 
country's competitive standing.
    These areas include taxes, regulation, trade, and protection of 
intellectual property and human capital, among many others. According 
to House Rule X, Clause 2(c) ``Each standing committee shall review and 
study on a continuing basis the impact or probable impact of tax 
policies affecting subjects within its jurisdiction . . . .''
    As part of carrying out our oversight responsibilities, the 
Committee reviews laws, programs and government activities that affect 
the country's competitiveness and innovation. Therefore, as we hear a 
range of policy recommendations from our witnesses today, it is 
imperative that we understand how these many issues affect our Nation's 
economic competitive position.
    As of April 1, the United States will have the dubious honor of 
having the highest marginal corporate income tax in the industrialized 
world. This tax rate harms competitiveness by taking money away from 
companies that could be better used to conduct research, develop new 
innovations and create jobs, and it encourages companies to look for 
more favorable business environments abroad.
    Policy uncertainty can also make private sector business and 
investment decisions more difficult. For instance, the Research and 
Development Tax Credit has expired 14 times since it was first 
authorized under President Reagan in 1981. While the Congress has 
repeatedly extended this credit, it generally has not done so until the 
end of each year, adding a layer of uncertainty to company investment 
decisions.
    Excessive regulations and red tape increase the cost of doing 
business and create uncertainty for private sector companies. A study 
commissioned by the Small Business Administration in 2008 calculated 
that small businesses faced annual regulatory costs of $10,585 per 
employee. In the first three years of the Obama Administration, the 
Federal Government imposed 106 new major regulations with annual costs 
of more than $46 billion. By piling on new hoops for employers to jump 
through, we are simply increasing costs that are passed on to 
consumers.
    Finally, our country's deficit is projected to exceed $1 trillion 
for the fourth straight year, and our gross national debt exceeds $15 
trillion. This fiscal path is unsustainable. It's bad for business, and 
it is wrong.
    Clearly, we must do better.
    As policy makers, we need to foster an environment that allows 
U.S.-based innovators to compete and to flourish. We should enact 
policies that ensure this country remains the best place to launch or 
expand a business.
    Today, we will be examining how federal policies and regulations 
affect competition, innovation and job growth and we will be hearing 
recommendations from leaders of innovative companies and technology 
transfer organizations on ways to improve federal economic and 
regulatory policy.
    We thank our witnesses for being here today and we look forward to 
your testimony.

    Chairman Quayle. I now recognize the gentlelady from 
Maryland, Ms. Edwards, the Ranking Member, for her opening 
statement.
    Ms. Edwards. Thank you very much, Mr. Chairman, and thank 
you for calling this hearing on competition, innovation, and 
job growth. This hearing is an important follow-up to one that 
we held back in November on small business creation.
    I am pleased that we are taking an in-depth look at these 
issues as we seek to identify the best federal policies for 
fostering innovation and job growth and preserving our 
competitive edge in the global economy. And I thank the 
witnesses for being here today.
    Without a doubt, regulatory, tax, immigration, and economic 
policies have an unquestionable impact on innovation and 
competitiveness. And there are important steps that we can and 
should take in Congress to address these issues, including 
policies that I have long advocated, such as increasing and 
making permanent the research and development tax credit and 
providing incentives for businesses to co-locate their research 
and development and manufacturing activities here in the United 
States.
    In addition, I am strongly supportive of efforts by 
policymakers and business leaders in my home State of Maryland 
to enact a measure to make more companies eligible for the 
State's biotech investment tax credit and to streamline the 
application process, aiding countless small- and medium-sized 
businesses.
    Locally, in Montgomery County, which I represent along with 
Prince George's County, the biotech investment tax credit, the 
first such program at the local level anywhere in the country 
and modeled after the State's program, has helped facilitate 
nearly $6 million in local investment for a number of local 
biotech companies. These are very promising programs that ought 
to be replicated elsewhere.
    However, for our purposes of today's hearing and despite my 
advocacy for some issues that do not fall under this 
Committee's jurisdiction, I think it is most worthwhile for us 
to focus on the areas and programs within our committee's 
jurisdiction, and these can have an important impact on 
innovation and competitiveness.
    We have legislative authority over many programs throughout 
the Federal Government that are seeking to partner with the 
private sector, State and local governments, academia, and 
others to promote innovation- and technology-based economic 
development. For example, in the America COMPETES 
Reauthorization Act of 2010, we authorized the Office of 
Innovation and Entrepreneurship and the regional innovation 
strategies program at the Economic Development Administration. 
These programs are up for reauthorization next year. I think it 
would be a valuable use of our time to check in on the progress 
of these programs and to hear from our witnesses today about 
how they might be improved, enhanced, or expanded.
    The truth is that there is much that can be done in the 
area of regional innovation beyond the critical aspect of 
creating linkages between and amongst the various stakeholders 
in a region. There are interesting ideas involving shared 
facilities, collaborative research and development, and 
commercialization that we ought to be exploring in an effort to 
enhance regional innovation and economic development. That is 
why I am particularly pleased that Mr. Bendis is joining us 
today as a witness. I am very interested in the BioHealth 
Innovation initiative, and I am very supportive of efforts to 
formalize and accelerate development of a biotechnology cluster 
in the Central Maryland region. We have extraordinary and 
unparalleled biotech assets in Central Maryland that can be and 
ought to be leveraged to make the region a truly global force 
in biotechnology.
    In addition to EDA's efforts with respect to regional 
innovation and economic development, there are also some very 
relevant, White House-led policies under way that deserve some 
examination and review. These include the President's Public-
Private Start-Up America initiative and his recent efforts to 
enhance and improve technology transfer from our federal labs.
    We have jurisdiction in this committee over these programs 
and policies, and we should make the effort to evaluate their 
effectiveness to determine if there are steps that we could 
take by legislatively strengthening or improving them.
    I think it would also be worthwhile for us to take a 
serious look at what is going on with our international 
competitors. Other countries, including Germany, Singapore, and 
China, are pouring significant amounts of money into programs 
to spur innovation and are trying out some interesting new 
models. We should seek to better understand these models, the 
lessons learned and the best practices, and explore the 
possibility of piloting some of them here in the United States.
    I look forward to hearing from our witnesses today and hope 
we have an opportunity to touch on some of these important 
issues, and I yield the balance of my time.
    [The prepared statement of Ms. Edwards follows:]

