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






                 DEPARTMENTS OF LABOR, HEALTH AND HUMAN

               SERVICES, EDUCATION, AND RELATED AGENCIES

                        APPROPRIATIONS FOR 2013

_______________________________________________________________________

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS
                             SECOND SESSION
                                ________
  SUBCOMMITTEE ON THE DEPARTMENTS OF LABOR, HEALTH AND HUMAN SERVICES, 
                    EDUCATION, AND RELATED AGENCIES
                    DENNY REHBERG, Montana, Chairman
 JERRY LEWIS, California            ROSA L. DeLAURO, Connecticut
 RODNEY ALEXANDER, Louisiana        NITA M. LOWEY, New York
 JACK KINGSTON, Georgia             JESSE L. JACKSON, Jr., Illinois
 KAY GRANGER, Texas                 LUCILLE ROYBAL-ALLARD, California
 MICHAEL K. SIMPSON, Idaho          BARBARA LEE, California
 JEFF FLAKE, Arizona                
 CYNTHIA M. LUMMIS, Wyoming         
                                    
 NOTE: Under Committee Rules, Mr. Rogers, as Chairman of the Full 
Committee, and Mr. Dicks, as Ranking Minority Member of the Full 
Committee, are authorized to sit as Members of all Subcommittees.
                 Susan Ross, Kevin Jones, John Bartrum,
              Allison Deters, Jennifer Gera, and Lori Bias,
                           Subcommittee Staff
                                ________

                                 PART 6
                                                                   Page
 Budget Hearing for Department of Health and Human Services--
Secretary.........................................................    1
 Budget Hearing for Department of Health and Human Services--NIH..  173



[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



                                ________

         Printed for the use of the Committee on Appropriations













                 DEPARTMENTS OF LABOR, HEALTH AND HUMAN

               SERVICES, EDUCATION, AND RELATED AGENCIES

                        APPROPRIATIONS FOR 2013

_______________________________________________________________________

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS
                             SECOND SESSION
                                ________

  SUBCOMMITTEE ON THE DEPARTMENTS OF LABOR, HEALTH AND HUMAN SERVICES, 
                    EDUCATION, AND RELATED AGENCIES
                    DENNY REHBERG, Montana, Chairman
 JERRY LEWIS, California            ROSA L. DeLAURO, Connecticut
 RODNEY ALEXANDER, Louisiana        NITA M. LOWEY, New York
 JACK KINGSTON, Georgia             JESSE L. JACKSON, Jr., Illinois
 KAY GRANGER, Texas                 LUCILLE ROYBAL-ALLARD, California
 MICHAEL K. SIMPSON, Idaho          BARBARA LEE, California
 JEFF FLAKE, Arizona                
 CYNTHIA M. LUMMIS, Wyoming         
                                    

 NOTE: Under Committee Rules, Mr. Rogers, as Chairman of the Full 
Committee, and Mr. Dicks, as Ranking Minority Member of the Full 
Committee, are authorized to sit as Members of all Subcommittees.
                 Susan Ross, Kevin Jones, John Bartrum,
              Allison Deters, Jennifer Gera, and Lori Bias,
                           Subcommittee Staff
                                ________

                                 PART 6
                                                                   Page
 Budget Hearing for Department of Health and Human Services--
Secretary.........................................................    1
 Budget Hearing for Department of Health and Human Services--NIH..  173



[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



                                ________

         Printed for the use of the Committee on Appropriations
                                ________

                     U.S. GOVERNMENT PRINTING OFFICE

 75-968                     WASHINGTON : 2012

                       COMMITTEE ON APPROPRIATIONS

                    HAROLD ROGERS, Kentucky, Chairman

 C. W. BILL YOUNG, Florida \1\            NORMAN D. DICKS, Washington
 JERRY LEWIS, California \1\              MARCY KAPTUR, Ohio
 FRANK R. WOLF, Virginia                  PETER J. VISCLOSKY, Indiana
 JACK KINGSTON, Georgia                   NITA M. LOWEY, New York
 RODNEY P. FRELINGHUYSEN, New Jersey      JOSE E. SERRANO, New York
 TOM LATHAM, Iowa                         ROSA L. DeLAURO, Connecticut
 ROBERT B. ADERHOLT, Alabama              JAMES P. MORAN, Virginia
 JO ANN EMERSON, Missouri                 JOHN W. OLVER, Massachusetts
 KAY GRANGER, Texas                       ED PASTOR, Arizona
 MICHAEL K. SIMPSON, Idaho                DAVID E. PRICE, North Carolina
 JOHN ABNEY CULBERSON, Texas              MAURICE D. HINCHEY, New York
 ANDER CRENSHAW, Florida                  LUCILLE ROYBAL-ALLARD, California
 DENNY REHBERG, Montana                   SAM FARR, California
 JOHN R. CARTER, Texas                    JESSE L. JACKSON, Jr., Illinois
 RODNEY ALEXANDER, Louisiana              CHAKA FATTAH, Pennsylvania
 KEN CALVERT, California                  STEVEN R. ROTHMAN, New Jersey
 JO BONNER, Alabama                       SANFORD D. BISHOP, Jr., Georgia
 STEVEN C. LaTOURETTE, Ohio               BARBARA LEE, California
 TOM COLE, Oklahoma                       ADAM B. SCHIFF, California
 JEFF FLAKE, Arizona                      MICHAEL M. HONDA, California
 MARIO DIAZ-BALART, Florida               BETTY McCOLLUM, Minnesota
 CHARLES W. DENT, Pennsylvania            
 STEVE AUSTRIA, Ohio                      
 CYNTHIA M. LUMMIS, Wyoming               
 TOM GRAVES, Georgia                      
 KEVIN YODER, Kansas                      
 STEVE WOMACK, Arkansas                   
 ALAN NUNNELEE, Mississippi               
   
 ----------
 \1\Chairman Emeritus     

               William B. Inglee, Clerk and Staff Director

                                  (ii)

 
DEPARTMENTS OF LABOR, HEALTH AND HUMAN SERVICES, EDUCATION, AND RELATED 
                    AGENCIES APPROPRIATIONS FOR 2013
_______________________________________________________________________

                                            Tuesday, March 6, 2012.

 BUDGET HEARING FOR DEPARTMENT OF HEALTH AND HUMAN SERVICES--SECRETARY

                                WITNESS

HON. KATHLEEN SEBELIUS, SECRETARY OF HEALTH AND HUMAN SERVICES
    Mr. Rehberg. Madam Secretary, good afternoon, and welcome 
back to the House. Sorry we are late.
    Before we begin our discussions about the Fiscal Year 2013 
budget request, I want to raise a number of financial 
management issues related to HHH, including the more than $1.4 
billion Anti-Deficiency Act violations submitted to Congress 
last July.
    For those who may not be familiar with an Anti-Deficiency 
Act violation, the act and related funding statutes restrict in 
every possible way the expenditures, and expenses, and 
liabilities of the government so far as executive offices are 
concerned to specific appropriations for each fiscal year. In 
general, agencies that violate funding restrictions violate the 
Anti-Deficiency Act.
    On July 14th, 2011, HHS notified Congress that it had 
identified 47 out of 176 contracts, slightly less than 30 
percent, which had an ADA violation. These violations primarily 
related to a lack of applying general appropriations and 
contracting principles and laws properly.
    This small identified violations in the HHS General 
Department Management Account, Agency for Health Care Research 
and Quality, the Centers for Disease Control, various 
components of the National Institutes of Health, and the 
Substance Abuse and Mental Health Services Agency.
    The notice stated a substantial lack of understanding 
throughout the department of the legal limits on Federal 
contracts, in particular, contracts that required effort or 
deliverables over a period of several years.
    The committee consulted with HHS Office of Inspector 
General, and understands one contributing cause is the lack of 
legal review of contracts, grants, and similar funding 
mechanisms throughout HHS. The violations seem to indicate 
either a fundamental misunderstanding of contract and 
appropriations principles, or deliberate disregard for the law.
    A number of other improper financial management concerns 
have been raised recently. For example, a February 6th, 2012 
joint letter to the Secretary from the Senate Finance Committee 
and House Committee on Ways and Means summarizes a number of 
issues supported in a recent independent audit by Ernst & Young 
on HHS' Fiscal Year 2011 financial statements. Some of the 
issues highlighted in this letter include Anti-Deficiency Act 
violations, so-called mystery money, funds that seem to 
disappear in the Fiscal 2011 financial audit, and HHS processes 
that date back to the 1980s.
    These themes are certainly echoed on the July 14th, 2011 
ADA notice to Congress. We understand the ADA violations date 
back to as far as 2002, and may go back several 
Administrations. However, blame is not the issue; it is 
accountability and corrective action.
    Agencies must report and correct ADA violations according 
to Section 1351 of Title 31 of the U.S. Code. The agency shall 
report immediately to the President and Congress all relevant 
facts and a statement of actions taken. A copy of each report 
shall also be transmitted to the Comptroller General on the 
same date the report is transmitted to the President and 
Congress.
    The agency must note if they suspect that the violations 
was knowing and willful, provide significant information on the 
appropriation or fund account for each violation, provide the 
name and position of the officers or employees responsible for 
the violation, and include all the facts pertaining to 
violation and action taken, including any new safeguards 
provided to prevent reoccurrence of the same type of violation.
    The HHS notice from last July, however, asserts it will not 
take corrective adjustments to these accounts, that the HHS' 
own judgment are that these corrective adjustments would have 
serious programmatic repercussions. A self-determination of 
this magnitude by HHS is a precedent of unparalleled 
proportions, in my opinion.
    The Comptroller General in 1937 once expressed the 
principle HHS and the Administration should follow, and it is 
equally applicable here. Where a payment is prohibited by law, 
the utmost good faith on the part of the officer, either in 
ignorance of the facts or in disregard of the fact, in 
purporting to authorize the incurring of an obligation, the 
payment of which is so prohibited, cannot take the case out of 
the statute. Otherwise, the purported good faith of an officer 
could be used to nullify the law.
    We have consulted with GAO on the matter and understand 
that GAO advises agencies in these circumstances to adjust 
their accounts accordingly, and then, if they do not have 
enough budget authority to do so, they should report the ADA 
violation. They also advise agencies to record an obligation 
where they neglected to do so, and if they do not have enough 
budget authority to do so, report an ADA violation. If the 
impact of the violation results in programmatic shortfalls, HHS 
has an avenue to request funds to cover any shortfall through a 
supplemental or deficiency appropriation request in the notice.
    Madam Secretary, I call upon HHS to go back and do 
everything it can to lawfully do to correct or mitigate the 
financial effects of the ADA violation, and make the 
appropriate adjustments. If a supplemental or deficiency 
appropriation is needed, it should be requested. We cannot 
ignore the law and due process.
    I am frustrated it took more than two years to report 
violations to Congress. This does not meet my definition of 
``immediate.'' The notice to the Comptroller General was even 
further delayed. It did not occur until after our committee 
contacted GAO to discuss the violations in September.
    The requirement of naming the accountable is not in the 
notice. It is surprising that HHS' leadership does not hold 
itself accountable. Our citizens expect Federal agencies, 
especially the one that desires to run the Nation's health care 
system and hold others accountable with mandates, to stand up 
and identify an accountable party for each violation.
    I was pleased HHS has updated some procedures and 
implemented one-time training for its contracting, finance, and 
budget personnel. Given the systematic and cultural 
entrenchment implied in the notice, HHS should ensure all 
senior officials get training. Further, I suggest HHS should 
require all contracts, grants, cooperative agreements, and 
similar actions to receive legal review, as suggested by the 
HHS OIG to ensure they do not violate ADA and other funding 
restrictions.
    In addition, I believe HHS should have its OIG immediately 
and for the next several years conduct a statistically sample 
of all contracts, grants, and similar agreements, starting with 
Fiscal Year 2010, vehicles to ensure the training is effective 
and that no ADA or other funding restriction violations occur.
    Madam Secretary, I would like an update within 30 days on 
the implementation strategies and status of these suggestions.
    Finally, I understand Congress may expect another HHS ADA 
violation in the near future related to a pay restriction 
violation, and I do appreciate the advance notice. My 
understanding is the potential violation primarily impacts NIH 
as a limited number of employees were paid more than allowed by 
law. I look forward to a speedy notice with details to allow 
the committee more understanding on the issue.
    I am, however, surprised the budget request does not 
include financial management corrective action initiatives, 
given the morass of issues. Therefore, Madam Secretary, I would 
like you to provide within 30 days a detailed 3-year corrective 
action initiative to rectify HHS's financial system and prevent 
ADA violations.
    Please ensure the annual cost for operating division is 
identified for each year. The committee must be prepared to 
take steps to strengthen financial stewardship throughout HHS.
    My desire was to start this hearing out on a more positive 
note. Unfortunately, our oversight and stewardship 
responsibility cannot be ignored. The confidence of the 
American public trust does matter.
    I yield to my ranking member, Ms. DeLauro, for an opening 
statement.
    Ms. DeLauro. Thank you very much, Mr. Chairman, and thank 
you all, and good afternoon. Let me thank the chairman for 
convening this important hearing.
    I want to say a thank you to our witness today, Secretary 
Kathleen Sebelius. Madam Secretary, thank you once again for 
coming before our subcommittee. Thank you for all of your hard 
work in implementing the Affordable Care Act, including the 
recently announced preventive measures for women to be covered 
without a co-pay. It is heartening to work with an 
Administration that understands and respects women's health 
needs.
    I would just make a note that I think I am correct that the 
Anti-Deficiency Act violations that were reported occurred over 
a long period of time starting back in 2002, and I am sure what 
the Secretary will do is you will lay out for us the actions 
that you have taken to correct the underlying problems and make 
sure that similar violations do not happen again.
    As we consider the President's budget proposal for 2013, we 
should also bear in mind the context in which it comes. These 
new proposals arrive after 2 consecutive rounds of budget 
cutting. Under the 2012 legislation enacted in December, 
appropriations for the Department of HHS are $3.4 billion less 
than the comparable level two years earlier. That is the cut in 
actual dollar terms without taking into account the rising 
costs, growing population, or unusually high levels of need.
    Some very important programs and services have been cut: 
the Low Income Home Energy Assistance Program, or LIHEAP, has 
been reduced by $1.6 billion, almost one-third, between 2010 
and 2012. This has happened at a time when heating oil prices 
are at record levels, other energy costs remain high, and the 
lingering effects of the recession leave many people still in 
need of help with their winter heating bills.
    Another key priority is medical research at the NIH, the 
National Institutes of Health, to find better treatments and 
cures for diseases like cancer and Alzheimer's. While we were 
able to provide a modest increase for NIH in 2012, it was not 
enough to reverse the cut enacted for 2011. And due to the 
combination of reduced funding and rising costs, the number of 
research project grants made by the NIH is now at the lowest 
level since 2001.
    For the Center for Disease Control, appropriations have 
been reduced by $735 million over the past two years, meaning 
cut backs in capacity to detect and control epidemics, and to 
reduce the prevalence and burden of both chronic and infectious 
diseases.
    Programs that help to train doctors, nurses, and other 
health care providers have now taken a $90 million reduction 
since 2010. Mental health programs have been cut by about $50 
million.
    Yes, the Department of Health and Human Services has 
received additional funding through the Affordable Care Act for 
some of the programs that receive appropriations in this bill, 
though the ACA funding is not enough to make up for the loss in 
appropriations. But that funding was intended to supplement and 
expand funding for programs that increase the availability of 
health care and preventive services, not to simply allow 
equivalent cuts in regular appropriations.
    And we are now facing the prospect of new rounds of much 
deeper cuts. There is the threat of sequestration under the 
Budget Control Act, which could mean an additional 8\1/2\ 
percent reduction in HHS appropriations for 2013.
    We also hear that some on the majority side do not consider 
the current caps stringent enough, and want to use the budget 
resolution to reduce those limits still further. The contenders 
for the Republican presidential nomination seem to be trying to 
outdo each other with budget plans calling for huge, though 
mostly unspecified, future spending cuts. If any of these 
possibilities materialize, the past cuts I have been describing 
will look small by comparison.
    So, that is the context for the 2013 budget we are 
discussing today, a proposal which involves a small further 
reduction in overall HHS appropriations. There are some good 
things in the proposal. For example, there is a $325 million 
increase for child care, a critical need for working families. 
There is also funding to meet the department's responsibilities 
in operating Medicare and implementing the Affordable Care Act. 
And there are small, but important, increases for food safety 
and control of health-care-acquired infections.
    There are also some things in the President's budget that 
cause me concern. There is yet another reduction to LIHEAP, 
this one amounting to $452 million. There is a renewed proposal 
to cut the Community Service Block Grant almost in half, and 
there are additional rounds of cuts to the CDC, to mental 
health and substance abuse programs, and to the children's 
hospital graduate medical education and other health 
professions training programs. I very much hope that we will be 
able to find ways to alleviate and to avoid these reductions.
    Secretary Sebelius, I look forward to your testimony and to 
a discussion of these and other issues.
    Thank you, Mr. Chairman.
    Mr. Rehberg. I understand that Mr. Rogers is coming, is 
going to want to make an opening statement. We will do it after 
the Secretary's testimony if he is here in time. Mr. Dicks.
    Mr. Dicks. Should we wait until then?
    Mr. Rehberg. Okay.
    Mr. Dicks. Yeah. The only thing I wanted to say is welcome 
the Secretary here today. I would like to thank you for your 
help and giving attention to the Medicare geographic and 
disparity problem. I understand phase 2 of Institute of 
Medicine Study is due out in the spring. I hope that we will 
see some actionable recommendations on how to change the 
geographic adjusters to ensure they reflect accurate data and 
result in better access to care for seniors. I know we can 
count on you and your leadership in ensuring appropriate 
policies are implemented to resolve the geographic disparity 
issue.
    And that is all I have, Mr. Chairman. I want to associate 
myself with the comments of the ranking member, Rosa DeLauro. 
And, you know, last year we were able to work out things. It 
started bad, but it came out pretty much okay. And I know we 
are concerned about this year's, but I am also very concerned 
about avoiding sequestration.
    Thank you.
    Mr. Rehberg. Thank you, Mr. Dicks. And, again, welcome, 
Secretary Sebelius. You may proceed.
    Secretary Sebelius. Okay. That is on? Okay, thank you. That 
is why I asked.