      Prepared Statement of Ranking Minority Member Donna Edwards

    Mr. Chairman, thank you for calling this hearing on competition, 
innovation, and job growth. This hearing is an important follow-up to 
the hearing we held back in November on small business creation. I'm 
glad that we are taking an in-depth look at these issues as we seek to 
identify the best federal policies for fostering innovation and job 
growth and preserving our competitive edge in the global economy. And 
thank you to the witnesses for being here.
    Without a doubt, regulatory, tax, immigration, and economic 
policies have an impact on innovation and competitiveness. And there 
are important steps that we can--and should--take in Congress to 
address these issues, including policies that I've long advocated such 
as increasing and making permanent the R & D tax credit and providing 
incentives for businesses to co-locate their research and development 
and manufacturing activities here in the United States.
    In addition, I'm strongly supportive of efforts by policymakers and 
business leaders in my home state of Maryland to enact a measure to 
make more companies eligible for the State's biotech investment tax 
credit and streamline the application process, aiding countless small- 
and medium-sized businesses. Locally, in Montgomery County, which I 
represent along with Prince George's County, the biotech investment tax 
credit--the first such program at the local level anywhere in the 
country and modeled after the State's program--has helped facilitate 
nearly $6 million in local investment for a number of local biotech 
companies. These are very promising programs that ought to be 
replicated elsewhere.
    However, for our purposes today, I think it is most worthwhile for 
us to focus on those areas and programs within our Committee's 
jurisdiction that have an impact on innovation and competitiveness. We 
have legislative authority over many programs throughout the Federal 
Government that are seeking to partner with the private sector, State 
and local governments, academia, and others to promote innovation- and 
technology-based economic development. For example, in the America 
COMPETES Reauthorization Act of 2010, we authorized the Office of 
Innovation and Entrepreneurship and the regional innovation strategies 
program at the Economic Development Administration.
    These programs are up for reauthorization next year. I think it 
would be a valuable use of our time to check in on the progress of 
these programs and hear from our witnesses how they might be improved, 
enhanced, or expanded.
    The truth is that there is much that can be done in the area of 
regional innovation beyond the critical aspect of creating linkages 
between and amongst the various stakeholders in a region. There are 
interesting ideas involving shared facilities, collaborative research 
and development, and commercialization that we ought to be exploring in 
an effort to enhance regional innovation and economic development.
    That is why I am particularly pleased that Mr. Bendis is joining us 
today as a witness. I am very interested in the BioHealth Innovation 
initiative and am very supportive of efforts to formalize and 
accelerate the development of a biotechnology cluster in the central 
Maryland region. We have extraordinary and unparalleled biotechnology 
assets in central Maryland that can be, and ought to be, leveraged to 
make the region a true global force in biotechnology.
    In addition to EDA's efforts with respect to regional innovation 
and economic development, there are some very relevant White House-led 
policies underway that deserve some examination and review. These 
include the President's Public-Private Start-Up America initiative and 
his recent efforts to enhance and improve technology transfer from our 
federal labs. We have jurisdiction over these programs and policies, 
and should make the effort to evaluate their effectiveness and 
determine if there are steps that we could be taking legislatively to 
strengthen or improve them.
    I think it would also be worthwhile for us to take a serious look 
at what's going on with our international competitors. Other countries, 
including Germany, Singapore, and China, are pouring significant 
amounts of money into programs to spur innovation and are trying out 
some interesting new models. We should seek to better understand these 
new models, the lessons learned and the best practices, and explore the 
possibility of piloting some of them in the United States.
    I look forward to hearing from our witnesses today, and hope that 
we will have an opportunity to touch on some of these important issues. 
I yield back the balance of my time.

    Chairman Quayle. Thank you, Ms. Edwards. If there are 
Members who wish to submit additional opening statements, your 
statements will be added to the record at this point.
    At this time, I would like to introduce our witnesses, and 
then we will proceed to hear from each of them in order.
    Our first witness is Dr. Ron Cohen, President and CEO of 
Acorda Therapeutics. In his current position, he oversees a 
public biotechnology company aimed at bettering the lives of 
those afflicted with a variety of neurological conditions. Next 
we will hear from Mr. Mick Truitt, Vice President of Ludlum 
Measurements, Inc. In this capacity, Mr. Truitt has dealt with 
the extensive growth in the international markets. Our third 
witness is Mr. Thomas Brandt, Jr., who is the Senior Vice 
President and Chief Financial Officer of TeleCommunications 
Systems, Inc., a wireless technology solutions provider. Mr. 
Brandt is also here on behalf of TechAmerica, an association of 
diverse U.S. technology companies. Our fourth witness is Mr. 
Richard A. Bendis, the Interim CEO of BioHealth Innovation, 
Inc., and President and CEO of Innovation America. These 
current roles allow Mr. Bendis to lead two innovation 
intermediaries which help bring together the range of 
organizations and knowledge necessary to spur innovation. 
Thanks again to all of our witnesses for being here this 
morning.
    As our witnesses should know, spoken testimony is limited 
to five minutes each. After all witnesses have spoken, Members 
of the Committee will have five minutes each to ask questions. 
I now recognize our first witness, Dr. Ron Cohen, for five 
minutes.

                  STATEMENT OF DR. RON COHEN,

             PRESIDENT AND CEO, ACORDA THERAPEUTICS

    Dr. Cohen. Chairman Quayle and Ranking Member Edwards, 
Members of the Committee, it is my privilege to be here today 
to discuss ways to foster biomedical innovation in the United 
States.
    My name is Ron Cohen and I am the President, CEO, and 
founder of Acorda Therapeutics, Inc. I have over 25 years of 
experience in the biotechnology industry, and I am appearing 
before this Committee on behalf of the Biotechnology Industry 
Organization, or BIO, where I serve as Chairman of the Emerging 
Companies section of the Board.
    Acorda is a small biotechnology company located in 
Hawthorne, New York. I founded the company in 1995 with one 
mission, to develop therapies that could restore neurological 
function to people with multiple sclerosis, spinal cord 
injuries, and other conditions that affect the nervous system.
    In 2010, after 15 years of effort, we obtained FDA approval 
for Ampyra, a drug that improves walking in people with MS, a 
significant improvement in a basic function that affects the 
lives of MS patients.
    Our company went public in 2006, and today we employ over 
330 people who are working on a pipeline of innovative 
medicines that could be transformative in the lives of patients 
afflicted with these terrible diseases.
    America has developed more cures and breakthroughs than any 
other country. However, this position will not be sustained 
without a concerted policy focused on supporting and 
incentivizing the next frontiers of biomedical discoveries, 
treatments, and cures. Unfortunately, investors are now 
decreasing their funding in early-stage companies, such as 
ours, developing potential medical breakthroughs. Even as we 
are decreasing our investment in early-stage biotechnology in 
the United States, we are facing unprecedented competition from 
around the globe to be the leader in biomedical research. In 
2008, China pledged to invest $12 billion in drug development, 
and in 2011, the Chinese government named biotechnology as one 
of seven industries that will receive $1.7 trillion in 
government funding over the next five years. The competitive 
gap is getting smaller.
    The U.S. biotechnology industry is poised to be a major 
driver in an innovation-driven economy, and we offer real 
solutions to our most pressing healthcare needs: curing 
diseases, reducing costs, increasing quality, and ensuring that 
people enjoy not only longer lives but better and more 
productive lives. In fact, today the Nation's biotechnology 
industry employs 1.42 million people and supports an additional 
6.6 million jobs.
    In order to truly realize these potential benefits, we must 
have a policy environment that fosters innovation. My written 
testimony discusses five policy areas that would better enable 
us to do this. For my oral testimony today, I want to focus on 
two areas, tax policy and regulatory environment.
    In the past, Congress has provided tax incentives that 
mitigate risk and enhance the returns of innovative development 
projects like those found in our companies. The growth of the 
industry in the early 1980s was due in part to the ability of 
growing companies to pass through various tax incentives, 
including credits and losses, to their investors. This 
sponsored and promoted a great deal of investment in the 
industry. Allowing certain tax incentives stemming from R&D to 
flow through life science projects to their investors would 
result in immediate tax benefits to investors and encourage 
further investment.
    On the regulatory front, we need to have a strong 
successful FDA and a transparent FDA. It is imperative that the 
FDA have the resources that it needs. In 1992, Congress, 
industry, and the FDA created the PDUFA, or the Prescription 
Drug User Fee Act. This ensured that the FDA would have the 
wherewithal to hire the reviewers it needed, to expedite the 
drug development process. And this year, the fifth 
reauthorization of that very successful program is up for 
renewal, PDUFA V. This PDUFA V legislation will further 
streamline the activities of the FDA, and I encourage Congress 
to pass that.
    In addition, Congressmen Stearns' and Townes' Faster Access 
to Specialized Therapies Act, or the FAST bill, would create a 
robust, accelerated approval pathway that would enable the safe 
and expeditious development of the next generations of modern 
medicines. I encourage passage of the FAST Act and the benefits 
that will accrue from it.
    Thank you very much for the opportunity to speak to you 
today.
    [The prepared statement of Dr. Cohen follows:]

                  Prepared Statement of Dr. Roy Cohen

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    Mrs. Biggert [presiding]. Thank you, Dr. Cohen. Mr. Truitt, 
you are recognized for five minutes.

                 STATEMENT OF MR. MICK TRUITT,

           VICE PRESIDENT, LUDLUM MEASUREMENTS, INC.

    Mr. Truitt. Chairman, Ranking Member Edwards and 
distinguished Members of the House Subcommittee on Technology, 
thank you for the opportunity to testify today.
    My name is Mick Truitt, and I'm the Vice President of 
Sales, Marketing, and Business Development for Ludlum 
Measurements, Inc., a mid-sized company located in Sweetwater, 
Texas, a town of 11,000 people. I am here today to testify on 
behalf of the U.S. Chamber of Commerce, where I serve on the 
Corporate Leadership Advisory Council.
    For over 50 years now, Ludlum has manufactured radiation 
detection equipment. We are recognized internationally for our 
reliable equipment, excellent customer service, and fair 
pricing. When disaster struck last year in Japan, Ludlum was 
one of the first in line to work hand in hand with the 
companies and people to help meet their needs. We continue to 
support the efforts being taken for cleanup and to ensure 
people's safety.
    Mr. Don Ludlum, the Founder and the President, was 29 years 
old when he started the company and today is still a very 
active participant in the business as the Company President. 
But most days, you won't find him in his business office. You 
will find him in Engineering, working on the next new design 
that Ludlum will present to the world. He told me not long 
after I started there that a company is either growing or 
dying. You can never just be standing still. That is even truer 
today in this global economy than it was on Valentine's Day in 
1962 when Ludlum first incorporated.
    Why Sweetwater? Simple economics. The people were friendly, 
and the bank was willing to take a chance on this 29-year-old 
and his idea of building a company. Now Ludlum employs 450 
people in Nolan County and is the area's largest employer. Mr. 
Ludlum always liked the idea of keeping work in house, so when 
he needed more capacity, he built it internally, from making 
our own printed circuit boards to a full machine shop and 
plastic injection molding facility to specialized divisions 
that develop and manufacture both photomultiplier tubes and 
organic scintillator material that collects the radiation 
energy and turns it into an electronic signal that can be 
measured.
    Ludlum has a staff of over 30 highly qualified engineers to 
make sure we stay up to date with our products. It is never an 
easy task to convince a young engineer that they should move to 
a small town in West Texas, and sometimes the best-qualified 
engineers are from outside of the United States. This is where 
the complications really begin.
    Yes, our Nation's immigration laws impact the business 
community everywhere in this country and not just the major 
household name companies and the titans of American industry.
    Four years ago, when we were interviewing for an 
engineering position, we had a very bright young electrical 
engineer who had graduated with honors and had then gone on to 
get his Masters of Business Administration from the University 
of Texas. At that time, there were only three manufacturers of 
photomultiplier tubes in the world. He had worked for four 
years with one of them. This was almost too good to be true, 
but there was a snag. He was a Mexican citizen. It seemed that 
since his professional skill set was a perfect match for our 
needs, that the immigration process would be straightforward. 
However, to date, it has cost our West Texas company over 
$17,000 in government fees and legal services to obtain and 
maintain lawful status for him. We are sponsoring this key 
employee for permanent resident status, but the green card 
process will take many more years to complete.
    Meanwhile, as a direct result of this hire, we have 
expanded our sales and distribution in Central and South 
America from a little over $200,000 to over $1 million 
annually.
    In 2007, Ludlum acquired a company in the United Kingdom 
just outside of London. As this group grew, it became apparent 
we would need to expand our operation, but we wanted to expand 
here in the United States and not in the U.K. To do this, 
specialized equipment had to be purchased or manufactured. Once 
this manufacturing equipment was in place, Ludlum would need a 
highly skilled, qualified production engineer familiar with 
photomultiplier tube production to get the equipment up and 
operating and to train people to operate the equipment and test 
the end product. As this is a highly specialized market, there 
are few people in the world that could do this. Unable to find 
anyone locally, we depended upon our past experience of the 
people in the U.K. Instead of focusing on the fact that we had 
just completed a corporate acquisition, where it should be 
expected or at least acceptable for us to access our newly 
acquired staff and technology, we were faced with immigration 
delays. Three months and $7,000 later, we finally were able to 
bring an appropriate engineer over on a regular basis to manage 
all the production line at our Sweetwater facility. This 
operation now employs another 20 Americans.
    Ludlum Measurements now has only one competitor in the 
photomultiplier tube business, and you may have heard of this 
company. It is Hamamatsu. It would be impossible to compete in 
these global markets without engineers like these two, no 
matter where they come from.
    I am running behind. Another barrier to innovation and 
investment for our company is the uncertainty and potential 
increases of the individual marginal income tax rates. Ludlum 
is structured as a subchapter S corporation, which means that 
profits are passed through to the shareholders in the form of 
distributions and taxed at the individual's rate of income. It 
also means the rate of return on any reinvestment on those 
profits retained by the company will be impacted by the 
individual rate. As we attempt to plan for future long-term 
growth and expansion or paying off the principal on existing 
debt, individual marginal income tax rates do matter. Moreover, 
the uncertainty of whether those rates are dramatically 
increased at the end of this year or will be extended instills 
yet another layer of risk in the growth and investment 
decision-making process.
    In conclusion, the decisions you make can help or hinder 
us. By that, I mean the laws you create will either cultivate a 
climate that provides small- and mid-sized business owners 
greater confidence and certainty to invest, innovate, grow, and 
generate new jobs or one that does just the opposite. We 
desperately need elected officeholders who are on the right 
side of the debate and are willing to lead. I served in the 
United States Navy for 20 years and traveled the world aboard 
nuclear submarines. Between my military and business 
experience, I have been exposed to numerous countries and 
cultures around the globe. I am incredibly proud to be an 
American and strongly believe this Nation is still the greatest 
place to live and do business.
    Thank you for the opportunity to testify, and I look 
forward to your questions.
    [The prepared statement of Mr. Truitt follows:]

                 Prepared Statement of Mr. Mick Truitt

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    Mrs. Biggert. Thank you, Mr. Truitt. Mr. Brandt, you are 
recognized for five minutes.

            STATEMENT OF MR. THOMAS M. BRANDT, JR.,

                 SENIOR VICE PRESIDENT AND CFO,

                TELECOMMUNICATIONS SYSTEMS, INC.