                           Opening Statement

    Thank you for having me here today. I just want to start by 
saying, Mr. Chairman, we share your concerns about the Anti-
Deficiency Act violations. We did report them to you eight 
months ago. We have been working closely not only with our 
Office of Inspector General to retrain people and set up new 
procedures, but we are also working closely with the Government 
Accounting Office to put in place corrective action. I will be 
happy to submit a full report for your review, and want to 
assure you that although the grants were not structured 
appropriately, the dollars paid out were not in excess of the 
grant amounts. And we take this very seriously. We want to 
correct it in the future. It clearly was a process that has 
been underway for years. That is not an excuse, but to assure 
you that I will certainly respond.
    The Budget before us today helps create an American economy 
built to last by strengthening our Nation's health care, 
supporting research that will lead to tomorrow's cures, and 
promoting an opportunity for America's children and families so 
everyone has a fair shot to reach their full potential. The 
Budget makes the investments that we need right now while 
reducing the deficit in the long term to make sure that the 
programs that millions of Americans rely on will be there for 
generations to come.
    And I look forward to answering your questions about the 
Budget, but first I want to share some of the highlights.
    The entire discretionary budget for our department is just 
under $77 billion, and this Committee oversees almost $70 
billion of those dollars.
    Over the last two years we have worked to deliver the 
benefits of the Affordable Care Act to the American people. 
Thanks to the law, more than 2 and a half million additional 
young Americans are already getting health coverage through 
their parents' plans. More than 25 million seniors have taken 
advantage of the free recommended preventive services under 
Medicare, and small business owners are getting tax breaks on 
their health care bills that allow them to hire more employees.
    This year we will build on that progress by continuing to 
support states as they work to establish affordable insurance 
exchanges by 2014. Once these competitive marketplaces are in 
place, they will ensure that all Americans have access to 
quality, affordable health coverage.
    Because we know that the lack of insurance is not the only 
obstacle to care, our Budget also invests in our health care 
workforce. The Budget supports training more than 7,100 primary 
care providers and placing them where they are needed most.
    We also invest in America's network of community health 
centers. Together with fiscal year 2012 resources, our Budget 
creates more than 240 new access points for patient care, along 
with thousands of new jobs. All together, health centers will 
provide access to quality for 21 million people, 300,000 more 
than were served last year.
    This Budget also continues our Administration's commitment 
to improving the quality and safety of care by wisely spending 
our health dollars. This means investing in health information 
technology. It also means funding the first of its kind CMS 
Innovation Center, which is partnering with physicians, nurses, 
hospitals, private payers, and others, who have accepted the 
challenge to develop a new sustainable health care system.
    In addition, the HHS Budget ensures that 21st century 
America will continue to lead the world in biomedical research 
by maintaining funding for the National Institutes of Health. 
At the same time, the Budget recognizes the need to set 
priorities, make difficult tradeoffs, and ensure we use every 
dollar wisely. That starts with continuing support for 
President Obama's historic push to stamp out waste, fraud, and 
abuse in the health care system.
    Over the last three years, every dollar we have put into 
health care fraud and abuse control has returned more than $7. 
Last year alone, these efforts recovered more than $4 billion, 
which is now in the Medicare Trust Fund and returned to 
Medicaid throughout the States. And last week, our 
Administration arrested the alleged head of the largest 
individual Medicare and Medicaid fraud operation in history. 
Our Budget builds on those efforts by giving law enforcement 
the technology and data to spot perpetrators early and prevent 
payments based on fraud from going out in the first place.
    The Budget also contains more than $360 billion in health 
savings over 10 years, most of which comes from reforms to 
Medicare and Medicaid. These are significant, but they are 
carefully crafted to protect beneficiaries. For example, we 
have proposed significant savings in Medicare by reducing drug 
costs, a plan that also puts money back in the pockets of 
Medicare beneficiaries.
    The Budget makes smart investments where they will have the 
biggest impact, and puts us all on a path to build a stronger, 
healthier, and more prosperous America for the future.
    Thank you again, Mr. Chairman, and I look forward to our 
conversation.
    [The information follows:]



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                              SECTION 220

    Mr. Rehberg. Great. Thank you very much. We will begin our 
questioning then at this time.
    And, Madam Secretary, Section 220 of the Fiscal 2012 
omnibus requires reasonable transparency and sharing of 
information with the public through a website on how the $1 
billion prevention and public health fund will be awarded and 
spent. In the 2011 State of the Union, the President said, ``In 
the coming year, we will also work to rebuild people's faith in 
the institution of government. Because you deserve to know 
exactly how and where your tax dollars are being spent, you'll 
be able to go to the website, get that information for the 
first time in history.''
    In fact, in the Fiscal Year 2012 omnibus, signed into law 
by the President on December 23rd of 2011, it included a 
provision making this promise a reality. I was quite surprised 
to note, however, that the President's Fiscal Year 2013 budget 
proposes to eliminate a reasonable transparency requirement for 
the Prevention and Public Health Fund. The request would remove 
Section 220 in its entirety.
    How does eliminating the public reporting website fulfill 
the President's commitment to transparency? In my mind, it does 
just the opposite. Can you help us understand the policy behind 
this proposal?
    Secretary Sebelius. Well, Mr. President--I mean, sorry, Mr. 
Chairman.
    Mr. Rehberg. That is okay. [Laughter.]
    Not yet.
    Secretary Sebelius. It is not typical for an Administration 
Budget to give ourselves direction of how to report. I can tell 
you that we take transparency very seriously. That is why this 
morning the website recommended in the last year's fiscal year 
2012 Budget is up and running, and so you will be able to go to 
the website and see very clearly where tax dollars are being 
spent. We eliminated the reporting requirement, but fully 
intend to comply with the website for ongoing budgets.

                   BUDGET RESOURCES AND PUBLIC HEALTH

    Mr. Rehberg. Okay. The President's request appears to make 
a policy shift from supporting using discretionary funds for 
traditional public health programs in favor of what I would 
call health access programs. For example, the President reduces 
the Centers for Disease Control by the $668 million, while 
increasing the Centers for Medicare and Medicaid by $1 billion 
to implement exchanges.
    Although the CDC does get increases from other resources, 
like the Public and Prevention Health Fund, an evaluation set-
aside, such that the total program level is only a reduction of 
$222 million, these reductions are all primarily from public 
health programs.
    Another interesting observation I make regarding the 
President's request is that what appears to be a cut in a 
number of programs that provide support for children, women, 
and minority populations. For example, the following programs 
all reflect reduced funding in the President's budget: CDC's 
birth defects, development, disability and health programs, 
HHS's Office of Minority Health, HHS's Office of Women's 
Health, HHS' Office of Civil Rights, elimination of the racial 
and ethical approaches to community health at CDC, and an 
unanticipated reduction in NIH's National Children's Health 
Study, Children, Youth, Women, and Families HIV/AIDS programs. 
Please explain your apparent disproportional shift from women, 
children, and minority programs and the anticipated impact. I 
assume you believe the request provides sufficient support to 
public health activities, but please describe what public 
health factors you considered in deciding on the appropriate 
level of resources to shift out of public health.
    Secretary Sebelius. Well, Mr. Chairman, as you know, this 
is a challenging budget atmosphere. The President requested all 
of his Cabinet officers to make strategic choices and determine 
the best use of our resources. I can assure you that there is 
no reduction in our interest in women, children, and minority 
health programs. In fact, I can assure this Committee that more 
activity and more focus has been directed toward these programs 
in the last three years than probably in the last several 
decades.
    What we have done is ask each of our agency directors, 
including Dr. Frieden at the Centers for Disease Control and 
Prevention, my Assistant Secretary on Health, and other leaders 
to identify program duplication ideas, to efficiently reach the 
population served, and flexibility to States so they can 
address the target populations. In a number of the cases that 
you mentioned, we are eliminating programs that either sat on 
top of others or did not allow the effective use of resources.
    The Budget includes increases in a whole variety of 
programs aimed at children and families. The Budget increased 
child care programs by $825 million so that the numbers are 
increasing. HRSA health centers are increasing their output to 
sites and providers so that we will serve additional women, 
children, and families. The CDC vaccines for children program 
is increased. The IHS program, which actually serves some of 
the most vulnerable families in the country, is increased--the 
Agency for Children and Family Head Start Program. So, we are 
trying to be strategic and trying to use our resources as 
efficiently as possible.
    Mr. Rehberg. Thank you. I will try and hold pretty tight on 
the time, myself included. And so, I apologize if I gavel you 
all down or you, Secretary Sebelius. But just so everybody gets 
a fair shot.
    Thank you, Ms. DeLauro. And, Mr. Rogers, if you would like 
to give an opening statement.

                           MANDATORY SPENDING

    Mr. Rogers. Thank you, Mr. Chairman. I apologize for being 
tardy.
    Madam Secretary, welcome.
    Secretary Sebelius. Thank you, Mr. Chairman.
    Mr. Rogers. This is truly a historic time in our country's 
history. I do not have to tell you that we are borrowing 40 
cents on every dollar we spend. But it is high time, and the 
people have told us this. It is high time that we get serious 
about reducing spending for the debt and the record-setting 
deficit that we are running every year, now four years running, 
of the trillion dollars plus, running our debt now to some $16 
trillion.
    Fully 89 percent of your budget is mandatory spending. Of 
the total budget that you have proposed, $604.4 billion, the 
mandatory portion of that is 89 percent, which is outside the 
jurisdiction of this committee, subcommittee. It is automatic 
spending that comes out of the Treasury whether we act or not.
    I think the onus is on the Administration to tell us how we 
can stabilize these out of control entitlement programs. I see 
an old proposal in your budget request to put some sort of 
discipline on the wildly growing mandatory side of the budget.
    We have known about these shortcomings for years now, and 
yet on top of this spending sits the President's controversial 
health care law. Regardless of whether you support or oppose 
the Affordable Care Act--many Americans do not--the reality is 
Obamacare is a budget buster. The CBO has reported that this 
law will cost billions more than we were told when we voted two 
years ago, but I will not be surprised to see even these 
ominous estimates skyrocket once the rosy assumptions utilized 
by CBO do not materialize.
    What is potentially more egregious than the vast increases 
in mandatory spending created by this law are new slush funds 
created in the Treasury outside the control of Congress and the 
staunch oversight of this committee. Meanwhile, the 
unprecedented layers of Federal bureaucracy created by this law 
and the countless mandates on employers, insurance providers, 
doctors, and patients, have increased health insurance premiums 
that families pay at a time when long-term unemployment remains 
at historical highs, and family budgets are squeezed by higher 
gas and electric prices.
    Certainly I hope you recognize the peril and the 
unsustainability of this constant rise in mandatory spending, 
particularly where Medicare is concerned. We have been told 
that Obamacare will help alleviate the looming shortfall in 
Medicare through various new programs, boards, payment schemes, 
that will bring savings to the program. However, the CBO 
recently reported that demonstration projects aimed at 
achieving savings in the health care sphere have historically 
failed to do so, and that the payment reductions envisioned in 
this law likely will not be put in place.
    Yet even if savings are achieved through these various 
schemes, these funds have already been earmarked to pay for new 
entitlements created by Obamacare, not to save Medicare. You 
cannot count that money twice.
    These are not trivial issues. If mandatory spending is not 
brought under control, these programs will fold, and the vital 
needs they address will go unmet.
    I think it is critical that we stop living in a fantasy 
land where the money never runs out.
    This past calendar year, this committee passed two Fiscal 
Years of appropriations. That has never happened before, to my 
knowledge. What has not happened since World War II is we cut 
discretionary spending two years in a row. That is a real 
rarity.
    The discretionary spending is not the problem. If we zeroed 
out every penny we appropriate of the discretionary budget, we 
would still be in the red every year because of the mandatory 
entitlement spending. And yet we blindly go ahead without 
tackling the problem, and it is a growing problem. And unless 
we deal with it, I am afraid for our future.
    I wonder what you think about it.
    Secretary Sebelius. Well, Mr. Chairman, I think that in the 
two years since the Affordable Care Act has been passed, we 
have some good news to report. I share your concerns about the 
deficit looming for our children and grandchildren, and also 
about the survival of entitlement programs. And as you know, 
there are two very different approaches. One approach is to 
address the entitlement programs. This approach would fix the 
dramatic rise in underlying health care costs, which not only 
helps the Federal government's budget, but it also helps 
private payers. And, the other is to blow up the programs as we 
know them, and shift the costs on to beneficiaries. We have 
chosen to go down the earlier described path.
    And what I can tell you is that the Budget figures for the 
Affordable Care Act, which is fully paid for, does not add to 
the deficit, and will save $100 billion in the first decade, 
and a trillion dollars in the second decade.
    We are seeing good news on the Medicare front, as 
predicted. The spending of Medicare prior to the passage of the 
Affordable Care Act was rising at the rate of about 8 percent, 
just under 8 percent a year. We are now seeing the growth rate 
for the last two years slow to just over 6 percent. That is 
good news, and that is not only money going back to the 
Medicare Trust Fund, but it is money in the pockets of 
beneficiaries. The program is stronger than ever. This budget 
adds an additional couple of years to the Trust Fund life.
    But we certainly support the initiative of working with 
Congress to preserve the important promises made to 
beneficiaries about 45 years ago; that we will provide security 
for seniors and the most disabled citizens in this country as 
they move forward. We will take advantage of what we think are 
incredible opportunities to change the trajectory of the 
overall health spending in this country because it is not just 
the public programs going broke, but it is the health care 
system that is bankrupting business and private payers alike.
    Mr. Rogers. Thank you, Mr. Chairman.
    Mr. Rehberg. I am going to try to get back to a little bit 
of regular questioning. Ms. DeLauro.