    Mr. Brandt. Thank you. Mr. Chairman, Ranking Member 
Edwards, Members of the Subcommittee, I am Tom Brandt, Chief 
Financial Officer of TeleCommunications Systems, an 
entrepreneur-led, Annapolis, Maryland-based wireless 
communication technology business, which now employs about 
1,500 professionals and holds more than 200 patents. I am also 
here before you today representing TechAmerica, the Nation's 
leading technology advocacy organization representing over 
1,000 U.S. companies committed to innovation. In my testimony 
today, I will share TechAmerica's insights on some policy areas 
where Congress can act to help advance America's innovation 
economy.
    TechAmerica has been working to advance a competitiveness 
agenda for U.S. policy since collaborating with Leader Pelosi 
and others in 2005 when we published ``Losing the Competitive 
Advantage: The Challenge for Science and Technology in the 
United States.'' My hope is that these latest recommendations 
will help to inform public discussion and facilitate meaningful 
debate toward a national technology vision and strategy.
    The best hope for the United States to maintain its edge in 
an increasingly competitive world is by fostering and expanding 
our most prized intellectual asset, innovation. Over the past 
30 years, innovation has given the United States and the rest 
of the world wave after wave of technological advancement and 
generated millions of high-skilled jobs. On average, each 
technology job supports three jobs in other sectors of the 
economy. The multiplier effect for information technology jobs 
is even higher, nearly five to one.
    Information technology has a proven track record of 
economic success having recently accounted for more than a 
third of U.S. gross domestic product growth and nearly two-
thirds of corporate capital investment.
    Access to capital, strong basic research, the best and 
brightest minds, and an infrastructure that supports the 
entrepreneur are four key elements that have allowed the United 
States to thrive on the basis of innovation.
    Foreign governments, however, are increasingly aggressive 
in promoting favorable tax policies, improving their legal 
accounting/intellectual property structures, and boosting their 
R&D spending to foster innovation in their countries. The 
United States needs to meet the challenge of foreign 
competitors or risk losing our edge. To maintain our Nation's 
competitive advantage, we must update public policy to support 
what has made us successful: improving access to capital with 
smart tax policies, increasing support for our basic R&D, 
improving math and science education, and supporting 
immigration and opening new markets.
    One of the greatest challenges facing new start-up 
companies is gaining access to enough capital to get off the 
ground in the early years and then fueling growth without 
prematurely ceding control to a bigger, less entrepreneurial 
owner.
    About 25 years ago, my employer started up our company with 
his wife and a childhood friend. Critical steps in growing our 
company were venture capital investment followed by our IPO 12 
years ago. We now employ about five times the 295 employees in 
our 2000 prospectus, and we were very fortunate to raise our 
capital shortly before changes in the environment sharply 
raised the bar on access to such capital for similar stage 
companies.
    Reduced obstacles to investor capital for small growth 
companies can make a major difference. The United States also 
needs to reform the income tax code. Other nations have 
adjusted their codes to incentivize innovation, attract 
investment, and enhance the competitiveness of companies within 
their borders. In just days, the United States will lead the 
world with the highest corporate tax rate. We need to change 
that. The R&D tax credit is a modest but Byzantine provision 
that can help incentivize innovation, but it expired again in 
2011. The United States needs to make it stronger and make it 
permanent. The last major corporate tax reform took place 25 
years ago, long before many of today's U.S. technology-based 
companies were even in existence. TechAmerica looks forward to 
working with Congress and the Administration on ways to 
modernize the tax code.
    The government has a critical role in the area of basic 
research. From this pipeline of advances in information 
technology, life sciences, and now clean energy, technology 
enterprises have historically drawn many innovations. Often, 
early-stage research into new discoveries is first funded with 
federal dollars in a university or government lab and then 
commercialized by angel or venture investors.
    Prudent application of intellectual property laws can have 
an important impact on services to the public. For example, I 
am confident that all here recognize the importance of 911 
technology, a vital national service that protects the lives 
and property of every American and of which my company is a 
provider. Today 911 is threatened by what the Federal Trade 
Commission has termed patent assertion entities. These 
companies have increasingly focused on government-mandated 911 
services by wireless carriers as proof of infringement with 
significant financial consequences to both the carriers and 
their 911 vendors. I encourage you to investigate and resolve 
the 911 patent problem before it irreparably harms America's 
safety and security by disrupting the 911 system.
    In addition to supporting basic research, government must 
also support the entrepreneurial and technical talent that 
brings this research to life. TechAmerica wholeheartedly 
supports investing to improve math and science education for 
U.S. students, particularly in grades K through 12. Other 
countries have been devoting more resources to STEM education 
for some time.
    It is also critical that we reduce obstacles to the best 
and brightest scientists and entrepreneurs from all over the 
world who want to come to the United States. The U.S. high-tech 
industry and the 5.9 million workers that it employs rely on 
international trade and investment for continued growth, 
innovation, and job creation. Encouraging international trade 
buoys our GDP, enhances productivity and boosts the ability of 
small businesses to innovate and create good U.S.-based jobs.
    In conclusion, the technology industry remains committed to 
doing our part to ensure that the United States remains the 
leader in the innovation race, but we need the right policies 
in place. TechAmerica looks forward to working with Members of 
this Committee, Congress, and the Administration to support the 
best and brightest ideas that continue to fulfill a robust 
pipeline of innovation for our country. I thank the Committee 
for this opportunity to discuss these issues with you today, 
and I am happy to answer questions.
    [The prepared statement of Mr. Brandt follows:]

            Prepared Statement of Mr. Thomas M. Brandt, Jr.

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    Chairman Quayle. Thank you, Mr. Brandt. I now recognize our 
final witness, Mr. Richard Bendis, for his testimony.

         STATEMENT OF MR. RICHARD BENDIS, INTERIM CEO,

                BIOHEALTH INNOVATION, INC., AND

             PRESIDENT AND CEO, INNOVATION AMERICA

    Mr. Bendis. Thank you, Mr. Chairman. Chairman Quayle, and 
Ranking Member Edwards----
    Chairman Quayle. Is your mic on?
    Mr. Bendis. Thank you for the opportunity to testify before 
the Committee today. My name is Rich Bendis, and I am President 
and CEO of BioHealth Innovation, Inc. It is a private-public 
partnership that is predominantly funded by the private sector 
to foster biohealth innovation-based economic development and 
is a unique cluster-based model for regional economic 
development. This initiative could be used as a model program 
regardless of industry or cluster strength.
    BHI is the first regionally focused innovation intermediary 
created to connect the university and hospital biohealth 
research strengths of Baltimore with the bioscience industry 
and federal laboratory strengths of Montgomery County. It has 
entered into a Partnership Intermediary Agreement with the 
National Institutes of Health's Office of Technology Transfer 
and has created the first private-sector funded Entrepreneur in 
Residence program to identify commercializable science in the 
27 institutes of NIH. This program will create new project-
based companies and high-paying life science jobs. BHI believes 
this EIR program is applicable to many federal agencies that 
have technology transfer offices and support SBIR programs.
    BHI has designed a potential national pilot, the Health-
Regional Innovation Cluster, H-RIC, model, which will 
incorporate the best innovation-based economic development 
practices in the United States and integrate them into one 
region in Central Maryland. BHI is currently seeking federal 
financial support from several relevant federal agency partners 
to accelerate the creation and implementation of this 
innovative biohealth H-RIC model.
    Over the past 35 years, I have developed and led 
innovation-based technology organizations in Kansas, 
Pennsylvania, and currently in Maryland. I also worked as 
consultant in many States and countries to help them with their 
programs. For example, Iowa's Innovation Council was the 
recipient of the Economic Development Agency, EDA's, 2011 i6 
Proof of Concept Challenge Grant, and Innovation Philadelphia 
was the recipient of multiple grant awards by EDA's Public 
Works Grant program. These grants enabled the innovation-based 
strategies to be successfully developed and implemented within 
these States and regions.
    I have also partnered and served as a member of the United 
States Innovation Partnership, which was formed by the 
Technology Administration of the U.S. Department of Commerce 
under the Clinton Administration.
    The America Competes Reauthorization Act of 2010 
established the Office of Innovation and Entrepreneurship with 
its National Advisory Committee on Innovation and 
Entrepreneurship, and this was created to serve as the central 
location and focal point for these activities to foster 
interagency cooperation. I believe this should remain a 
priority for the U.S. Government, but it needs to have higher 
Administration and congressional visibility and empowerment to 
lead the innovation strategy for the Federal Government and 
America.
    The Department of Commerce and EDA should still continue to 
lead this initiative, but it needs a senior official who is 
empowered, fully budgeted and staffed office with clear 
responsibilities, and measurable outcomes. An earlier version 
of this office was created as the Technology Administration 
Office within the Department of Commerce under the Clinton 
Administration and had Undersecretary Dr. Mary Good leading the 
office. It was the closest we came to having an empowered 
technology and innovation coordinating body for the Federal 
Government.
    Today's theme, ``Examining the Effect of Federal Policies 
on Competition, Innovation, and Job Growth,'' needs to commence 
at the regional level where job creation occurs. It needs to 
link the economically distressed regions together with stronger 
regions to develop the much-needed jobs from the laboratories 
to the market, similar to the i6 program that EDA had created. 
EDA and the Department of Commerce need additional flexibility 
in their program design and implementation, as every region in 
the United States has their unique assets, strengths and needs.
    There are several positive programs that affect the federal 
policies on competition, innovation, and job growth. The 
following are examples that have helped mitigate the risk of 
those companies facing the valley of death in commercialization 
or capital.
    Number one, I applaud the SBIR reauthorization, but there 
is a need for a Phase III commercialization award category, 
especially in high-capital industries such as biotechnology and 
energy that require extensive R&D investment.
     Second, the National Institutes of Standards, NIST, 
Technology Innovation Program, TIP, was effective and was not 
corporate welfare as perceived, since it brought together large 
and small companies and universities to tackle high-risk 
mission-critical technology innovation projects that no other 
federal program addressed. TIP needs to be reinstated because 
it fills a critical gap in the innovation funding continuum.
    Continued support and growth of the Manufacturing Extension 
Partnership, MEP, is an excellent example of how the Federal 
Government, States and the private sector can all work together 
to tackle major challenges in our economy, especially in 
manufacturing.
    We need to create an early-stage seed jobs fund--of--funds 
to address the innovation capital valley of death that would 
complement the expanded Small Business Investment Company, 
SBIC, program that has really taken off this year.
    A national angel capital credit program to stimulate 
private early-stage investment in high-risk, early-stage 
ventures funded by private individuals is also something that 
America needs to create. Thirty States have programs with angel 
capital tax credit programs today.
    I agree with the permanent reauthorization of R&D tax 
credit, and we should also add a transferability component to 
the R&D tax credit.
    Lastly, we need an expansion of the Treasury program, New 
Markets Tax Credit, for venture capital investment, especially 
in early-stage companies and an expansion of the new State 
Small Business Credit Initiative, SSBCI, that would increase 
the percentage of allocation to seed and early-stage venture 
capital.
    Thank you much for the ability to make this testimony, and 
we will stand for questions now. Thank you.
    [The prepared statement of Mr. Bendis follows:]

                Prepared Statement of Mr. Richard Bendis

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    Chairman Quayle. Thank you, Mr. Bendis, and I would like to 
thank all of our witnesses for their testimony today.
    Reminding Members, the Committee rules limit questioning to 
five minutes. The Chair at this point will open the round of 
questions, and I will recognize myself for five minutes.
    Mr. Truitt, within your testimony you stated that there is 
absolutely no doubt that tax policy, both the burden and the 
uncertainty, impacts competitiveness. This includes uncertainty 
with the R&D tax credit as well as tax rate increases. In fact, 
there are over about 200 federal tax provisions that are 
scheduled to expire between 2010 and 2020. These policies 
really affect the ability for businesses to grow with research 
projects that are budgeted and planned for a three- to five-
year basis. How does uncertainty really reduce the ability to 
map out a business plan for future innovation and investment?
    Mr. Truitt. I am not really a tax expert, but what I can 
tell you is that we always have to look at what resources we 
have available, both in people and in money, when we look at 
how our map goes forward and how we produce or develop new 
products. When we do that, you know, a new product that may 
have some real research to it, instead of just development to 
it, where we have to go in and take some real risk to it, we 
may not be able to take that risk if we don't have this R&D tax 
credit to go along with it.
    Chairman Quayle. Okay. Thank you. And Mr. Brandt, kind of 
along those same lines, there has been a lot of talk about 
simplifying the tax code, especially on the corporate side, 
reducing the number of deductions and tax credit within the 
system to get a lower rate. Would you be willing to give up 
something like the R&D tax credit for a lower rate at the 
corporate level?
    Mr. Brandt. Well, speaking for myself and as a financial 
officer, certainly the cost of compliance with the complex code 
helps to offset the benefits of something like the R&D credit. 
The R&D credit is somewhat focused insofar as being an 
incentive for technology innovative companies to have a little 
bit more resources than they otherwise would to reinvest in 
development activities they wouldn't otherwise have the funds 
for.
    So I happen to be a big advocate for greater simplicity, 
speaking as a guy who has to ensure those forms get completed 
accurately and has to sign them.
    Chairman Quayle. Yes, we want to make your job easier. But 
true to course, I think there is, you know, broad agreement on 
both sides of the aisle on the importance of government-
supported basic research. However, I do get concerned about 
excessive technology transfer funding by the Federal Government 
that can lend itself to picking winners and losers.
    What do you view, Mr. Brandt, as the appropriate use of 
federal funding versus industry funding in tech transfer 
programs?
    Mr. Brandt. My observation is they are symbiotic. My 
company in part owes its legacy to DARPA and the investments 
that went into enabling the Internet and the connectivity that 
has then in turn led to the wireless industry and the broadband 
technology that benefits society in a lot of ways. So I like to 
think it is not an ``or'' but an ``and,'' and I am sure there 
is lots of judgment as to where the balance is. But I see 
benefits from both.
    Chairman Quayle. Dr. Cohen, do you have any thoughts on 
where it lies within tech transfer, whether on the federal 
involvement versus the private sector involvement?
    Dr. Cohen. It is a combination, as I think we are hearing 
from the other witnesses. Clearly, I believe most of the drive, 
the innovation, and the funding has to come from the private 
sector, but there is a time when having a kick start or a 
balance provided from government funding can be very helpful. 
In the case of my company, which I started out of my bedroom, 
you know it is now valued at $1 billion and, as I said, employs 
over 330 people and gives additional help to thousands of other 
people that we interact with in terms of their jobs and 
employment.
    But in the early days, it was very difficult to raise 
funding. It always is in an early startup. And we managed to 
get some SBIR grants. Back then there was the ATP or the 
Advanced Technology Program grants. We got a $2 million grant, 
which was a competitive grant that was adjudicated by a panel 
of experts based on the information we provided. That actually 
we were able to translate into enormous progress that then 
enabled us to raise a $20 million private venture capital 
round.
    So there really is a place where, especially in the R&D 
phase, when it is so difficult to kick start things that 
ultimately may become real contributors to the economy, real 
contributors to our health and so on. There is a place where 
the right sort of incentives can be the difference between life 
and death for these companies.
    Chairman Quayle. Great. Thank you very much. I now 
recognize Ms. Edwards for five minutes.
    Ms. Edwards. Thank you, gentlemen, for your testimony. I 
want to stay focused on that because although I have, you know, 
an interest in a lot of our tax policy, too, I have my own R&D 
tax credit bill, this Committee has really limited 
jurisdiction. So I want to focus on the things that we on our 
Committee could potentially do something about because 
otherwise, it is just kind of an abstract conversation.
    So, Mr. Bendis, in your testimony, you talked about the 
Technology Innovation Program, and what I would like you to 
focus on are some of the gaps that you mentioned where, you 
know, TIP fills important and critical gaps, but now, because 
of congressional action, we really don't have the benefit of 
that. And also if you could give me an idea about your 
perceptions of the predecessor program, the ATP, program as 
well.
    Mr. Bendis. Yes, Congresswoman Edwards, I believe the U.S. 
Government and Congress could take a look at a gap analysis, 
and to be honest with you, the gaps are wider and deeper than 
they have ever been in the private sector because venture 
capitalists are moving upstream and funding less early-stage 
capital.
    So I don't believe the Federal Government should fund by 
itself every different segment and stage of the life cycle 
within a company, but there are appropriate roles that the 
Federal Government can play. I will start at the beginning of 
the portfolio.
    The SBIR program is the best program in the world for doing 
early-stage funding. Many countries have copied what we do in 
the United States, and I couldn't believe that we had to go 
through so many reauthorization challenges here to get it 
reauthorized. It is something that also should become permanent 
in this government because it is the best early-stage 
investment program that America has, and we should not have to 
go through the reauthorization process, even after six years.
    As I mentioned in my testimony, where we have a tremendous 
gap in the innovation capital area right now is in 
commercialization, and basically bridging the gap from proof of 
concept to what I classify as proof of commercial relevance is 
where Phase III would empower people to get their technologies, 
to get it market and commercial ready.
    On the TIP program, it was designed to deal with mission-
critical, federal agency, mission-critical, and Federal 
Government and America mission-critical technologies in areas 
that needed to be focused on to enhance the quality of life, 
our infrastructure and defense of the United States. Since that 
program has been discontinued, there basically isn't a program 
to replace it with federal funding, and companies generally 
don't have the capital to take on this high-risk research 
themselves.
    The difference in the ATP program and TIP program was ATP 
tended to be more focused on large companies, but the TIP 
program organized itself to focus on partnerships with small 
business, academic institutions and large business but was 
predominantly small-business oriented, where basically that 
research should begin.
    Ms. Edwards. Thank you, Mr. Bendis. And let me just 
interrupt you because I think it is important for us, and I 
want to hear from each of you just very briefly. Is there 
universal agreement across this panel about the benefit of the 
SBIR program? Mr. Truitt?
    Mr. Truitt. You know, there was for us, you know. We have 
gone to a point now where it is beyond what Ludlum works with, 
but I could see where in the future that start-up companies 
need something like that.
    Ms. Edwards. But when you started up, you, your company, as 
I understand it, has had the benefit of SBIR. Am I correct? So 
it was important for beginning, even though for companies that 
are well down the line, it may not be as valuable as those 
start-ups, is that right?
    Mr. Truitt. Yes, that is true. And when we started up, we 
did have the benefit of, you know, the SBIR, and the local 