                   AFFORDABLE CARE ACT IMPLEMENTATION

    Ms. DeLauro. Thank you, Mr. Chairman.
    Madam Secretary, as you started to outline, there are a 
number of important protections for patients and consumers in 
the Affordable Care Act, and those have already taken effect. 
And I know your department has been working with the States to 
implement that.
    I am going to ask you about the status of the 
implementation efforts and the main provisions that are now in 
place and working, and what results have been achieved so far.
    I will ask the follow-up now that there have been repeated 
attempts in this House to cut off funding for the Affordable 
Care Act implementation. And if such a funding prohibition were 
to become law, what would happen to the department's ability to 
implement and enforce rules, such as the ban on excluding 
children's preexisting health conditions from insurance 
coverage?
    Now, I will say that, but I also wanted to commend to my 
colleagues something called The Affordable Care Act is Already 
a Success. I know the chairman asked about women and children. 
I think one ought to take a look at the $14 million in school-
based health centers that increased the number of children 
served by about 50 percent, 350 new community health care 
services, 2.5 million young adults who gained health care, who 
got insurance coverage. And millions of women who are taking 
advantage of the no-cost-sharing preventive health services in 
2011 will have access to women's preventive health services, 
and including those that would be effective in August.
    There is a wonderful chart, which I would include in the 
record, which shows the 54 million Americans estimated to be 
receiving expanded preventive services coverage under the 
Affordable Care Act.
    [The information follows:]


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    
    Ms. DeLauro. And you will see, quite frankly, that children 
and women are taking advantage of the new efforts that have 
gone into effect.
    Madam Secretary, let me ask you to comment on the status of 
the implementation, the main provisions in place, the results 
so far, and then what would happen if the funding is gone as 
some of our colleagues would like to see enacted.
    Secretary Sebelius. Well, Ms. DeLauro, I think you have 
outlined some of the changes that have taken place, but let me 
put it in a couple of buckets.
    There are some fundamental changes that have started to 
take place in the insurance market. Companies can no longer 
deny children with preexisting health conditions the ability to 
be in the insurance market. That is great news for parents. 
Children and young adults can stay on their parents' plan up to 
age 26, and we know that about 2 and a half million of those 
young adults have taken advantage of that. Companies can no 
longer dump somebody out of the market because of a technical 
mistake on their application; the so-called rescissions are now 
illegal. Insurance companies will no longer be able to put a 
lifetime limit on benefits, and while this affects a very small 
number of people, this situation is a life and death situation 
when these limits are reached in the midst of a health care 
treatment.
    Preventive services and new health plans are now available 
without co-pays or co-insurance, and that not only is true for 
the private market, but it is true for Medicare. And we know 
that millions of people are taking advantage of getting the 
preventive colon cancer screenings, mammograms and preventive 
checkups that they need.
    Seniors are now seeing a 50 percent discount in their brand 
name prescription drugs when they hit the so-called donut hole, 
and that has impacted millions of seniors this year with real 
money in their pockets. We have new rates that have been 
negotiated for Medicare advantage plans thanks to the tools 
that we have gotten. So, more people are enrolling, but the 
rates are down, which is, again, good news for seniors.
    In addition, new community health center access sites are 
being developed. And, that is in a little under two years.

                AFFORDABLE CARE ACT FUNDING PROHIBITION

    Ms. DeLauro. If the funding prohibition goes into law, what 
happens, Madam Secretary?
    Secretary Sebelius. Well, I think it is safe to say that a 
number of those programs either would vanish or be seriously 
threatened. And I am not quite sure what happens with our 
ability to operate Medicare programs because so many of the 
changes in Medicare are ones that were directed through the 
Affordable Care Act. So, we have staffers and funding that are 
available through that Act.
    Also, I would tell you that the toughest anti-fraud 
measures ever passed in this Congress in history are part of 
the Affordable Care Act. And as I said, $4 billion was returned 
last year, and another $375 million was identified. We have 
also built predictive modeling. That is a 7 to 1 return on 
dollars in, dollars out. Again, I think all of that is 
threatened and jeopardized if the funding goes away.
    Ms. DeLauro. I compliment you on the anti-fraud measures. 
Thank you.
    Mr. Rehberg. Mr. Alexander.

                            FRAUD AND ABUSE

    Mr. Alexander. Thank you, Mr. Chairman.
    Madam Secretary, you were just talking about the fraud and 
abuse, and we have made some pretty good strides over the 
years, as you indicated. But you mentioned the relatively high 
rate of return on the investments for fraud and abuse dollars. 
But the question is, how much of that money that we are 
providing for fraud and abuse goes to the so-called pay and 
chase, and how much is actually dedicated toward prevention, 
because we know that there could be a lot of fraud and abuse 
cases stopped if we prevented it to begin with.
    Secretary Sebelius. You are absolutely right, Congressman. 
And I think one of the great opportunities we have had with 
some of the new resources and some of the new tools given to us 
as part of the Affordable Care Act is to build a new data 
system, bringing all of the Medicare bills into one place so 
that they can be viewed across the Department.
    But more importantly is our ability to build a predictive 
modeling data analysis system so we can do what the private 
sector has done for years, which is to spot errant billing. The 
way we identified the doctor in Texas who allegedly is the ring 
leader for this massive home health service fraud was using the 
kind of data analytics that just did not exist a couple of 
years ago.
    So, those new tools are all about prevention. But, we still 
are doing some of the other techniques like paying and chasing 
and trying to spot errant bills before they go out the door. 
But I think that our efforts can only get better over time.
    Mr. Alexander. And you also stated that the budget makes 
Medicaid more flexible, and that by 2013 it would be critical 
in working with States to set up the infrastructure for the 
exchanges in the health care plan. In Louisiana, that exchange 
will be a Federal exchange set up by CMS, which is supposed to 
be up and running in about 22 months from now. Yet to date, we 
are hearing from the State Medicaid officials that they have 
not yet had guidance from CMS on the coordination activities 
that will be required between the Federal exchanges to set that 
program up.
    So, can you tell me what plans HHS or CMS has to do this, 
because our State Medicaid programs are concerned, extremely 
concerned, about it. And can you also give us more information 
on the flexibility mentioned in the testimony?
    Secretary Sebelius. I would be glad to, Congressman. We are 
working very closely with States, and, in fact, had a number of 
meetings just 10 days ago when all the governors and their 
staff were in town.
    We have put out guidance in terms of the framework for both 
the exchanges and the Medicaid enhancement and enrollment. 
States will be principally responsible for the Medicaid piece 
of the puzzle, whether or not it is in a Federally run 
exchange, a State-run exchange, or a partnership program, which 
are the three models that States are looking at. And we are 
trying to anticipate questions, issues, and have a lot of 
hands-on work going on with States around the country, 
including your home State of Louisiana.
    I can tell you that the Budget request that is before this 
Committee that the Chairman referenced earlier, which includes 
some enhanced funding for administration at CMS, will be used 
for one-time costs to establish the framework around the 
Federally-based exchanges. That is a critical part of this 
puzzle to make sure that we are up and running for the States 
that choose not to operate their own exchanges, or the States 
that want to be in a partnership effort.
    But the goal will be that when a consumer wants to take 
advantage of an exchange program or health insurance, that they 
will be able to come through one portal and determine whether 
they qualify for an exchange with the tax credit, or whether 
they qualify for Medicaid and be pretty seamlessly enrolled.
    Mr. Alexander. Thank you.
    Mr. Rehberg. Ms. Roybal-Allard.

                     PREVENTION PUBLIC HEALTH FUND

    Ms. Roybal-Allard. Welcome, Madam Secretary.
    I co-chair the Congressional Study Group on Public Health, 
and in that role I have been closely following the public 
health portions of the HHS budget for several years. And while 
I commend you for your efforts to address difficult financial 
decisions, I am concerned that CDC and SAMHSA budgets are being 
cut and back filled with monies from the Prevention and Public 
Health Fund, which was intended to get a step ahead of the grim 
reality that we spend approximately 70 to 75 percent of our 
health care dollars on treating chronic, preventable diseases.
    I know that you are a strong supporter of CDC and SAMHSA, 
and that you champion the PPH Fund in the Affordable Care Act. 
So, I would like to know the rationale for targeting the two 
public health agencies for the department's largest budget 
cuts, and how you anticipate that they will be able to continue 
with their mission.
    My concern is heightened also by the fact that $5 billion 
was taken out of the Prevention Fund earlier this year to pay 
for the District of Columbia fix. And will any of this money be 
coming out of CDC and SAMHSA core programs, which our budget 
proposes back filling with the PPH Fund?
    Secretary Sebelius. Well, Congresswoman, I assure you that 
your concerns about a strong public health infrastructure are 
certainly shared within our Department and within the 
Administration. The President also shares those concerns.
    And the use of some of the Prevention and Public Health 
Fund dollars for some of the CDC mission is one that we 
certainly would not do in a better budget time, but given the 
budget constraints, we are both not only enhancing CDC's budget 
with some of the funds, but also making sure that the funds 
focus on some new initiatives going forward.
    SAMHSA has made some recommendations in the Budget, which 
we are presenting to you again, to more efficiently, I think, 
use some of their funding. It is programmatic restructuring at 
the State level that they feel will not diminish the public 
health infrastructure, but rather will allow these dollars to 
be used in a more flexible way by their State partners, so that 
I think in both cases we can make a strong argument that the 
public infrastructure is being protected.
    Would it be preferable that 100 percent of these budgets 
were funded, plus a full use of the Prevention Fund? That would 
be the goal, but I think given the restraint on spending and 
our interest in making sure we contribute to the overall budget 
picture, we feel that these recommendations are probably the 
best way to go about that.

                       SECTION 317 IMMUNIZATIONS

    Ms. Roybal-Allard. Well, one of the concerns that I have is 
that given the fragility of the support for the Prevention Fund 
in today's political climate, that CDC and SAMHSA are made 
vulnerable in their ability to continue to carry out their core 
functions if this fund is eliminated or used for another pay 
for.
    Another concern that I have about the proposed reduction is 
in the 317 Immunization Program, which, as you know, has been a 
huge success in providing the infrastructure for the Vaccines 
for Children Program. Vaccination programs have proven to be 
some of the most cost-effective approaches to preventing 
disease and reducing health care costs, and the Children's 
Vaccine Programs are estimated to be a 10 to 1 savings a 
paycheck.
    A Fiscal Year '11 report to this committee from CDC 
estimated that the 317 Program was underfunded by hundreds of 
millions of dollars. If this is still the case, how do you 
anticipate addressing the impact of cutting this program by $58 
million or close to 10 percent?
    Secretary Sebelius. Well, again, Congresswoman, I think 
that it is the view of Dr. Frieden and the experts who work 
with the Children's Vaccine Program that the resources that we 
have requested will allow us to continue to run this very 
successful program in partnership with States around the 
country. We are continuing to do outreach to maximize these 
resources, and are hopeful that this cut will not jeopardize 
the important public health initiative that the Children's 
Vaccine Program represents.
    Mr. Rehberg. And you can always provide additional 
information for the record, Secretary Sebelius.
    Ms. Lummis.

                                MEDICARE

    Ms. Lummis. Thank you, Mr. Chairman.
    Madam Secretary, as you know, we spend almost twice as much 
on Medicare in this country as we take in. And Medicare cannot 
go on like that. It is going to be broke soon. And for the 
fifth consecutive year, the Medicare trustees have issued a 
Medicare funding warning, which means that general revenues do 
account for more than 45 percent of Medicare funding. So, under 
this trigger, the President is legally required to submit a 
legislative proposal to Congress to address Medicare's solvency 
within 15 days of a budget submission.
    Now, President Obama's predecessor complied with that law 
and submitted legislation in 2008. But President Obama has 
never complied. So, was there ever a conversation between you 
and the President about complying with the law? And what led to 
your decision not to comply with the law?
    Secretary Sebelius. Congresswoman, the President has 
submitted a Budget which very much complies with the law, and 
it is a legislative proposal. And he feels that that is 
sufficient to comply with the trigger.
    I am one of the Medicare trustees. I know that trigger 
exists, and that is why he has a Budget which reduces the 
overall deficit and leaves Medicare solvent in the future.
    Ms. Lummis. Tell me specifically how his budget complies 
with that specific law.
    Secretary Sebelius. The budget----
    Ms. Lummis. Yes.
    Secretary Sebelius [continuing]. Taken as a whole reduces 
the deficit and fully funds Medicare. And it does comply with 
the Medicare figure.
    Ms. Lummis. It reduces the budget by the 45 percent, the 
full 45 percent every year that is being augmented by the 
general fund?
    Secretary Sebelius. I think if you look at the 10-year 
Budget that the President has submitted to Congress this year--
--
    Ms. Lummis. Does it do it every year?
    Secretary Sebelius. Last year, the year before, it does do 
it, Congresswoman.
    Ms. Lummis. Year by year, is it back end loaded?
    Secretary Sebelius. I think it is complying with the law. 
That is what we have interpreted, and that is what was 
submitted to this committee.

                   INDEPENDENT PAYMENT ADVISORY BOARD

    Ms. Lummis. I have a question about the Independent Payment 
Advisory Board in that regard. The President's budget makes 
reference to a value based benefit design. What does that mean? 
What is a value based benefit design?
    Secretary Sebelius. Well, I think if you talk to a lot of 
the best health systems in the country, they will tell you that 
paying for volume, such as the number of things done to a 
person, the number of days in the hospital, the number of tests 
run, is probably not only driving up costs, but is 
counterproductive because great health care systems, which keep 
people healthier in the first place, are financially penalized 
by that type of activity. What is more effective is to look at 
strategies which actually keep people healthier in the first 
place, reduce the acute illnesses, try and eliminate 
preventable harm to patients, everything from hospital-based 
infections to preventable readmissions. And that is a value 
based proposal--there should be a funding mechanism that does 
not penalize systems and providers for keeping people healthy, 
but rather actually rewards them.
    Ms. Lummis. I am told there will not be a rulemaking on 
this, so it is going to be up to the board to define these 
terms? Is that correct?
    Secretary Sebelius. I do not really know what it is that 
you are talking about. The Board----
    Ms. Lummis. The board will define value based----
    Secretary Sebelius. The Independent Payment Advisory Board 
will make recommendations to Congress. If a certain trigger is 
met by Medicare, if Medicare spending exceeds a projected 
level, they will be making recommendations to Congress about 
ways to reduce Medicare spending. So, I am not----
    Ms. Lummis. So, the Independent Payment Advisory Board will 
define value based benefits.
    Secretary Sebelius. I apologize. I can go back to the 
statute, see where it is in the statute, try and figure out who 
defines it. But I do not really know in what context it is that 
you are putting that.
    The Independent Payment Advisory Board, I can tell you, 
cannot make recommendations that ration care, raise beneficiary 
premiums or cost sharing, reduce benefits, or change 
eligibility. Can they make recommendations about better ways to 
deliver health care? I hope so.
    Ms. Lummis. And my concern here is that this board will set 
Medicare policy unless a super majority of Congress stops them. 
And so, if the board has things called like value based 
benefits, but nobody knows what that means because there are no 
rules, and the board is telling people what that means, how are 
we supposed to know?
    Secretary Sebelius. Well, again, Congresswoman, the Board 
does not have any authority beyond making recommendations to 
Congress. A simple majority in Congress can either accept their 
recommendations or substitute recommendations. So, it is not a 
super majority, it is a simple majority, in both the House and 
the Senate, is the way the rules are written.
    If Congress fails to act, if Congress fails to keep the 
costs of Medicare below the trigger, and then fails to accept 
the recommendations, then I am directed to move on the 
recommendations. But a simple majority of Congress can act, and 
the IPAB, as I say, is prohibited, by law, from rationing care, 
raising premiums, reducing benefits, or changing eligibility.
    Mr. Rehberg. Mr. Dicks.

                             HEALTH CENTERS

    Mr. Dicks. One of the most useful things about the health 
care reform, as far as I am concerned, is the additional 
funding to greatly expand the network of health centers, 
building on the base of support provided in the Labor, HHS 
appropriations bill.
    As the Affordable Care Act increases the number of people 
who have health insurance, health centers can help provide a 
place to use that coverage in areas that are otherwise short of 
good primary care. The goal is to help people stay healthy, as 
you have mentioned, and to get people detected and treated 
before they become seriously ill and expensive. That improves 
health and, in the end, it also helps lower costs.
    Can you tell us how the department has been making use of 
the combination of funding provided in the bill and the 
Affordable Care Act to expand health care sites and services?
    Secretary Sebelius. Yes, I can, Congressman.
    First of all, I want to recognize that I think community 
health centers are a topic where there has been a lot of 
bipartisan support and a lot of leadership from this Committee 
over the years, and certainly have been an enormously important 
infrastructure for lower cost delivery of primary care and 
preventive care.
    We are in the process of not only using the resources 
provided by the Affordable Care Act, but also by the Recovery 
Act, to expand access points in sites, to match newly trained 
health care providers with the most underserved areas. And with 
the funding of this Budget, we look forward to the opportunity 
to have about 21 million Americans throughout this country in 
the most underserved areas have access to this high quality, 
lower cost preventive care.
    Mr. Dicks. You know, in my district we have a number of 
these health care clinics, and I think they provide a 
tremendous service to the people in our area. And I have often 
thought that with all the controversy, maybe we should have 
just expanded this program to take care of everybody who needed 
help. It might have been less controversial. But, again, I just 
urge you to keep moving forward on that particular program.

                           HEALTH CARE FRAUD

    You mentioned the health care fraud. Now, we had a problem 
last year. We did not get the extra money necessary to expand 
the program. And as you said, we save $7 for every $1 invested, 
so it seems to me this is like the IRS agents that were going 
to be cut last year, and we finally got that straightened out.
    I mean, I think we should, especially since you have just 
had this great success, we should keep the pressure on and get 
the right people involved, and try to shut down a lot of these 
rackets that are going on around the country.
    Secretary Sebelius. Well, Congressman, I share that view. I 
think unfortunately our Inspector General's Office was hopeful 
that the full funding was forthcoming in the fiscal year 2012 
Budget so that it could have expanded some additional 
resources. They are going to hold tight now, but we would urge 
the Committee to look at the additional $270 million that would 
strengthen the efforts, and I think is, again, a real win-win 
situation.
    We are building this very aggressive partnership with not 
only law enforcement and our Inspector General's Office, but 
also with U.S. attorneys and inspectors on the ground. And we 
now have strike forces in nine cities. We would like to expand 
that further. We think that the efforts are really beginning to 
pay off, and think that anything that this Committee can do to 
make sure that those investments are fully funded would be very 
much, not only appreciated, but I think appreciated by the 
taxpayers.

                               EXCHANGES

    Mr. Dicks. One of the increases you are seeking at CMS is 
for expenses involved in setting up the new insurance exchanges 
that are scheduled to begin operation in 2014. What has to 
happen in order for this to move forward?
    Secretary Sebelius. Well, Congressman, the original 
Affordable Care Act passed and signed into law in March two 
years ago appropriated $1 billion for implementation of health 
reform. At the time, the Congressional Budget Office estimated 
that it would cost about a billion dollars a year in 
implementation costs until it was fully realized.
    I think the good news is that we have spent under that 
estimated amount. We are now two years in, and have spent about 
$475 million. But the remainder of that billion dollars we 
anticipate being gone by the end of fiscal year 2012. We have 
requested in this Budget a new----
    Mr. Dicks. Does the money expire? Is that what you are 
saying?
    Secretary Sebelius. No. It is being expended and drawn 
down.
    Mr. Dicks. Okay. But it will be gone.
    Secretary Sebelius. That is correct, so that this fiscal 
year 2013 request is for a billion dollars, $200 million of 
which will be spent on Medicare and Medicaid, and about $800 
million will help build the primary infrastructure, a lot of 
one-time costs for the Federally-run exchanges.
    Mr. Dicks. Thank you, Mr. Chairman.
    Mr. Rehberg. Thank you. Ms. Granger.

                             DRUG SHORTAGES

    Ms. Granger. I just want for a comment to second what Mr. 
Dicks said about community health centers. The ones I have been 
involved in have done excellent work.
    And my question is, as you know, there have been shortages 
of critical drugs, including drugs to treat pediatric cancers 
over the past years. I do not know of anything that really is 
more serious than that. But my understanding is that there are 
several potential sources of this problem: the closing of 
factories that produce the pharmaceuticals, low payment rates 
for these drugs, and a shortage of the raw materials that 
produce these pharmaceuticals.
    I know the FDA has taken action to require companies to 
provide FDA notification of upcoming shortages, but what are 
you doing to solve this problem of shortages of really critical 
pharmaceuticals?
    Secretary Sebelius. Well, Congresswoman, I think this is a 
very high priority within our Department, and we are really 
looking at all the tools that we have.
    Currently we do not have a mandatory reporting, and we are 
trying to work with Congress to see if that can be put into 
place because what we know is that since the President's 
executive order was signed in October, about 100 additional 
shortages have been eliminated by companies ramping up their 
voluntary reporting. So, that is a big step.
    We also are expediting at the FDA re-inspections, looking 
around, the importation possibilities as drug shortages become 
available. At least as far as we can determine, and we would be 
happy to share this with you, the pricing issue is really not 
as much of an issue as some of the others because the prices 
are negotiated well in advance by the purchasing contracts. And 
so, it is not the end user that is negotiating the price; it is 
really kind of pre-determined at the hospital level.
    But certainly capacity is being expanded with the 
manufacturers, and I think that is another very critical piece 
of the puzzle. And we are committed to expediting those 
inspections as rapidly as possible.
    But it is an issue that we are trying to analyze what 
levers we have and how fast we can move. But I think the 
mandatory reporting that is currently before Congress would be 
a big step.
    Ms. Granger. Good. Thank you.

                   GRADUATE MEDICAL EDUCATION PROGRAM

    The second question, at the budget hearing last year, we 
discussed your decision to eliminate the Children's Hospitals 
Graduate Medical Education Program funding. And at that 
hearing, you said that this was one of the toughest budget cuts 
that had to be made in this request, and in better budget 
times, you said, you would not have recommended this. I was 
pleased that your budget request for this year did not zero out 
this funding, but it still proposed a severe cut in the 
program.
    When I look at the funding for HHS that was included in the 
health care law, I was surprised that you do not think that you 
are in better budget times. Your budget request for 2013 
includes funding for implementation of the health care law, 
including the $1 billion increase for CMS that you cited in 
your testimony.
    So, could you please help me understand how new programs in 
the health reform law were supported in your budget, but the 
Children's Hospital Graduate Medical Education Program, a 
program you acknowledged as having had substantial success, was 
subject to a severe cut?
    Secretary Sebelius. Certainly, Congresswoman.
    The Budget request that we have pending before this 
Committee is our estimation for what it will take to cover the 
direct costs for the pediatric residents that are in training. 
What it does not cover is the indirect costs of those 
residents, so we are hopeful that this will preserve the number 
of teaching slots.
    We also are looking at the number of other programs which 
also support training in pediatrics, including the National 
Health Service Corps. We have a new teaching health center 
graduate education program. Many of these are funded through 
the Affordable Care Act, as you just have referenced, so we are 
focusing some of those resources on this very critical area. 
The primary care training and enhancement, we have got 
scholarships for disadvantaged students, including those 
training to be pediatricians, maternal health and child 
training programs, a new pediatric loan repayment.
    So, using some of the Affordable Care Act funding for the 
workforce initiatives, we are trying to redirect that funding 
as much as possible to focus on primary care, and particularly 
on some of this pediatric training. So, we are looking at the 
range of issues. But the children's health graduate medical 
education payments are designed to support the direct costs of 
those pediatric residents.
    Ms. Granger. Thank you.
    Mr. Rehberg. Mr. Jackson.
    Mr. Jackson. Thank you, Mr. Chairman, for yielding me the 
time, and let me welcome Secretary Sebelius back to our 
committee. Let me also----
    Secretary Sebelius. It is not your birthday this year. What 
is the deal with that? Where are the cupcakes? I mean, you 
know----
    Mr. Jackson. Thank you for reminding me. [Laughter.]
    Secretary Sebelius. Just to put you all on notice, you 
know.
    Mr. Jackson. We actually did talk about that. [Laughter.]
    Mr. Jackson. I trust, Mr. Chairman, that did not come out 
of my time. [Laughter.]

               LOW INCOME HOME ENERGY ASSISTANCE PROGRAM

    Mr. Jackson. Let me also apologize in perfect candor for 
the position that we have put the Secretary of Health and Human 
Services under because, from my perspective, this Congress' 
inability, Madam Secretary, to pass a jobs bill and recognize a 
real need for the American people, that we should be putting 
Americans to work. If there were more Americans working, we 
would be paying more money into the Treasury. And many of the 
programs for which you have had to make difficult cuts, we 
would be in a position to not look at zeroing them out.
    Towards that end, in 2011, the Low Income Home Energy 
Assistance Program served about 460,000 households in Illinois, 
which 83,955 recipients were in the 2nd congressional district. 
In the State, 50 percent of the funding was allocated to 
families earning below 75 percent of the Federal poverty level, 
and 24 percent was allocated to recipients between 75 and 100 
percent poverty. Thirty percent of the recipients are elderly, 
33 percent disabled. Twenty-two percent are under the age of 5. 
And these services are vital for the well-being of many of my 
constituents.
    Madam Secretary, the Administration for Children and 
Families Budget states that, ``Funding is prioritized for 
programs protecting society's most vulnerable.'' Clearly, the 
LIHEAP Program serves the most vulnerable among us, so why does 
the Administration's budget propose such a significant decrease 
in the LIHEAP Program? And would you also comment on the 
expected impact of the Administration's proposed 33 percent 
decrease from Fiscal Year '11 for LIHEAP and what its impact 
will be on low income recipients?
    Secretary Sebelius. Well, Congressman, this is a very tough 
budget cut. It is about $450 million above the 2012 Budget, but 
we understand that it still is seriously under the budget from 
two years ago where there was a substantial increase in LIHEAP, 
and we have not been able to sustain that increase.
    There is no doubt that the cuts fall on the low income 
families in a more difficult way, and certainly there is 
nothing more important than heating and cooling when you are 
talking about people's ability to stay in their homes.
    So, I think that this will have an impact on folks. We are 
trying to look at how much we can allocate at the front end. 
And, as you know, we hold some funds in reserve to make sure 
that as temperatures change over the course of a season, and 
States have different needs for this funding, we can allocate 
it to not leave people in dire circumstances. But it is a very 
difficult cut.

                   HEALTH CAREERS OPPORTUNITY PROGRAM

    Mr. Jackson. Madam Secretary, I know you have a difficult 
task in selecting how to spread proposed funding reductions 
across the budget proposal. However, I am disappointed in the 
Fiscal Year 2013 recommendation to eliminate the Health Careers 
Opportunity Program, or HCOP. The budget justification explains 
this reduction by stating the funding allocations for training 
are being focused on programs that have a direct link to a 
training program for primary health care professionals. 
Unfortunately, this does not take into account the importance 
of preparing individuals from disadvantaged backgrounds or 
medically underserved communities for a health career.
    Study after study demonstrates that individuals from 
medically underserved communities are far more likely to return 
to their communities as a health professional. If no effort is 
made to provide opportunities for disadvantaged students from 
medically underserved communities, like through HCOP, the 
training funds are more likely to be distributed among those 
who will end up serving in non-medically underserved 
communities. I do not see how this helps reduce health 
disparities, and it does not, from my perspective, narrow the 
health status gap.
    Should we not be dedicating our limited funding to a 
demographic that is in greatest of need?
    Secretary Sebelius. Well, Congressman, I think that, again, 
we are trying to do that. There are definitely lines of funding 
specifically aimed at minority and underserved communities. 
There is almost a $50 million scholarship programs for 
disadvantaged students who want to become health professionals. 
We have the National Health Service Corps, which, as you know, 
not only trains folks, but pays off loans for people who agree 
to serve in underserved areas, and they are doing that with a 
particular focus at this point to not only reaching into 
underserved communities to recruit those trainees, but also 
looking at returning veterans. We have a commitment to train 
and hire veterans returning who have qualified skill sets. And 
that program has tripled over the last three years. We have 
some primary care training and enhancement programs that are, 
again, looking at streams of funding for underserved 
communities and for students coming out of minority 
communities.
    So, I would agree that that is a huge issue, and one that 
we are trying to pay careful attention to as we expand these 
programs.
    Mr. Rehberg. For the record, you got an additional 30 
seconds beyond the 20 we wasted.
    Secretary Sebelius. And we still do not have cupcakes.
    Mr. Jackson. Forty-seven and 30 seconds. Thank you, Mr. 
Chairman.
    Mr. Rehberg. Mr. Kingston.

                          HEALTHCARE PREMIUMS

    Mr. Kingston. Madam Secretary, putting on your hat as a 
Medicare trustee, I am concerned, and I would think that the 
Trustees would be very concerned, with some of the rosy 
assumptions of the President's budget. Some would call them 
gimmicks. For example, under the category of deficit spending, 
he counts war savings, which according to the recent 
developments in Afghanistan even though the President says he 
has calmed it down because of the Koran burning, it does not 
look like the war is going to wind down exactly as planned. He 
also makes some great assumptions about tax increases and 
economic growth.
    I do not know if you have seen those, but I would recommend 
as a trustee that you go back and review that because it would 
appear to me that his assumptions of deficit reduction are 
really irresponsible, very political, but also to the trustees 
they would be considered irresponsible. So, I would recommend 
that to you.
    Also, you had said that in response to the success of the 
health care bill that there is a high enrollment of seniors, 
children, and high-risk people. And I understand that. But 
reacting to free money and government money is not necessarily 
a sign of success. What I am more disturbed about is that the 
President claimed that Obamacare would bring down the costs 
premiums for the average middle class family to $2,500, and yet 
the Kaiser Foundation estimates that the total premiums have 
gone from $12,860 in 2008 to $15,073 per year. So, instead of 
decreasing the American middle class families' premiums by 
$2,500, Obamacare has, in fact, increased premiums by $2,213.
    And the point being is when we say, well, this is 
wonderful, the kids are now,--and I do not know why we call 
people the age of 26-years-old kids, but now they are taking 
advantage of some good program and they get to stay on mom and 
dad's health care. There is nothing really remarkable about 
that. It is just, hey, free money, come and get it. And yet, 
when they look at their premiums, the middle class families are 
picking up the tabs.
    So, as you may suspect from my comments, I have some 
philosophical disagreements with the Administration on this 
program. But I want to say that to you as a trustee because to 
me it scares me to think that the trustees are really counting 
on the Obama budget to give a realistic picture of the future 
of Medicare when we do know Medicare is going broke. And I 
would assume that the trustees would be concerned about that.
    Secretary Sebelius. Mr. Kingston, I think the trustees are 
very concerned about the long-term solvency of Medicare, and 
are eager to implement the strategies that I told you are 
already beginning to show very promising impacts.
    I would say in terms of your analysis of the private 
insurance market, you are absolutely correct. And it is even 
more glaring if you could look at what has happened in the 
decade before the passage----
    Mr. Kingston. So, well, you would admit then that the 
President----
    Secretary Sebelius. Mr. Kingston, could I just respond to 
the----
    Mr. Kingston. Well, let me reclaim the time then. You would 
admit that the President's assumption on claims that premiums 
were going to be reduced $2,500 was wrong then, because that 
was what he was claiming the premium savings would be.
    Secretary Sebelius. No one ever claimed that premiums would 
be reduced until there was a new insurance market, which does 
not exist yet.
    Mr. Kingston. Okay.
    Secretary Sebelius. So, you are absolutely right. You are 
looking at what has happened to the private insurance market, 
but it well pre-dates the passage of the Affordable Care Act. 
This market is on a death spiral where younger and healthier 
small business owners, and others, are leaving the market as 
health care costs spiral. Our plan includes a new insurance 
exchange run at the State level or the backup plan to be run at 
the Federal level, because the market is broken. It is broken 
for small business owners. It is broken for individuals buying 
their own policies. They are paying the brunt of these 
skyrocketing costs.
    And you are absolutely right, that has not changed yet 
because the new market is not in place until after 2014.