bankers and things that were--again, back then, you know, 
handshakes meant something. And that is really how a lot of the 
business was done.
    Ms. Edwards. Mr. Brandt.
    Mr. Brandt. And I can report that our company benefited 
from the 8(a) program early in its life, and at the time we did 
our IPO, the pure venture money was supplemented and enhanced 
by an SBIC. So those were key milestones in the development of 
our 1,500 person company.
    Ms. Edwards. Thanks, and I appreciate that because I think 
sometimes we get confused. I mean, there is an important role, 
especially in a start-up for several different programs, 
whether it is through SBA, SBIR, you know, these things that 
really can sort of jump start without choosing winners and 
losers. That is not what this is about, but it is saying, you 
know, there are some ideas out there that have to be seeded. 
The Federal Government can provide some of that seed, and then 
you all go off and let your thousand flowers bloom without us 
choosing which one of them are the ones that should be picked. 
And with that, I think I will yield.
    Mrs. Biggert [presiding]. Thank you, and I would now yield 
myself for five minutes. Mr. Brandt, thank you so much for what 
you do for TechAmerica. I think that is so, so important to our 
country. You know, we have heard a lot from companies about the 
time and resources required to comply with the regulations. In 
fact, some of them say that the only job they have been able to 
hire for has been compliance officers. So I think that that 
shows that there is a problem here.
    Can you give us a sense of cost and time required by your 
company to achieve regulatory compliance?
    Mr. Brandt. Well, what is closest to my desk is Securities 
and Exchange Commission requirements for being a public 
company, and the cost and time certainly went up a notch as the 
Sarbanes-Oxley 404 rules kicked in, and we have been obliged to 
invest for internal control, monitoring and reporting, at a 
much higher cost than prevailed before that rule came into 
effect.
    Mrs. Biggert. Does it really affect your business and 
investment decisions?
    Mr. Brandt. Well, it diminishes the capital that is 
available to invest elsewhere. So to the extent I have an 
internal audit department now and I have staff that are 
virtually full time committed to ensuring that we have records 
of having checked ourselves multiple times during the year for 
compliance with our own policies. Those are dollars that are 
not available for us to hire engineers to enhance our products 
and be more competitive.
    Mrs. Biggert. The SEC I think has at least 450 regulations 
that they are working on or have already brought forward. Are a 
lot of these the ones that you are working on?
    Mr. Brandt. Well, between the outside auditors and the 
attorneys who are, on the average, $300 to $500 an hour, they 
monitor all those rules on behalf of my office and the company, 
and I am sure they all factor into those bills.
    Mrs. Biggert. Thank you. Then, Mr. Truitt, you testified 
that trade policies affect the cost of doing business for 
companies in the global markets, and you cite policies and 
partnerships critical to the U.S. competitiveness and economic 
growth. How can the United States best promote exports through 
trade agreements, and can you give us a sense of how access to 
new markets enable small- and medium-sized enterprises to 
create jobs and grow their businesses?
    Mr. Truitt. Yes, trade agreements do play a big part in 
what we can do. The recent trade agreements with South Korea, 
which has a big nuclear industry, and in fact, they are 
building nuclear power plants for other countries now, has made 
it so that we are more competitive with local companies because 
there are local companies within South Korea that compete with 
us. So it makes it so we are on a more level playing platform. 
More trade agreements like this, because most countries around 
the world have more than what the United States do, would 
certainly make us more competitive in more countries.
    Mrs. Biggert. It seems like those trade agreements that we 
have just had with South Korea and Panama and Colombia really 
took a long time to get out.
    Does anyone else have anything they would like to add to 
that question? Anybody else deal with trade? Okay.
    Let me go back to research and development. It seems like 
research and development is so important that we have the 
Office of Science for the Department of Energy and Department 
of Defense does a lot of this. But you talked about the valley 
of death that so many companies reach. And I have had a couple 
of companies that have come to me and, you know, they have a 
product, it works but they can't get to that part where they 
can really, you know, open up a big shop. What do we do with 
them? There is one right now that really is an important issue 
that could really solve some of the problems that we are having 
with gasoline and diesel. Anybody have any ideas? Mr. Bendis.
    Mr. Bendis. Yes, ma'am. Basically, every company shouldn't 
create a big shop. What we need to determine whether or not is 
whether they have something that is commercially relevant, that 
somebody wants to buy and that there is a scalable market to be 
able to create a real business around it. So what we can do to 
them is to mentor them, provide advice to them initially, not 
give them money, but I think they need knowledge more than they 
do money sometimes to determine whether or not the market 
really needs their technology.
    And the other thing is there are a lot of State resources 
that exist in each of the individual States, and that means 
that if, for example, in Maryland you have TEDCO, which is a 
tech-based economic development organization, that can provide 
some support to them. Some of the tech transfer offices can 
also provide some support to them.
    So at the end of the day, I think providing good mentoring 
knowledge and access to resources might be one of the best 
things that could be done for these companies and 
entrepreneurs.
    Mrs. Biggert. Thank you very much. Dr. Cohen.
    Dr. Cohen. Yes, speaking for the biotechnology industry, 
one of the key issues in allowing that sort of growth and 
transition for us is now the regulatory pathway, and we are one 
of the most regulated industries in the world, and rightly so. 
People need to be assured that we have safe and effective 
medicines, and that is what the FDA tries to do.
    But the reality is over the last decade or so, the pathway 
has become so burdensome that the timelines have been 
increasing, and companies are finding it harder and harder to 
get their products to market, even with drugs that work and can 
confer benefits. So, for example, in 2001, drugs that got 
approved on average had taken about 12.4 years or so to get 
through the development process. Now it is about 14.8 years. So 
in just 10 years, we have increased the burden by over two 
years, and that seems to be continuing.
    So things that can be done, for example, what I suggested 
in my testimony are approval of bills like the FAST bill where 
we can get pathways adopted by the FDA and expand them to many 
diseases that are serious, that require answers. Right now 
those pathways are being applied reasonably well in HIV and 
cancers. But for other diseases that are equally serious or 
sometimes more so, they are not being applied. And that is a 
critical thing that could help the biotech industry because 
investors have recognized this, and 61 percent of venture 
capitalists in a poll last year cited the regulatory 
uncertainties as the reason that they are reducing their 
investment in the biotechnology industry.
    Mrs. Biggert. Thank you very much, and I have gone over my 
time, but now I recognize the gentlelady from Oregon, Ms. 
Bonamici.
    Ms. Bonamici. Thank you very much, Madam Chair. Dr. Cohen, 
you just anticipated and answered my question. But I wanted to 
follow up a little bit about it because you talked about this 
FDA approval process in your testimony, and it is something 
that I have heard about from constituents, both relating to 
drugs and devices, and you did mention that one of the reasons 
why there is reduced investment in medical science sectors is 
because of this regulatory challenge. I think we can all agree 
that we need to have a process to assure that the drugs and the 
products are safe.
    So can you expand a little bit about the FAST bill, and I 
know there is already the accelerated approval. What else can 
be done so that we can assure safety but speed up the approval 
process?
    Dr. Cohen. So thank you for the opportunity to respond to 
that. There are a number of things that can be done to respond 
to that particular issue, and in my view it is the leading 
issue for the biotech industry in terms of what could be done 
to foster the industry and make sure that it is healthy and 
growing and helping all of us.
    BIO has put forth a series of suggestions, so for example, 
in the FDA's mission statement, right now it does not include a 