                                LOBBYING

    Mr. Kingston. Well, when we hear some of the assumptions 
that are made--for example, the stimulus bill was supposed to 
bring down the unemployment to, I think, 6 and a half percent, 
and we are still lingering at around 9 percent. So, I get very 
concerned when I hear the government making these great 
promises.
    Let me ask you this very specifically. The Prevention and 
Public Health Fund is about a billion dollar fund. And part of 
the resources by the Philadelphia Department of Public Health, 
which received a $10.4 million CDC grant, were used to lobby 
for a 2 cent per ounce tax on sugar sweetened beverages. And I 
was wondering, is that the purpose of that grant, to let a 
local government lobby for a higher tax increase?
    Mr. Rehberg. I will ask you to answer very quickly because 
we are trying to make it all the way through all of our 
members, and you asked the question right at the end of your 
time. So, if you could answer very quickly.
    Secretary Sebelius. Well, our long-term guidance, both 
within the Department and through OMB to grantees, has always 
prohibited lobbying either at the Federal level or lobbying at 
the State level.
    The Congress added some additional language to our fiscal 
year 2012 Budget which is new, and for the first time talked 
about grantees not being able to either lobby administratively 
or to local units of government. We are updating our guidance 
and going to make sure that that happens.
    Nothing prohibits any group from using their own funds to 
lobby, and nothing prohibits them from using Federal funds to 
provide technical assistance or education.
    Mr. Kingston. Thank you.
    Mr. Rehberg. Ms. Lee.

                               H.R. 2954

    Ms. Lee. Thank you very much. Hello, Madam Secretary. Good 
to see you.
    As you know, I introduced a comprehensive bill this 
Congress--it is H.R. 2954 on behalf of the Congressional Asian-
Pacific American Caucus, the Hispanic Caucus, and the Black 
Caucus--to help address racial and ethnic disparities.
    Now, this bill, it actually builds on the health care 
reform bill and includes additional tools necessary to address 
these challenges, especially around the area of data 
collection, culturally and linguistically appropriate health 
care and health information technology.
    Now, many challenges, but one let me call your attention 
to. A study released last week showed that only 42 percent of 
eligible limited English proficient adults in California are 
expected to take part in the health benefit exchange. This 
means that some 100,000 Californians will miss out on health 
care expansion due to language barriers.
    Now, I was pleased to see that you launched the action plan 
to end health disparities, but I am also concerned about some 
of the budget cuts that may undermine now all of your efforts, 
especially the 26 percent cut in the Office of Minority Health. 
And I understand the consolidation and coordination 
requirements. And certainly your agency has done a heck of a 
lot more than Secretary in any Administration in the past. But 
I am worried now that with the progress being made that this 
cut is going to really, really hurt.
    And so, I would like to just get a sense of how you intend 
to provide targeted support to help reduce racial and ethnic 
disparities in health care, and also this whole issue with 
limited English individuals.
    And then, secondly, nursing shortage. I was glad to see the 
$20 million for Advanced Education Nursing Program. There is a 
nursing shortage, yet about 40 percent of new graduates cannot 
find jobs. And so, there is this huge disconnect. And I have an 
100-year-old aunt, and 87-year-old mother, a 91-year-old aunt, 
a sister who has multiple sclerosis. I am in hospitals and 
emergency rooms all the time. And every time I am there, there 
is a traveling nurse. And I am trying to get to the bottom of 
this.
    And they are wonderful. They know what they are doing, but 
I go outside of the hospital, and then I am faced with my 
constituents who cannot get a job as nurses, even though they 
have graduated and have the credentials and experience.
    So, I am trying to get to the bottom of this and try to see 
what we can do about making sure that nurses, especially 
minority nurses, get these jobs because they are just not 
getting them.
    Secretary Sebelius. Well, let me try to address the nursing 
issue first because it is certainly one that we share. And what 
we know is that without a sustained production of new nurses in 
the workforce, we are going to be in terrible trouble. So, we 
are trying to use the resources directed to us to expand the 
pipeline, and expand the capacity, and continue to train 
nurses.
    Having said that, we also know that there is not 
necessarily an accurate match between where the nurses are 
located and where the shortages are. Our Health Resources 
Services Administration is trying to do updated analysis of 
that pipeline, making sure that we are trying to get people to 
the spots where they have the training, locate centers where 
they can be trained. The expansion of the health center and the 
expansion of nurse run health centers is a part of that 
strategy. But we would love to continue to work with you. I 
know it is a huge issue for you.
    I also think that, Congresswoman, we do have for the first 
time plans that are coming into place not only around the 
closing the gap on health disparities with very clear 
measurements and a timeline, thanks to a lot of the work of 
your leadership in the Congress. But in terms of the outreach 
to people who might be in the most underserved communities 
about the opportunity to enroll in health plans, that is 
certainly part of our outreach effort as we go forward.
    In your State of California where they are likely to have a 
State-run center, we are working closely with the State to look 
at their resources to make sure we reach in, and the Federally-
run centers will do the same thing.
    But getting people the information, particularly in the 
most underserved communities, about how they can take advantage 
of the benefits and the new health insurance opportunities is 
one of the big challenges.
    Ms. Lee. Thank you. Mr. Chairman, I would like to submit 
the rest of my questions for the record.
    Ms. Lee. And then, Madam Secretary, I would like to follow 
up with you with regard to the tri caucus disparities bill and 
talk about some of these policy and programmatic initiatives 
that we may be able to work on together.
    Secretary Sebelius. Great. Thank you.
    Ms. Lee. Thank you.
    Mr. Rehberg. Mr. Flake.

                          HEALTHCARE PREMIUMS

    Mr. Flake. Thank you. Madam Secretary, I want to follow up 
on a question that Jack Kingston talked about. This $2,500 
reduction in premiums was not just one campaign promise tossed 
out once. It was said again, and again, and again, and again. I 
have actually 15 instances here of just in a few months where 
the President said we will start by lowering premiums by as 
much as $2,500 per family. Sometimes he said ``by as much as,'' 
and other times just we will lower it by $2,500. I know you are 
saying that really cannot be accomplished until you have a 
State exchange, which we will not have until 2014.
    Tell me, was that $2,500 promise a promise to lower 
premiums simply by shifting the cost to the taxpayer? And, if 
so, how does that jive with the budget figures and the 
assumptions that have been made going ahead? And if not, if it 
truly is a savings, tell me what is there inherent in this plan 
that drives down cost? I mean, there is not real competition 
that I can see. There is no tort reform. There are not 
requirements forcing insurance companies to compete across 
State lines. You just do not have things that typically in 
markets bring down costs.
    So, I guess the first question is, is that $2,500 figure, 
is that savings or is that a cost shift to government, to 
taxpayers?
    Secretary Sebelius. It is not a cost shift to government, 
Congressman. It is projected savings based on, again, not our 
analysis, but by the Congressional Budget Office.
    I would disagree that there is not any competition. The new 
rules around an insurance exchange for the first time will 
introduce real competition into the insurance marketplace. They 
will have to compete for service and price as opposed to cherry 
picking, who might not get sick and could be included in 
programs. Consumers for the first time ever will have a very 
transparent way of making choices. They cannot be locked out or 
priced out of the market. And there is an estimation that there 
will be a serious reduction in overhead costs.
    And we are already beginning to see some of that, glimpses 
of some of that with the 80/20 rule, the medical loss ratio, 
which requires companies for the first time in history to spend 
80 cents out of every premium dollar on health expenses, not 
overhead costs. And we are seeing companies begin to reposition 
and remarket. And for the first time in this calendar year, 
consumers will start to get rebates based on the fact that 
companies did not meet those costs estimates.
    So, there are a series of steps. Small business may be the 
biggest winners because they are currently paying 18 to 20 
percent more for exactly the same policy because they do not 
have any market leverage. They will be included in a larger 
pool by virtue of being part of an exchange. They will see cost 
reductions.
    So, the cost reductions are real and based on competition, 
lower overhead costs, and the ability to be in a pool situation 
which most people cannot get unless they are in a large 
employer plan.
    Mr. Flake. I am glad you mentioned the CBO because in 2008, 
the President promised his health care would cost between $50 
and $65 billion a year when fully phased in. That is not what 
the Congressional Budget Office is saying. They are actually 
saying that Obamacare will cost $229 billion in 2020 and $245 
billion in 2021.
    What is responsible for the fourfold increase in projected 
cost?
    Secretary Sebelius. Congressman, I do not know exactly what 
you are referencing. I would be glad to get you an answer very 
specifically in writing. But I really do not know what CBO 
numbers you are citing and what you are comparing them to. So, 
if you could provide those numbers then I would be delighted to 
get you an answer.
    Mr. Flake. Let me just say in the time remaining, this 
assumption that we are going to get $2,500 in savings, net 
savings, not shift to the taxpayer when these exchanges start, 
is fanciful at best. I just do not know how to say it because 
nothing that has happened so far has suggested that there is 
anything really to drive down costs here. And I think that 
these are rosy assumptions.
    I yield back.
    Mr. Rehberg. Ms. Lowey.

                                TITLE X

    Ms. Lowey. Thank you, and welcome, Madam Secretary, and 
thank you for your important work. And I apologize, but I had 
an urgent meeting I had to run to.
    An important component of health reform is the requirement 
that insurers provide free preventive services to women. 
Contraception we know is beneficial for women for a number of 
reasons, ranging from planned pregnancy to decreasing the risk 
of some cancers. In addition to the many health benefits, 
contraceptive coverage provides significant economic benefits 
for American families and the government.
    It was really disappointing for me that the last two 
spending bills this subcommittee wrote, H.R. 1 from last year 
and Chairman Rehberg's draft Fiscal Year '12 bill, would have 
eliminated funding completely for the Title 10 Family Planning 
Program.
    Can you share with us your views? Does reducing access to 
contraceptives increase overall health costs?
    Secretary Sebelius. Well, Congresswoman, currently Title X 
serves about 5 million individuals a year who access Title X 
clinics. What we know is that they are often younger women. 
About 3 million of them are under 25 years old. And 
comprehensive coverage includes both family planning and 
related reproductive and preventive health services, such as 
everything from HIV prevention, education screening, reduces 
not only unintended pregnancies, but infertility and related 
morbidity issues.
    It is a health issue for both women and their families that 
has been enormously effective through the Title X program.
    Ms. Lowey. Thank you. I thought you were going to go on.

                        CDC GRANT CONSOLIDATIONS

    I also want to talk to you about the CDC consolidation. In 
addition to concerns I have with the overall proposed funding 
level for the CDC, and along with the proposals Congress 
previously rejected to consolidate numerous programs, including 
chronic disease, birth defects, developmental disabilities, and 
environmental health.
    I understand that the fiscal climate may make it difficult 
to fund disease-specific programs at the levels we might seek, 
but providing a relatively small amount of funding to specific 
diseases facilitates partnerships with national organizations 
that really do tremendous work improving public health.
    I have spoken with Dr. Frieden about my concerns with 
consolidation, and I had hoped that the Administration would 
abandon its consolidation plan, particularly after Congress 
rejected the idea last year.
    Could you tell us why the department is again proposing to 
consolidate so many programs within the chronic disease, birth 
defects, developmental disabilities, and environmental health 
accounts? What does it accomplish? Why is it a good idea?
    Secretary Sebelius. Well, Congresswoman, I think a lot of 
the budget recommendations in the CDC budget are driven by 
conversations and consultation with our partners at the State 
level. And as you know, a lot of State public health budgets 
have been decimated over the last several years as resources 
have been slashed.
    What we are trying to maximize is the flexibility at the 
State level to maximize public health impact by addressing 
public health needs, not in siloed programs, but in a flexible 
stream of funding where the States then can address their most 
pressing needs.
    So, this recommends, as you say, consolidation of chronic 
disease, and birth defects, and developmental disabilities, 
asthma, and the Healthy Homes Program, in a way to try and use 
these resources as efficiently and effectively as possible to 
get to the public health goals I think we both share.

                     NATIONAL INSTITUTES OF HEALTH

    Ms. Lowey. Well, I hope we can continue that discussion 
because I think I strongly disagree with you on it.
    Just briefly in the couple of, what, seconds, minutes I 
have left, the President talks about winning the future. And I 
agree that we have to prioritize investments that make sure 
more competitive. But it seems to me that investing in the NIH 
is absolutely essential. I would increase it because not only 
is it the global leader in innovative life-saving biomedical 
research, it supports more than 325,000 high paying research 
positions at more than 3,000 facilities across the country. So, 
I am sure we can all agree on that.
    Why does the budget request not include an increase for the 
National Institutes of Health?
    Secretary Sebelius. Again, Congresswoman, I think that NIH 
is about 40 percent of our Budget, and we are trying to 
maximize resources. Sharing your interest in biomedical 
research, what I can tell you is that the current Budget will 
allow the NIH to distribute about 672 new grants, about a 7.7 
percent increase in grants. So, we will continue to enhance the 
research going on.
    Thanks to the work with Congress last year, the new 
National Center for Translational Sciences is moving forward. 
The Cures Acceleration Network is moving forward. They both 
have additional resources in this year's Budget. So, Dr. 
Collins feels that this presentation, again, given our Budget 
restrictions, is the way to maximize grant opportunities, 
maximize strategic opportunities, and keep life-saving 
medicines moving forward.
    Ms. Lowey. Thank you. Thank you.
    Mr. Rehberg. Secretary Sebelius, as we started late, I want 
to respect your time. Do you have a little additional time that 
you could stay? We figure that if we started the second round, 
as I look at the number of members here, it would take about a 
half an hour.
    Secretary Sebelius. I do not have a half an hour, Mr. 
Chairman, I am sorry. I was told that 4:00 was the----
    Mr. Rehberg. If you can grant us at least 10 minutes, I 
could ask an additional question and the ranking member, Ms. 
DeLauro, could ask an additional question. Can you grant us at 
least 10 minutes?
    Secretary Sebelius. Yes, sir.

                      STRATEGIC NATIONAL STOCKPILE

    Mr. Rehberg. Thank you very much.
    First of all, and I may yield some of my time if you want 
to finish your questioning having to do with the lobbying, 
because I know I cut you off. But I wanted to ask you about the 
Strategic National Stockpile. And as you know, that is the 
preparedness providing resources, 12-hour push packages and 
managed inventory, chem packs, Federal medical stations.
    And I noticed in the President's budget, and I am sensitive 
to this because I used to be a lieutenant governor. Disaster 
preparedness is something that has been very important to me. 
And I noticed that the President's budget proposes a reduction 
in the Strategic National Stockpile by 9 percent or $48 million 
in the Fiscal Year 2013. I just would like to have you explain 
how such a large reduction can possibly not impact the national 
preparedness posture.
    Secretary Sebelius. The Budget request will allow the 
Centers for Disease Control and Prevention to replace the high 
priority expiring counter measures, such as small pox and 
antibiotics for the treatments of Anthrax. And that is one of 
the issues that we have to pay careful attention to--what is 
going out of stock.
    But it will continue the ability to explore the methods of 
distribution, implement the national policy for Anthrax-related 
event, and continue to purchase, and warehouse, and manage 
medical counter measures. So, we feel that this is an important 
initiative moving forward.
    Mr. Rehberg. Thank you, Secretary. I am going to follow up 
with a letter----
    Secretary Sebelius. Okay.
    Mr. Rehberg [continuing]. Because I do want to address it 
in the larger bill. And so your staff has an opportunity to 
come up with an explanation or a description. I do not disagree 
necessarily. I just need to find out. I want to find out.
    Secretary Sebelius. Sure.
    Mr. Rehberg. Mr. Kingston, I will yield three minutes.

                                LOBBYING

    Mr. Kingston. Thank you, Mr. Chairman.
    Madam Secretary, we may need to just put these on the 
record, but I guess one of the questions is since the 
Philadelphia Department of Public Health was acting not in 
accordance with the law, I would like to know what happened, 
for example, if somebody abuses a grant like that, are they 
banned from getting future grants?
    Secretary Sebelius. Mr. Kingston, I do not know that they 
did not act in accordance with the law. I do not know if they 
used their funding or Federal.
    Mr. Kingston. Oh, I thought you said----
    Secretary Sebelius. The law with regard to Federal funding 
being used for certain purposes.
    Mr. Kingston. Okay. We will follow up with you on that 
then.
    Secretary Sebelius. Sure.

               SUPPLEMENTAL NUTRITION ASSISTANCE PROGRAM

    Mr. Kingston. And now, on WIC, there is a limited menu. As 
you know, it is for nutrition, whereas on SNAP there is not. 
And I know that is not your jurisdiction. But recently, the 
USDA turned down the City of New York or New York City who 
wanted to try a limited menu for SNAP. And I would be 
interested in your thoughts about that, but only academically 
because I know it is not in your jurisdiction, or perhaps some 
of it is. I am not certain.
    Secretary Sebelius. No, we do not have jurisdiction over 
the program.
    Mr. Kingston. But if you had any thoughts along that line, 
that would be of interest to me.
    And then I wanted to mention also, you do have some overlap 
on food deserts. You have an interagency working group or 
anything like that on food deserts?
    Secretary Sebelius. The Department of Agriculture did some 
mapping, and we have a grant program that we run out of the 
agency----
    Mr. Kingston. But you use the same definition.
    Secretary Sebelius. Pardon me?
    Mr. Kingston. You use the same definition?
    Secretary Sebelius. We use their definition. We do not----
    Mr. Kingston. Do you think that that definition should be 
revisited, because one of the things is that if you are in an 
urban area a mile away from a grocery store, you are in a food 
desert, which I would think in so many cases is ridiculous. 
Have you looked at their definition?
    Secretary Sebelius. We have, sir.
    Mr. Kingston. And you think it is a good one?
    Secretary Sebelius. Well, I think it is very difficult for 
a family buying groceries if they have to walk a mile with bags 
of groceries. It may be too far to get healthier food, so----
    Mr. Kingston. You really think that.
    Secretary Sebelius. I do.
    Mr. Kingston. Because I suspect in this room most of us 
might live a mile away from a grocery store. And it is a 
broad----
    Secretary Sebelius. And you walk a mile to get to the 
grocery store?
    Mr. Kingston. Well, I do not think the walking part is in 
the definition.
    Secretary Sebelius. Well, I am just suggesting to you, sir, 
that----
    Mr. Kingston. But it is not in the definition, so, I mean, 
you know, it would also be bad if, you know, if you did not 
have a driver's license, but that is not in the definition, so 
that is not relevant.
    Secretary Sebelius. We would be happy to look at the 
definition, but----
    Mr. Kingston. I think we should in terms of the spirit of 
what a food desert should be. And I have interest in that, so 
let me yield back.
    Mr. Rehberg. Okay. Ms. DeLauro.
    Ms. DeLauro. Thank you very much, Mr. Chairman.
    Madam Secretary, I am going to try to get in two questions. 
I will be brief.

                  CONSUMER OPERATED AND ORIENTED PLANS

    Co-op insurance plans, I know that the Affordable Care Act 
authorizes loans to set up these co-op health plans, to 
increase competition. These are non-profit -profit health 
insurance with customers making up the majority of the 
governing boards.
    I understand you have just made 7 loans for startup costs, 
in New Mexico, Oregon, Iowa, Nebraska, Montana, New York, New 
Jersey, Wisconsin. There have been a number of attempts to 
reduce or eliminate funding for the co-ops. In the 2011 
appropriations bill, $2.2 billion was rescinded. The 2012 
Labor, HHS bill would have rescinded all remaining funding by 
shutting down the program before it made its first loan. In the 
final conference agreement we were able to considerably reduce 
the size of the rescission.
    What is your view of the prospects for the co-op loan 
program? Is the department getting good applications? Do you 
think the program has promise? What would be the consequences 
of further rescissions?
    Secretary Sebelius. Well, Congresswoman, it is designed to 
have competition in the marketplace, and as we have heard, that 
is a good thing. When monopolies exist among insurance 
companies, often it is very difficult to get pricing down. 
Competition tends to drive down prices. So, I think the program 
has great promise, and we have had some good initial 
applications, and we look forward to more.

              AFFORDABLE CARE ACT TRANSPARENCY PROVISIONS

    Ms. DeLauro. I want to talk about transparency in the 
Affordable Care Act.
    In 2009, less than 1 in 5 of the insurance plans that sold 
in the individual market included comprehensive maternity 
coverage. Now, maternity care is one of the 10 bundles of care 
that must be covered by plans as part of the essential health 
benefits package.
    The agency announced groundbreaking transparency 
provisions. Plans that participate in the health insurance 
exchanges will have to use a helpful, concise, easy to 
understand summary of benefits coverage. I have an example of 
the form right here and the summary of important questions. Two 
clear examples of how the insurance plan would cover two 
things: having a baby and managing type 2 diabetes.
    Can you tell me when the provision will be implemented? 
When will our constituents be able to use these helpful pieces 
of information instead of the hundreds of pages that the 
insurance company throws out at you and then you have to try to 
figure it out. Do you believe that it will help consumers make 
decisions about their health insurance options?
    Secretary Sebelius. I do. A couple of things. I have just 
been told that the implementation for the transparency is 
October 1st of this year, so that the forms will begin to be 
revised, and folks will not have to wade through pages of 
small, fine print. And as a former insurance commissioner, I 
know how complicated that is for people to find out what 
actually their coverage includes.
    We also, as you know, Ms. DeLauro, have in place right now 
in Healthcare.gov a website where for the first time consumers 
can get comparative information about plans, and deductibles, 
and prices in their own neighborhoods. That has never existed 
before, and we were directed to do that by the Affordable Care 
Act, and I think it has been an enormously important tool for 
people to find out about what they had in the marketplace, and 
how much it was going to cost before they went to an agent to 
try and buy insurance.

                     PREVENTION PUBLIC HEALTH FUND

    Ms. DeLauro. Thank you for that. Also thank you on the 
anti-fraud measures. I think you have laid that out.
    A final question, if I can get it in, and this is about the 
Prevention and Public Health Fund, which my colleagues keep 
talking about. But for the past two appropriations cycles, 
Congress has failed to exercise its authority to determine the 
uses of the fund. I believe that is because of a reluctance on 
the part of some of our majority colleagues to have anything to 
do with anything connected in any way with the Affordable Care 
Act. As a result, the priority setting for the Prevention and 
Public Health Program has been turned over to the executive 
branch.
    Tell us your approach, what that has been, to allocating 
and using amounts of the Prevention and Public Health Fund. 
What have you accomplished and what do you hope to accomplish 
in 2013? You are not going to have a chance to answer all those 
questions. We can follow up. But at least what is your 
approach, and what do you think you have accomplished?
    Secretary Sebelius. Well, I think the approach is, as it 
was designed, to focus on strategies that actually reduce 
health costs and create a healthier population. Tobacco 
prevention, the new Community Transformation Grants, which are 
focusing on enormously promising health strategies, HIV/AIDS 
work, public health workforce, State epidemiology and 
laboratory capacity, coordinated disease prevention, are all 
areas that have been funded. And we would look forward to 
working with Congress on the allocation.
    As you know, since there was no directed allocation by the 
Appropriations Committee, we did have informal conversations 
with bipartisan staff members from both the Appropriations 
Committees in the House and Senate. I tried as much as possible 
to follow their direction, but look forward to having those 
conversations in the future.
    Ms. DeLauro. Thank you. Thank you, Madam Secretary. Thank 
you for the job you are doing.
    Mr. Rehberg. Thank you.
    Members are allowed 14 days to submit questions for the 
record.
    Mr. Rehberg. Secretary Sebelius, I thank you for making 
your presentation today, for being patient with us, and giving 
us a little extra time. Thank you.
    Secretary Sebelius. Certainly.


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                                           Tuesday, March 20, 2012.

    BUDGET HEARING FOR DEPARTMENT OF HEALTH AND HUMAN SERVICES--NIH

                               WITNESSES

FRANCIS S. COLLINS, M.D., PH.D., DIRECTOR, NATIONAL INSTITUTES OF 
    HEALTH (NIH)
THOMAS INSEL, M.D., ACTING DIRECTOR, NATIONAL CENTER FOR ADVANCING 
    TRANSLATIONAL SCIENCES (NCATS) AND DIRECTOR OF NATIONAL INSTITUTES 
    OF MENTAL HEALTH (NIMH)
    Mr. Rehberg. Good morning, and welcome. Let me begin by 
thanking the subcommittee for providing the leadership that 
resulted in an increase in Fiscal Year 2012 to support basic 
science. We recognize NIH's mission is to invest in basic 
biomedical research. We made policy choices to support the 
pipeline of investigators and the extramural basic biomedical 
infrastructure across the Nation.
    The Fiscal Year 2012 Appropriations Act included a number 
of important items and statements of managers' provisions, and 
I expect NIH will ensure that both the letter and the spirit of 
this language is followed.
    Specifically, our efforts provided a much needed base 
increase in specific language for the Clinical and 
Translational Science Awards (CTSA) and Institutional 
Development Awards (IDeA) programs.
    We also continue support for the National Children's Study 
(NCS), which is of interest to both the ranking member and 
myself as co-founders of the Baby Caucus. The NCS is a 
necessary study of 100,000 children from birth to age 21. It 
aims to examine the effects of the environment on growth, 
development, and health of children across the United States.
    The Fiscal Year 2013 budget request provides vaguely 
described changes to the study and an unanticipated reduction 
in the cost. A transparent discussion is needed to ensure the 
proposed changes do not undermine the scientific value of the 
study. As I think we all agree, it is important to finally 
gather a large body of scientific data which in the future can 
improve the health and well-being of our children.
    I agree with one of the key NIH 2013 budget request themes, 
to invest in basic science. It is important, I believe, to 
support the historical level of 55 percent of NIH resources 
towards basic sciences. I would suggest that NIH develop a 
governance process towards this end; otherwise, the increased 
focus on translational research could squeeze out NIH's primary 
mission, that of basic science. We do not want to wake up in 
the future to find a NIH director without a stable full of 
science available for translation because we took our eye off 
the ball of basic science.
    Another trend of concern is incremental decreases that 
continue to divert funds from the extramural to the intramural 
science programs. Again, I suggest NIH find a governance 
process to resume the historical balance of 10 percent for the 
intramural programs.
    Finally, I cannot imagine supporting NIH's request to 
reduce the base of the IDeA program below the level of Fiscal 
'12. This program supports diversity, capacity building, basic 
science, and developing young investigators in 23 States for 
less than 1 percent of NIH's budget.
    Today, we have expert NIH and outside witness panels to 
discuss issues related to NIH and the National Center for 
Advancing Translational Sciences. I believe we have provided 
NIH with a more focused authority to study steps in the 
therapeutic development process, consult with experts in 
academia, biotechnology, and the pharmaceutical industries to 
identify bottlenecks in the processes that are amenable to 
reengineering.
    The specific mission of NCATS is to coordinate and develop 
resources, to leverage basic research, to support translational 
science, and develop partnerships in ways that do not create 
duplication, redundancy, and competition with the industry 
activities.
    NCATS has authority to support clinical trials and 
infrastructure activities, in addition to a reasonable, but 
narrower, level of authority to take drugs into phase two 
clinical trials. Congress did not provide or envision NCATS or 
NIH to have authority to compete with industry or become a drug 
developing organization. I repeat, Congress did not provide or 
envision NCATS or NIH to have authority to compete with 
industry or become a drug developing organization. The focus of 
NIH and NCATS is to study the process and leverage basic 
science towards the goal of providing tools and methods to 
industry which can one day speed up drug development process.
    I am looking forward to the discussion, but let me first 
ask my ranking member, Ms. DeLauro, if she has any comments 
before we turn to the panels.
    Ms. DeLauro. Thank you very much, Mr. Chairman. I do have 
comments.
    Also let me just personally thank you for inviting me to 
come up a few minutes early. Unfortunately I could not do that. 
I hope I will have an opportunity to get a chance to at least 
shake hands with everyone who is testifying this morning. I 
actually was on the phone with a staff member in our district 
office whose mother is struggling with cancer, and I think my 
last comment to her was, well, you know, maybe I will get on 
the phone and call the NIH. So, you are our touchstone. I mean 
that very, very sincerely, when it comes to illness and disease 
in this country.
    And as we meet here to discuss the National Institutes of 
Health, the House is preparing to debate a budget plan for the 
upcoming fiscal year. The House majority is renewing its 
demands for more and more drastic cuts that, in my view, will 
harm medical research and many other priorities vital to our 
well-being and to our future.
    What the NIH does, and the research it supports at 
universities, hospitals, and institutes across the country, is 
unquestionably important to each of us. It alleviates 
suffering. It saves lives. And so many of you know that I am a 
cancer survivor--26 years this month. I am here because of the 
grace of God and because of biomedical research.
    Just last year, researchers found that anomalies in a 
single gene were present in nearly all of the most common types 
of ovarian cancer, a finding that may lead to more effective 
diagnostics and treatments. That is but one example of why NIH 
is the gold standard for biomedical research, not only in the 
United States, but in the world.
    Medical research at NIH and elsewhere has led to, among 
other things, dramatic reductions in death rates from heart 
disease and stroke, more effective treatments for HIV/AIDS, 
improved survival rates for cancer, and better ways of managing 
diabetes. That is why we came together in a bipartisan way to 
double the NIH budget nearly 15 years ago, and why members of 
this subcommittee on both sides have continued to support NIH 
funding, even in the face of budgetary constraints.
    The work of NIH also brings substantial economic benefits. 
Every dollar in funding is estimated to result in more than $2 
of business activity and economic impact. A report released 
yesterday found that NIH funding supports nearly half a million 
jobs in our country, and another study found that our 
investment in the human genome project created nearly $800 
billion in economic growth.
    I doubt that we would have had the wherewithal to invest in 
the human genome project a decade ago if the discussion in 
Washington, D.C. today had taken place then. And think of what 
we would be missing. Medical biotechnology industries fostered 
by this research, are among the keys to our future growth and 
world competitiveness of our economy, new technologies, and 
more personalized treatments to improve the health of 
Americans.
    Despite these benefits, recent budget choices have shrunk 
NIH. Total funding for the NIH is now $86 million less than it 
was just two years ago, and that is without considering 
inflation, meaning that those same dollars are able to support 
even less research. When adjusted for increasing costs of 
medical research, the NIH appropriation has lost 5 percent of 
its purchasing power since 2010, and 16 percent since 2003.
    NIH estimates that it will be able to support 767 fewer 
research project grants in 2012 than it did in 2010, and 2,700 
fewer grants than in 2004. Ten years ago NIH was able to fund 
almost 1 out of every 3 applications for research grants. Now, 
that ``success rate'' is down to less than 1 in 5. The erosion 
of resources may just be the beginning as the majority party 
demands still more cuts to the programs that are funded in 
appropriations bills. It appears that the 2013 budget 
resolution walks away from the multi-year agreement negotiated 
last summer, and instead reduces the limit on overall 
appropriations down to roughly the level of 2011, that package 
which was passed in the form of H.R. 1.
    If the funds available to this subcommittee decrease, it is 
hard to imagine that the NIH will not shrink along with that 
total. After all, the NIH is one-fifth of our bill. H.R. 1, 
which the majority now seems to want to repeat, would have cut 
the NIH by $1.6 billion.
    Budget debates may be conducted using fake terms like 
``domestic discretionary spending,'' but in reality we are 
talking about things like NIH research that saves lives.
    What is at stake is whether national investments in medical 
research will be continued and expanded or whether we will 
scale back these efforts, lose jobs, and cede leadership to 
other nations.
    At today's hearing, Chairman Rehberg has asked the 
witnesses to focus particularly on the new National Center for 
Advancing Translational Science, and to address issues of 
possible overlap and duplication with the work of private 
industry. The purpose of that new center is to consolidate and 
focus NIH resources aimed at improving the science of 
translating research, and to better treatments and cures for 
patients. That is a critically important mission. It will be 
good to get an initial progress report.
    Possible duplication with the private sector is an 
important issue to explore. But the most important question 
should be whether this new focus will help to speed cures, 
diagnostics, and treatments to patients.
    We will hear from two distinguished panels this morning. 
The first consists of leaders from the NIH. The second has 
experts from the pharmaceutical, biotech industries, along with 
a leading research from a non-profit foundation that works to 
advance therapies for Parkinson's disease.
    Welcome to each of you. I look forward to your testimony 
and to the questions that follow. Thank you very much. Thank 
you, Mr. Chairman.
    Mr. Rehberg. Let me begin by thanking you, Ms. DeLauro, for 
your input in the hearings that we are going to have over the 
course of the next couple of days.
    Ms. DeLauro. Thank you.
    Mr. Rehberg. It was very important to hear your 
suggestions.
    Ms. DeLauro. Appreciate it.
    Mr. Rehberg. We were able to fit some of them in.
    Ms. DeLauro. I know. I appreciate it. And this is one that 
is particularly important as you know.