commitment to foster biomedical innovation. We think it should, 
because out of that will flow a decision-making process that 
will take into account that, for example, there is a cost not 
only to putting a potentially unsafe drug on the market, but 
there are many costs to not putting a potentially effective 
drug on the market in a timely way. And too often in that 
equation, that part of it is not given due weight.
    So what is the cost to patients who need a drug now of not 
getting it to them now, versus the cost, of course, you don't 
want to get an unsafe drug out there.
    But the balance is in my view skewed on one side, and it 
needs to have that other balance, on behalf of the patients who 
need the drugs. The patients' voices themselves are too often 
not included in the process. There ought to be more ways for 
patient groups to make their voices heard in terms of what do 
they consider a benefit to them, and what do they consider a 
risk that they are willing to assume. That voice is too often 
missing from the equation.
    So there are many different things. There are others--in my 
written testimony I think we have a longer series of 
proposals--but a very good start is embodied in the FAST Act. 
It includes some of what I have just talked about, but in 
particular this issue of accelerated approval, which is an 
existing pathway.
    Ms. Bonamici. Right.
    Dr. Cohen. The FDA already recognizes it, but it is not 
sufficiently broad in its application. There is not sufficient 
transparency to companies like mine where we can have a 
dialogue with FDA and say, well, do we potentially qualify for 
this pathway? And over all, there needs to be more transparency 
and communication between drug sponsors, like my company, and 
the FDA. And one of the encouraging signs in the PDUFA 
legislation that is up for reauthorization is FDA did agree to 
an ombudsman that would now help facilitate basic 
communications back and forth, where now if my group has a 
simple question that could be answered theoretically in a day 
or two, it could take a few months before we get our answer. 
And during those few months, we are paralyzed. We can no longer 
continue with our development program.
    So these are the sorts of things that I would be very happy 
if Congress would continue to focus on to help the FDA 
accomplish the mission that they want to accomplish which will 
help all of us.
    Ms. Bonamici. Terrific. Thank you very much. Mr. Truitt and 
Mr. Brandt, thank you for your testimony as well. I know you 
both mentioned the difficulty of finding highly skilled, 
qualified workers. And I suspect as we move toward more 
advanced manufacturing, that difficulty is going to grow. And 
Mr. Truitt, I understand you are here on behalf of the Chamber, 
and I want to applaud you for talking about the need for high-
skilled immigration reform and how it needs to be coupled with 
education reform. I think I couldn't agree with you more on 
that.
    But putting aside the immigration issue, what else can we 
do as government policymakers to improve the training of our 
domestic workforce to meet these growing advanced manufacturing 
needs?
    Mr. Bendis. I believe that continued support for STEM is 
extremely important and also looking for advanced workers. All 
of them don't need to have graduate degrees. I think the 
community colleges in America play a tremendous role in 
providing skilled workers, and I think they can actually help 
support the need for skilled workers as our advanced 
manufacturing needs occur because everybody doesn't need to be 
a Ph.D. or scientist. But I think also some of the major 
professional societies in America and associations need to work 
on this problem because it is not just a congressional or a 
federal problem. I think it is an industry problem which a lot 
of them are trying to address as well as to how do we increase 
the quality of our workforce in America to be able to compete 
on a global basis.
    Ms. Bonamici. Thank you very much, and I believe my time is 
expired. Thank you.
    Mrs. Biggert. Thank you. The gentleman from Illinois, Mr. 
Lipinski, is recognized for five minutes.
    Mr. Lipinski. Thank you, Madam Chairwoman. I have a couple 
questions here. First I want to thank everyone for their 
testimony here. Clearly we are all interested in what we can do 
to foster the competitive edge that our country has as our 
economy continues to struggle and people are asking the 
question. I keep saying this, although I don't think people 
want to voice it. Americans are saying where are our jobs going 
to come from, and I think certainly innovation is what we need 
to look to. On this Committee, one thing I want to especially 
focus on, and we have been focusing on, is ways of leveraging 
the Federal Government's investment in basic research to spur 
the creation of new jobs.
    If you are looking at this from an SBIR perspective, you 
could consider it to be Phase 0. We are talking about we have 
all these researchers in our universities, our national labs, 
who are doing all this great research, but they don't know how 
to start the process even trying to develop a product from that 
research that can create a new company, new jobs.
    Now, a couple of things we have done, the National Science 
Foundation has started a program called the Innovation Corps, 
or I-Corps, where research grant recipients can take what 
amounts to an entrepreneur course for scientists. In part, the 
corps teaches academic researchers how to develop a business 
model, solicit customer feedback and revise their products over 
and over to meet customer demands. This is based on decades of 
experience by entrepreneurs and venture capitalists in Silicon 
Valley. NSF has gone through one round of this so far and is 
about to do a couple more rounds of this. So it is open to 
anyone who has received an NSF grant.
    On the SBIR side, I was able to get language into the 
reauthorization bill that redirects $10 million of NIH's STTR 
funds for grants to universities and other research 
institutions to support proof of concept capabilities for 
researchers, that is, programs that help researchers that are 
attempting to found companies assess the marketability of the 
innovation and give them the tools they need to succeed in 
business. This is based on programs such as the one at 
University of Virginia, which has generated a five-to-one 
overall return on investment and new follow-on funding and a 
42-to-1 ROI for the top 10 percent of portfolio projects at 
UVA.
    So we have these two programs. I wanted to ask, first start 
with Mr. Bendis and then if anyone else has any comments, on I-
Corps, on essentially Phase 0, SBIR over at NIH. Are these good 
programs? Is there anything else you would recommend for this 
space, for what we can do to better get the great research 
being done into new products, new jobs?
    Mr. Bendis. The answer, both of them are good products, 
Congressman Lipinski. The I-Corps I think is an innovative way 
that we can look at identifying some potential scientists that 
have ideas that may be commercializable but we can get in the 
marketplace and find a way to give them some training.
    Phase 0 is an extremely important part of the overall SBIR 
portfolio of programs, and it is a good jumpstart program to 
look at true proof of concept. But if we look at ways that we 
want to improve these programs, or look at other programs to 
strengthen it, and I think prior to your coming in, we talked 
about the Phase III commercialization program for SBIR, of 
which we are strong proponents and believe there is a 
tremendous gap that needs to be addressed there.
    Second, the tech transfer offices in the federal labs 
generally are reactive, not proactive. That means that they 
basically do laboratory push with trying to push technology 
into the marketplace and rather than a market pull. What we 
have created is a very innovative program called an 
Entrepreneur in Residence program where we are placing a serial 
entrepreneur within the Office of Technology Transfer at NIH to 
be able to determine what industry's needs are and the market 
needs are today, rather than just identifying what good science 
is. We need to work hand in hand with these tech transfer 
offices from a market perspective, rather than just purely from 
a science and a laboratory perspective. And I think that is a 
tremendous program.
    Another program that is innovative in Maryland is called 
Innovate, and it is a program between the University of 
Maryland-Baltimore and Johns Hopkins where they take post-docs 
that have ideas, that have potential commercialization, and 
they work with them on a 12-month basis and educate them, 
basically, to determine whether or not they should be 
entrepreneurs, whether or not they have the capability to be an 
entrepreneur, or whether or not the idea is marketable. If they 
are not qualified at the end of that period, and say we don't 
want any part of entrepreneurship but the technology is good, 