                       Introduction of Witnesses

    Mr. Rehberg. Great. I am going to introduce both panels 
first. And our first panel includes the one and only NIH 
director, Dr. Collins and the acting director of NCATS, Dr. 
Insel. Welcome. They will discuss what regulations, policies, 
and guidance are being established in Fiscal Year '12 within 
the NIH and NCATS governance system to ensure it does not 
compete with, duplicate, or invest in redundant activities in 
industry. See a theme developing in my statement?
    I asked NIH to highlight how input from industry will be 
collected and evaluated to ensure NIH complies with the law. In 
addition, I hope NIH will discuss how the Fiscal Year '13 
request ensures basic science is not negatively impacted, given 
its recent focus on NCATS. I will not repeat it. You got it.
    Our second panel will discuss key hurdles observed with 
pharmaceutical development which hinder the advancement of 
translational science, and how NIH or NCATS can coordinate 
activities to leverage basic science in ways to improve how the 
pharmaceutical industry can accelerate moving discoveries into 
treatments. We have three very distinguished witnesses in Dr. 
Roy Vagelos, former chairman/CEO of Merck and Company, Dr. 
Scott Koenig, M.D., Ph.D., president and CEO of MacroGenics, 
and Dr. Todd Sherer, Ph.D., CEO, of the Michael J Fox 
Foundation for Parkinson's Research.
    I hope you will be able to stay for the second panel. I 
think that you indicated you were going to be able to do that. 
I appreciate that very much. It is always good to hear it one 
more time from an outside source.
    So, Dr. Collins, the floor is yours.

                     Dr. Collins' Opening Statement

    Dr. Collins. Well, thank you, and good morning, Mr. 
Chairman, and members of the subcommittee. I am very pleased to 
present the President's Fiscal Year '13 budget request for the 
National Institutes of Health. And I must begin by thanking 
you, Mr. Chairman, for the $1 billion increase you proposed for 
NIH in your draft Fiscal Year '12 bill, and for the ultimate 
Fiscal Year '12 appropriation which maintained NIH's budget at 
the Fiscal Year '11 level.
    We are also grateful for your leadership in creating this 
new National Center for Advancing Translational Sciences or 
NCATS.
    In addition to Dr. Insel, who is sitting next to me, I 
would like to mention that Dr. Harold Varmus and Dr. Tony Fauci 
are also here, leaders of the National Cancer Institute and the 
National Institute of Allergy and Infectious Diseases, 
respectively.
    This morning, I would like to highlight a few of NIH's many 
contributions to our Nation's health and its economy, as well 
as discuss NIH's commitment across this wide spectrum of basic 
and translational research.
    Let us start with health. NIH funded research has prevented 
untold human suffering by enabling Americans to live longer, 
healthier, and more productive lives. These benefits include a 
70 percent reduction in the death rate for heart disease and 
stroke over the last half century, a 40 percent decline in 
infant mortality in the past two decades, and much more.
    And then there is the economy. As our Nation struggles to 
recover from a difficult period, it is worth pointing out that 
government investments in biomedical research are a terrific 
way to spur economic growth. Eighty-four percent of the NIH 
budget goes out in grants to researchers located in every one 
of our 50 States, and each dollar NIH sends out is estimated to 
return $2.21 to the local economy in just one year.
    NIH supports approximately 432,000 high quality American 
jobs, and when our partnerships with the private sector are 
factored in, this rises to more than 8 million jobs.
    Technological advances are driving rapid progress in 
medical research today. No less a futurist than Steve Jobs once 
said, ``I think the biggest innovations of the 21st century 
will be the intersection of biology and technology.'' He was 
spot on. A striking example: The cost of sequencing a human 
genome, all of the DNA in our instruction book. Twelve years 
ago, it cost $400 million; five years ago, $10 million, today 
less than $8,000. And within the next year or two, a couple of 
U.S. companies plan to sell machines that sequence a genome in 
a single day for $1,000 or less. Those machines used to be the 
size of a phone booth. Here is one of them today. That is a DNA 
sequencing machine. This will revolutionize how doctors 
diagnose and treat diseases and will allow researchers to 
pursue previously unimaginable scientific questions.
    Mr. Chairman, NIH is the leading supporter of basic 
biomedical research in the world, and this year has been the 
case for many years. Slightly more than half of NIH's budget 
will support this kind of fundamental research, which I 
understand is a major concern of yours, and I agree with that. 
There is no competition, though, between basic and applied 
research at NIH. I support basic research that makes possible a 
wide range of new biological discoveries, discoveries that in 
turn can then be translated into new strategies for diagnosing, 
treating, and preventing disease, and which, in turn, in a 
virtuous cycle triggers new ideas in basic research.
    But there is much work to be done. Despite phenomenal 
progress in basic science, we still lack effective treatments 
for far too many diseases. And this translational pipeline to 
get there is long, 14 years on the average. And it is leaky.
    A recent article in the Journal of Nature Reviews Drug 
Discovery found that despite huge and growing investments in 
research and development from both public and private sectors, 
the number of new drugs approved per billion dollars spent has 
fallen steadily since 1950. Bottlenecks continue to vex this 
process resulting in long development times, very high failure 
rates, and steep costs.
    We need to re-engineer this pipeline, and that is why this 
new center, NCATS, is already working with industry in a 
complementary way to develop innovative ways to speed the flow 
of new therapies to patients.
    Mr. Chairman, I have described the synergy between basic 
and translational research at NIH, but I would like to close 
with a story that ties these points together. As toddlers, 
twins Alexis and Noah Beery were diagnosed with a rare and 
devastating movement disorder called dystonia. Although they 
initially responded to empirical treatment, their symptoms 
reappeared and worsened as they entered their teenage years. 
Noah developed severe tremors in his hands. Even worse, his 
sister, Alexis, began falling frequently and had frightening 
episodes where she could not breathe.
    Desperate for answers, doctors at Baylor College of 
Medicine sequenced the twins' genomes. The result? Discovery of 
a never before described genetic mutation affecting neuro 
transmitters in the brain. After being put on a new treatment 
regimen tailored to their unique genetic profile, the twins' 
symptoms began to improve within just two weeks.
    I saw a video last night of the two of them doing tricks on 
a trampoline. In fact, Alexis' breathing is so much better 
today, she has joined her school's track team.
    Now, while this story centers on two teens with a rare 
disease, this outcome carries a message of hope for all of us. 
It points directly to the promise that NIH research offers to 
patients of today and tomorrow.
    So, thank you for this opportunity, Mr. Chairman, members 
of the subcommittee. I will be glad to answer your questions.
    [Prepared statement and biography of Dr. Francis Collins 
follows:]


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    Dr. Insel. I do not have an opening statement. I think we 
can just get right into the discussion.
    [Prepared statement and biography of Dr. Thomas R. Insel 
follows:]



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                   IMPACT OF NCATS ON BASIC RESEARCH

    Mr. Rehberg. I had better turn that on. Tell me about the 
governance within NIH and how you are going to maintain the 55 
percent. How does this, first of all, the Fiscal Year '13 
budget allow for that based upon the budgetary request? And 
then work into a little bit of NCATS.
    It is no secret today. I did not necessarily like the way 
NCATS came about. I am a supporter. I encourage it. And yet 
this, you know, for those of us who are kindly more process 
oriented, the loosey-goosey attempt of creating an 
infrastructure without some meat on it always makes at least 
this member nervous. And so, convince me that you have got a 
plan that is going to, one, protect NIH extramural activities, 
maintain the 55 percent, and then as it relates to NCATS, how 
you intend to see this work over the course of the next few 
months.
    Dr. Collins. Well, thank you for the question and for your 
support, Mr. Chairman.
    And I know that the way in which NCATS came to this 
committee occurred in a fashion that did not have the number of 
details that you would have normally hoped to see during the 
regular budget process, and for that we apologize.
    I will admit to being an impatient physician researcher 
charged with leading an organization, the largest supporter of 
biomedical research in the world, and feeling that an 
opportunity had arisen that could be, in fact, capitalized 
upon, and, therefore, was moving as swiftly as possible to see 
it come true. I guess trying to go against the idea that the 
government always moves slowly, we were maybe moving a little 
too fast for the pleasure of this committee. But I do think we 
can defend what has come forward now as part of NCATS in very 
strong ways.
    To answer your question about the 55 percent for basic 
research, actually it is 54 percent, and in some years it has 
been 53 percent. But over the last 20 or 30 years, that 
percentage, as we define basic versus applied research, has 
remained essentially constant, and I do not expect that 
percentage to change in any significant way in the coming years 
because as you have rightly pointed out, NIH is the main 
supporter of basic biomedical research. These are the kinds of 
work that would not go on in the private sector generally 
because they will not connect to something that would result in 
a product. And so, it is our job to carry out that kind of 
research.
    But at the same time, as I mentioned in the opening 
statement, we have the chance to capitalize on a deluge of 
basic science discoveries because they are pouring out of 
laboratories now, and to try to make sure that those do not 
remain for too long untouched.
    And there is this valley of death, Mr. Chairman, which is 
commonly cited between some basic discoveries and ultimately 
arriving at a therapeutic or a diagnostic benefit where 
oftentimes things go to die. And if NIH can assist by the 
formation of this new center in identifying the bottlenecks 
that keep those successes from happening, then my sense is, and 
I get much encouragement from this from the private sector, and 
you may hear some of that in the second panel, that this is a 
role that we could play without skewing our investments in the 
favor of translational versus basic, but basically taking the 
translational efforts and putting them together under one 
center with the synergies that can create, with a hub that is 
created by that.
    Most of the translational science that goes on at NIH is 
not going to be at NCATS. It is in our 27 institutes--the 
Cancer Institute, the Infectious Disease Institute. They have 
been in this space for a long time. That is why you can see so 
many vaccines, for instance, coming forward, so many new drugs 
where NIH played a major role.
    But what we are trying to do is to identify the pipeline as 
the problem and to see how we could engineer that in a way that 
would break down these bottlenecks. That is what NCATS is 
about.
    Dr. Insel. If I can just add in one point of clarification 
to make sure we are all on the same page. This is indeed a new 
center, but with a very tiny exception. It is not new money. 
This does not shift the balance of anything because all of the 
programs that are in NCATS existed last year and the year 
before. What we are doing is building a new adjacency so they 
are now sitting next to each other interacting.
    These were all funded before sitting at different parts of 
the NIH. The one exception is the 2 percent of our budget in 
NCATS that goes towards the Cures Acceleration Network. That is 
new, that $10 million program.
    Mr. Rehberg. Ms. DeLauro.

                    CURES ACCELERATION NETWORK (CAN)

    Ms. DeLauro. Thank you very much, Mr. Chairman, and I want 
to also welcome Dr. Varmus and Dr. Fauci. It is wonderful to 
see you.
    Mr. Chairman, it is wonderful to have these folks here. 
This is one of the most exciting efforts that our government is 
engaged in and has been engaged in through the years. We are 
really the leaders in the world on this effort, and we have to 
maintain that standard. I am just so excited to have you here.
    And I just will mention, with regard to the valley of 
death, it may be the place where drugs or some science goes to 
die. Quite frankly I am excited that you want to break the log 
jam of the bottlenecks because, quite frankly, the valley of 
death is for people who do not survive because we have not 
found a diagnostic or a therapy or a cure. That is really what 
the issue is. It is getting this so that somebody can take 
advantage of it and live. I mean, that is what we are about.
    With that, your budget proposes a substantial increase in 
spending authority for the Cures Acceleration Network. That 
program received its first appropriation of $10 million in the 
2012 bill. The budget proposes an increase to $50 million for 
2013. Please tell us what the Cures Acceleration Network is 
intended to do, why you consider it important, and what more 
this proposed expansion would allow you to accomplish.
    Dr. Insel. Well, thank you for the question.
    The Cures Acceleration Network is indeed the one new 
element within NCATS that was not there before. And this is the 
piece where we hope to be able to push forward an agenda that 
looks at fixing some of those log jams that you talked about.
    When we have listened to industry about what are the main 
impediments to progress for them, we hear about two. One of 
them has to do with toxicity, that about a third of medications 
fail in trials because data about toxicity from animals does 
not predict what happens in the clinic.
    Ms. DeLauro. Explain toxicity for a second. What is it?
    Dr. Insel. So, a drug that you develop for one indication 
has an adverse event, an adverse effect that keeps you from 
being able to develop it further. Sometimes we just cannot 
predict from what we have seen in animals. And so, that was one 
of the issues we heard.
    The other one we heard about was what they call efficacy. 
It just does not work well enough. Those two together explain 
about two-thirds of the failures. And drugs fail 95 percent of 
the time when they get into the clinical pipeline. So, this is 
a big problem that all of us have a stake in.
    What we hope to do with the Cures Acceleration Network is 
to establish a set of programs that can address this. One would 
be creating what we call tissue on a chip. These are human 
tissues now, not animal tissues, that would be able to screen 
compounds that are in early stage development to find out 
whether they do have toxicity. This is a lung, a human lung, on 
a chip that allows us with some efficiency for the first time 
to be able to look using what we call microfluidics. It is a 
technology recently online to go very quickly into looking into 
a whole series of different compounds to find out whether they 
are tolerated by human tissues, in this case lung tissue. We 
would like to do this across the board for human tissues to be 
able to predict toxicity in a dish. So, that is the kind of 
thing that we see the Cures Acceleration Network doing.

                         PERSONALIZED MEDICINE

    Ms. DeLauro. How does that translate into an individual 
treatment? In other words, you are taking tissue, et cetera, 
from a lung. That is general. It is not an individual person or 
so forth. But in your route toward personalized medicine, what 
kind of application is----
    Dr. Insel. So, you are asking about the second piece----
    Ms. DeLauro. Right.
    Dr. Insel. The things that are just more effective, and to 
get those into the pipeline. And the problem with that is often 
we just do not know enough about the biology of the diseases, 
the problem that we define as understanding the target you are 
going after. And that is really another important area for the 
Cures Acceleration Network is trying to figure out ways of 
working with many partners, because these are complex problems, 
to identify better partners, and then better targets, and also 
to think about ways that we can begin to use medications that 
might be there already developed for one indication and try to 
use them in a new one.
    Ms. DeLauro. In another one.
    Dr. Insel. So, there are a lot of opportunities out there 
that are part of reengineering this pipeline.
    Ms. DeLauro. My time is going to be up in a second, so I 
will yield back. No, that is fine. Thank you very much. Thank 
you.
    Mr. Rehberg. Mr. Alexander.

                              IDEA PROGRAM

    Mr. Alexander. Thank you, Mr. Chairman, and good morning to 
you all.
    Dr. Collins, my State of Louisiana is eligible for the 
National Institutes of Health Institutional Development Award 
IDeA program. It is a program which has played a significant 
role in building and strengthening biomedical research in the 
State.
    The Louisiana IDeA Networks for Biomedical Research 
Excellence Program, called INBRE, has impacted 21 different 
colleges and universities within the State. It has enabled 
researchers to produce more than 100 journal publications and 
secure more than 80 additional research grants totaling $12 
million in funding.
    Louisiana INBRE has supported more than 650 students, 
staff, and faculty in biomedical research, as well as 
supporting summer research programs for students of which more 
than 100 have graduated and are now in graduate schools, and 
medical schools, and professional schools across the country.
    At Louisiana Tech, INBRE has helped the institution recruit 
and retain talented junior faculty. From one grant alone, the 
researchers involved with the grant have now served on more 
than 16 NIH scientific review panels since obtaining support 
from the INBRE program.
    The question is, why does it seem that the IDeA program is 
in a low priority as evidenced by the $51 million cut 
recommended for the program in the NIH budget?
    Dr. Collins. So, Congressman, thank you for the question.
    We are enthusiastic about the IDeA program, and as you 
pointed out, in the State of Louisiana and some other States 
represented here at the table. Montana, for instance, Idaho. 
This program has been a way in which NIH can support individual 
investigators at institutions in States that have not had the 
same tradition of research intensive universities that some 
States have. Those 23 IDeA States do, in fact, receive the 
support for this enterprise through a number of programs, and 
you have mentioned the INBRE program, which is an IDeA network 
for biomedical research excellence, and the COBRE programs, 
which are also centers of biomedical research excellence.
    We were grateful for the additional increment of funds for 
the IDeA program in the Fiscal Year '12 budget, and we are 
following what was the sense of the Congress in terms of using 
those funds to fund two new centers for translational research 
as well as an additional set of eight COBRE centers with that 
additional funding.
    But our understanding of the way in which this increment, 
you know, could be utilized was this was a much needed, one-
time boost. And given the tightness of the budget in Fiscal 
Year '13 for many other areas, we, therefore, in the 
President's budget see that the funds for IDeA have been 
reduced roughly back to where they were in Fiscal Year '11.
    I promise you the Fiscal Year '12 dollars will be spent. 
But considering the number of other pressures on the system, 
including the fact that investigators anywhere in our portfolio 
have seen the lowest success rates ever, and Congresswoman 
DeLauro mentioned those numbers, we felt that this was the most 
reasonable way to balance. And that is how the President's 
budget lays out the plan for IDeA.
    Mr. Alexander. It has also been brought to my attention, of 
course, that the groups of IDeA researchers have sought to meet 
with you since you became the NIH director. They have met with 
NIH directors in the past. To this date, they have not been 
given a meeting. Can you help us understand why?
    Dr. Collins. So, the IDeA program moved as part of the 
changes in structure of NIH in Fiscal Year '12 from where they 
had been located in the National Center for Research Resources, 
into the National Institute for General Medical Sciences 
(NIGMS).
    I am not aware whether they have made a plea to meet with 
the director of NIGMS, Dr. Judith Greenberg, but I will say 
here in front of this committee, I would be glad to meet with 
the leaders of the IDeA program and discuss their concerns.
    Mr. Alexander. And at some point we would like to invite 
you to the State of Louisiana to look at some of the work going 
on there. Thank you.
    Dr. Collins. You have a fine State, and I would enjoy the 
experience.
    Mr. Alexander. Thank you, Mr. Chairman.