it helps match up the technologies with potential entrepreneurs 
who can take it further.
    But everybody that is a scientist should not be a potential 
entrepreneur or develop a product. And we need to have balance 
in our research to where we have the advancement of knowledge, 
which is extremely important, to our congressional and the 
federal mission, but at the same time identify the low-hanging 
fruit where there is significant commercial potential and match 
them up with the resources, knowledge, and the potential 
capital that is necessary. And there are some good programs 
within the Federal Government to support that.
    Mr. Lipinski. Thank you, Mr. Bendis, for bringing those 
forward. Mr. Brandt.
    Mr. Brandt. If I may, I would submit that in recent years 
it is not only at the gestation stage but at the adolescent and 
maturation stage where we have seen a big change in the 
reduction and venture-backed initiatives that make their way 
through to the stage of going public. And in order for the 
venture community to be as effective as it once was in 
filtering through the ideas and commercial opportunities that 
began in the incubators or in academia, they need to know where 
there is an exit. And today they can sell to a bigger company 
which ordinarily means the departure of the entrepreneur. They 
don't have an exit, and that has sharply reduced, it appears, 
their number of investments that are nurturing and bringing 
companies up to a larger stage where they are employing and 
growing more people. But the high cost of being a public 
company and other obstacles to going public have very, very 
sharply reduced the number of IPOs and consequently the middle-
stage companies that prevailed a few years ago.
    Mr. Lipinski. Thank you. I yield back.
    Mrs. Biggert. The gentleman yields back. The gentleman from 
California, Mr. Rohrabacher, is recognized for five minutes.
    Mr. Rohrabacher. Thank you very much, and thank you very 
much to our very knowledgeable panel. Before I ask you some 
questions, let me predicate this on the fact that all of us on 
this side of the room are faced with a huge challenge, and that 
challenge is for the last three years our country has spent $5 
trillion more than we have taken in and that if we do not stop 
that, if we do not have some way to pull that back so we are no 
longer going into debt at such a high rate, our economy will 
collapse, the currency will collapse, the system will collapse. 
So I am predicating my comments on that before we get into the 
questions.
    Now, with that understanding, how we are going to get out 
of that depends on about what you are talking about. We have 
got to make sure that we develop the technology that we are 
capable of in this country, not only just develop it but put it 
in place and see that it is working, commercialize it so that 
it is developing, it is permitting us to do the things we need 
to in a cheaper and better and faster way that only new 
technology will permit us. In other words, $5 trillion in debt, 
we have got to produce the equivalent of $5 trillion worth of 
labor or focus and activity or wealth in our society.
    With that said, there are several different approaches. 
Some of the approaches we have heard today, like we just heard 
a litany of, are focused on very specific--say we have got to 
pick the low-hanging fruit, got to find those technologies that 
have the best chance of making it and making a contribution. 
Unfortunately, we have a focused approach, and you are relying 
on the bureaucracy or on government to do this, to select who 
is the low-hanging fruit. What happens is you end up with 
cronyism, and in the midst of that $5 trillion debt, a close 
examination of that will show that a substantial amount of 
money, hundreds of billions of dollars, are ending up in the 
pockets of cronies. Decisions that were made, ``Oh, yes, you 
have got a good project because you are my buddy.'' And we end 
up building factories in Finland, for example, with the 
stimulus package, or we end up just in time giving a solar 
energy company $250 million just before they go out of 
business.
    So what I would like to look at are the general policies 
which I believe is if you have a general field of policies in 
place, you look at those policies and find out what can make 
sure that an overall environment for the development of new 
technology is put into place, rather than relying on focused 
programs.
    So I am going to ask you about those general policies. We 
have a general policy that is represented by the FDA. We have a 
general policy that we are going to protect the public from 
people who are offering things that have not been thoroughly 
examined that might be harmful to them. Are we now protecting 
our people to death? Is the FDA--I know three or four examples 
myself of drugs and changes and innovations that the FDA has to 
approve that they have been sitting on because they are a 
bureaucracy. Do we need major FDA reform or some kind of 
restructuring or at least some sort of systematic attempt to 
make the FDA more efficient? Go right ahead, Dr. Cohen.
    Dr. Cohen. Thank you, Congressman. As I indicated earlier, 
I do believe that the system that we have in place now has many 
virtues, but it has become overly, if I may use the word, 
bureaucratic and too slow and too complex. And it needs to be 
streamlined. It needs to be put in a position where it can 
expedite development----
    Mr. Rohrabacher. Well, aren't we spending billions of 
dollars now that in the end, once something is approved, we 
figure out those billions of dollars were actually not 
necessary and perhaps time that we could be serving people who 
are suffering with a new technology, that now they won't be 
able to utilize this new technology or a new medicine? As I 
say, that is a cost. We are talking about wasting huge amounts 
of money.
    Dr. Cohen. You are speaking about the billions of dollars 
that are spent on FDA?
    Mr. Rohrabacher. FDA approval, for example.
    Dr. Cohen. Yeah. It is a question that is beyond my ability 
to answer because I think you are asking a societal question, 
and at the end of the day, society, and in particular the 
patients who are affected and their loved ones, need to come to 
consensus over time over what risk-benefit ratio they are 
willing to accept. Because, clearly, I think we all agree that 
there needs to be regulation to protect the public and ensure 
that what my industry is putting out there is, in fact, at some 
minimal level of safety and effectiveness that we all want and 
accept.
    Having said that, so I believe we need a strong FDA. I do 
believe we need to invest in the FDA because it helps all of 
us. It helps me to develop the right kind of medicines.
    Mr. Rohrabacher. We need an FDA that functions. We need a 
patent system so that----
    Dr. Cohen. Correct.
    Mr. Rohrabacher [continuing]. People who are inventing new 
technologies will be protected and a copyright system and 
people who are coming up with new medicines and new 
technologies--let me ask one question, just informationally 
here. The President's health care plan, I am not sure about 
this detail. I heard that there was a new tax on health 
technology in the new bill. Is that right? There is not? I am 
asking you. I am not sure.
    Mr. Bendis. I am not positive of that, but I think there 
has been some confusion related to that issue.
    Mr. Rohrabacher. Yeah, because I saw a list of things that 
people are saying that would need to be fixed in the bill, and 
one was that we are actually discouraging health care 
technology because we are taxing new health care technology by 
two percent or something. If we are doing that, that is insane 
because if you have new health care technology, you might be 
saving more than that.
    Thank you, Madam Chairman.
    Mrs. Biggert. Gentleman's time has expired. I would like to 
thank all the witnesses for their valuable testimony. You have 
been a great panel. And I would like to thank the Members for 
their questions, and the Members of the Subcommittee may have 
additional questions for the witnesses, and we would ask you to 
respond in writing. And the record will remain open for two 
weeks for additional comments and statements from Members.
    With that, the witnesses are excused, and thank you all for 
coming, and this hearing is now adjourned.
    [Whereupon, at 11:30 a.m., the Subcommittee was adjourned.]

                   Answers to Post-Hearing Questions

Responses by Mr. Ron Cohen

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Responses by Mr. Mick Truitt

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Responses by Mr. Thomas M. Brandt, Jr.





Responses by Mr. Richard Bendis

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                               Appendix 2

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                   Additional Material for the Record



              TechAmerica: Technology Roadmap for America

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