                         INTENT OF IDEA FUNDING

    Mr. Rehberg. If, Mr. Alexander will yield for a moment. Dr. 
Collins, we did not suggest in the Fiscal Year '12 that these 
were 1-year funds. We suggested that each of the programs be at 
50 percent. So, I guess I do not understand the hesitation or 
the confusion or at least the difference, I think, of answers 
as I understand it.
    Dr. Collins. Well, again, I believe in the President's 
budget. The proposal was that the dollars for IDeA in Fiscal 
Year '12, much appreciated as they were, were treated in the 
President's budget as a one-time addition to that program, not 
as a change in the base.
    Mr. Rehberg. Not in our--excuse me, not in our Fiscal Year 
'12 budget. Not as we sent it out of here. It might have been 
in the President's suggested budget or his budget request, but 
that is not the way it went out of here as a one-time 
allocation. It was 50 percent in each program.
    Dr. Collins. I am not sure I understand the 50 percent.
    Mr. Rehberg. Identified for each program as opposed to 
being a one-time allocation, so it was an ongoing opportunity 
within the various programs.
    Dr. Collins. Well, again, I think that is why were are here 
talking about Fiscal Year '13 is to figure out what the 
Congress' intentions would be going forward with the IDeA 
program. I guess I am here to represent what the President's 
budget put forward, which was an interpretation that this was a 
one-time allocation and not an adjustment in the base.
    Mr. Rehberg. Okay. Ms. Roybal-Allard.

           COMMUNITY BASED ORGANIZATIONS AS RESEARCH PARTNERS

    Ms. Roybal-Allard. Dr. Collins, as we increasingly look to 
NIH investments in clinical and translational research, the 
engagement of communities and partners in NIH research is 
essential to advancing NIH research investments.
    As more community based organizations enter into research 
partnerships with NIH funded academic institutions, and 
initiate and conduct research, there is an increased need for 
NIH to provide them with direct support for research capacity 
building and research infrastructure.
    Unfortunately, the current funding mechanisms and peer 
review processes at NIH are designed to support academic 
institutions, even if technically CBOs are among the 
organizations eligible to submit applications.
    What funds are you requesting in the NIH 2013 budget to 
directly support the research capacity building and research 
infrastructure needed in community based organizations?
    Dr. Collins. Well, thank you, Congresswoman, for the 
question, and we certainly agree that there is a great deal of 
strength in community based organizations both in terms of the 
services that they provide and the research opportunities that 
they can conduct.
    I think a major area where we see this happening and have 
been gradually supporting in an increasing way is through the 
Network of Clinical and Translational Science Awards, the 
CTSAs. This is NIH's most major investment in clinical research 
now amounting to almost $500 million supporting 60 centers 
across the country.
    And as part of those centers, community outreach is a 
component of their activities, especially urging them to link 
up with community organizations in their own geographic area 
where they will know them the best and try to build those 
networks of research capacity.
    The CTSAs have actually moved to the National Center for 
Advancing Translational Sciences, so I will ask Dr. Insel to 
say a word about the CTSAs and the plans we have for them now 
because it is a moment of specific opportunity.
    Dr. Insel. Well, again, let me emphasize that for NCATS, 
for this new center that we are here to discuss, that we are 
talking largely about drug development. Eighty percent of our 
budget is the CTSA program, these 60 centers around the country 
that are, as Dr. Collins said, our largest investment in 
clinical research in this arena. So, those have had as part of 
their remit over the last five years, they are about five years 
old now as a program, the increasing engagement of communities, 
not only as a source of patient volunteers or research 
volunteers, but increasingly to get them in at the front end to 
help define what the research problems need to be and to bring 
them in as a full partner. And that has been one of the great 
successes of the CTSA program, one that we hope to leverage in 
the next five years as we go forward.

                 PANCREATIC CANCER: LONG-TERM STRATEGY

    Ms. Roybal-Allard. Okay. I would like to move on to another 
subject that has been of a great deal of concern to me, and 
that is the fact that while the survival rates for many cancers 
are steadily improving, in some cases nearly 70 percent, the 
survival rate for pancreatic cancer, one of the most lethal 
forms of cancer, is only about 6 percent. And after submitting 
report language for many years, I was pleased that NCI finally 
released an action plan for investing in pancreatic cancer 
research. However, as I understand it, it was disappointing 
that the action plan is mostly a summary of research that is 
already under way.
    So, when can we expect to see a long-term research strategy 
for pancreatic cancer that establishes concrete objectives for 
the future and sets a goal of increasing the 5-year survival 
rate?
    Dr. Collins. Congresswoman, I certainly share with you the 
sense of urgency about dealing with this very, very serious 
malignancy with currently 5-year survival rates that are lower 
than most other cancers.
    There are two areas that perhaps are particularly exciting 
to contemplate right now to do something about this. First of 
all, pancreatic cancer clearly is diagnosed in general after it 
has been present for a very long time. Estimates are probably 
20 years from the time the cancer starts until it is actually 
recognized, in part because it arises in a part of the body 
that is very far away from detection by the usual means.
    If we had better means of detection of this disease early 
on, that would clearly make a huge difference. And right now, 
we do not have for pancreatic cancer those kinds of measures, 
and that is a big priority for research right now.
    But furthermore, we do need to understand at the DNA level 
what is driving a good cell to go bad and become a malignant 
pancreatic cancer cell.
    The Cancer Genome Atlas, which is this very bold initiative 
of the Cancer Institute and the Genome Institute, has 
pancreatic cancer on the list of cancers that are being 
unraveled in unprecedented detail, revealing what exactly is 
going on in those cells and revealing in the process new 
potential targets for therapy that might be much more 
successful in terms of curing this disease than in the current 
approaches which depend on chemotherapy.
    Mr. Rehberg. Dr. Simpson.

                                 NCATS

    Mr. Simpson. Thank you, Mr. Chairman. I had two of my 
favorite hearings this morning, my favorite institutions, NIH 
and the Smithsonian down in my committee. So, I am glad I could 
make it up to it.
    But NIH, as I have often said, is one of the best kept 
secrets in Washington. That is also one of the bad news stories 
in that the public needs to know what NIH does, and how we get 
that message out to the general public is some debate we have 
had over the last several years.
    But I think as I listen to everybody on this panel, nobody 
disagrees with what we are doing with NCATS. That is a good 
direction that we ought to hit. But as I listen to people on 
the panel and to the general public, there is concern that it 
is going to take resources away from what has traditionally 
been used, as an example, the IDeA program and other things. 
And so, I get questions submitted to me that, you know, can you 
ensure the committee that the continued development of NCATS 
will not take resources away from other basic science 
initiatives, or hamper programs like IDeA? And can you detail 
how the National Center for Advancing Translational Science 
plans to engage all of the NIH institutes and centers and the 
opportunities it puts forward particularly given that they were 
all tapped to contribute to the formation of this new center?
    I think that is the main concern here is that any time you 
start something new, people wonder where you are going to get 
it, particularly in these budget times, and they are worried 
that it is going to come out of what they have been doing in 
the past, which we all agree with also.
    Dr. Collins. So, maybe I will start and Tom may want to 
add. In the discussion about NCATS, this did not happen sort of 
overnight in a vacuum. So, basically going back now two years, 
the notion of whether NIH would benefit and whether the public 
would benefit from a hub for this sort of translational 
activity, even though there is a great deal of this work 
already going on the Institutes, was brought forward to our 
scientific management review board, a very distinguished group 
of experts. And they deliberated and took testimony and talked 
to lots of people and ultimately recommended that we should do 
this.
    That then led to numerous other consultations, including, 
of course, with all the institute directors at NIH. And there 
was a lot of shaping of the program that went on during those 
months, and a very beneficial shaping it was. And now I think 
it is fair to say the NIH as a family is supportive of this 
enterprise and excited about it, not that it is going to 
compete with things that the other institutes are doing very 
well already, but providing particularly this focus on 
bottlenecks in the translational process, which otherwise would 
not get attention.
    We consulted also with people in the private sector, 
distinguished leaders and pharma biotech venture capital in a 
working group that was put together. They came forward. Very 
enthusiastic in support of what this could do.
    But we recognize that resources are tight; they are 
terribly tight. And so, the way in which NCATS came into being 
on December 23rd, as you heard from Dr. Insel, was largely to 
take programs already funded through other parts of NIH and 
bring them together, providing new synergies that were not 
there before.
    The amount of new funds going to NCATS is a very small 
amount indeed, some bits of it in Fiscal Year '13, which Tom 
mentioned a minute ago. But we are trying to be very careful 
about this. We believe that we could do a lot with modest 
resources at this point simply by doing the focus on the 
bottlenecks, the way an engineer would do in a way that has not 
been possible, and by working with the private sector and 
making sure we are building on those kinds of relationships in 
new ways. And we are very vigorously involved in those kinds of 
workshops, and planning processes, and steering committees that 
have come together because of NCATS' existence providing the 
nucleus for it to do so.
    Mr. Simpson. But certainly you can understand how people 
that are involved in other parts of NIH and have other 
interests, such as the IDeA program and stuff, when they see a 
proposal that reduces the IDeA budget by $15 and a half million 
and the development of NCATS, they look at it that is where 
they got the money.
    Dr. Collins. Well, I really would like to speak to that 
because that is not the sort of connected lines there is any 
sense at all. We are, of course, dealing with tight resources. 
You heard that effectively we have lost about 18 percent of our 
buying power since 2003.
    I have to tell you the thing that wakes me up in the middle 
of the night, Doctor, is the realization that there is 
wonderful science that could get done, and that we have to make 
very tough decisions about what will get done because we do not 
have the resources to support all the great ideas, all the 
great investigators.
    And so, it is constantly a struggle, but it is a struggle 
that involves some very bright, thoughtful, visionary minds in 
an ongoing process, practically weekly, trying to decide how 
should we set those priorities. I do not think we are perfect, 
but I think we do get the inputs that you would want to see us 
get in making those decisions.
    Mr. Simpson. Thank you.
    Mr. Rehberg. It is the chair's intent to have a second 
round before I recognize Ms. Lummis. But we will quit this 
segment at 11:30, so do not feel compelled to ask a second 
question if you do not want to.
    Ms. Lummis.

                                  IDEA

    Ms. Lummis. Well, thank you, Mr. Chairman. I can see that 
this is a popular topic because I want to focus on IDeA as 
well.
    I used to sit on my State's EPSCoR Committee, and the 
proposals that came through us that we vetted and referred on 
to NIH were truly remarkable at the University of Wyoming. So, 
again, if I am emphatically reinforcing things that are 
previously said, excuse my redundancy.
    Have you ever visited one of these IDeA programs at a land 
grant school?
    Dr. Collins. I have not personally since I became NIH 
director, but I have in the past when I was directing the 
Genome Institute.
    Ms. Lummis. Okay. I would sure encourage you to do so. And 
if I could be so bold, I would recommend the University of 
Wyoming Center for Neuroscience. [Laughter.]
    Dr. Collins. And your colleagues might say Montana, or I 
would say Idaho.
    Ms. Lummis. Yeah. You could make a intermountain tour that 
we would be happy to accommodate.
    Dr. Collins. And Louisiana, we got to get Louisiana in 
there, though, so we got to----
    Ms. Lummis. Well, and that can be the icing on the cake.
    The President proposes, what, $225.5 million for IDeA, that 
is a $50 million reduction, in order to fund other research 
priorities. What are those other priorities that would be 
higher research priorities than the ones you are receiving 
through the IDeA program?
    Dr. Collins. Well, again, Congresswoman, NIH is a big fan 
of the IDeA program. I agree with you. We get wonderful 
proposals. We see wonderful science being conducted. But we see 
that across our portfolio and many other programs as well.
    I think the fundamental area where there seems to be some 
friction or misunderstanding or difference of opinion is 
whether, in fact, faced with the circumstance where the 
resources are so tight for everything, whether we could 
sustain----
    Ms. Lummis. And I apologize for interrupting, but I would 
like you to direct your specifically your proposal to seek a 
$64 million increase for NCATS, which is a new program, and an 
almost $40 million increase for Cures Acceleration Network, 
which is another new program. So, that is where I would like 
you to focus your response.
    Dr. Collins. Again, I would not want you to see a direct 
connection between what decisions were made in the President's 
budget about the IDeA program and about NCATS. Those are not 
the same dollars that just got moved from one box to the other. 
This is part of a big overall plan to try to figure out where 
the scientific opportunities are most pressing.
    Ms. Lummis. But it does cut one place and add another, one 
of which is a new program. And maybe it is not exactly the same 
dollars, but, you know, dollars are dollars, and they are all 
borrowed money. So, we are just looking, since we are borrowing 
this money from China and Saudi Arabia, Japan, let us find out 
where to put it.
    Dr. Collins. So, the dollars that go into the Cures 
Acceleration Network, that is actually part of NCATS, so that 
$40 million is part of the $60 that you mentioned. Those are 
not separate buckets. Cures Acceleration Network is a program 
within the National Center for Advancing Translational 
Sciences.
    Congresswoman, that program aims to take advantage of an 
exceptional moment in history. If you look at the 4,000 rare 
diseases that currently exists, there are only treatments for 
250 of those. Twenty-six million people in this country are 
affected with one of those rare diseases, and we see an 
opportunity to do something about that in a way we could not 
have four or five years ago. That is the motivation for this 
center. I would not be a responsible director of the NIH if I 
did not respond to that opportunity.
    Ms. Lummis. Thank you, Mr. Chairman. I yield back.

                            HEALTH ECONOMICS

    Mr. Rehberg. Thank you. We will start round two, but we are 
going to shorten the time to three minutes apiece so that we 
all have an opportunity to do it.
    And in relation to funding and such, as I was going through 
the budget book, one of the questions I asked is what is the 
Common Fund, and I got a pretty good explanation of it. But I 
was aware of an awards presentation that was made in Fiscal 
2011 having to do with about $2 and half million coming from 
that, which centered in on economics. And, you know, we had 
this whole conversation about basic science and all the various 
grants, and so I asked staff, of the $2 and a half million that 
was given in 2011 for economics studies, how many grants would 
that equate into. And we came up with 6 additional grants.
    I guess the question is, why are you even involved in the 
economics? And just looking at it, one of them is, and it has 
been an issue that I have been intimately involved in, is the 
Class Act. Now, the President suspended the Class Act, and yet 
there is still a grant going out for the purposes of sending 
the Class Act as it relates to the economics within the health 
care provision. And I just wrote some notes.
    Let us see here. Another category of research is titled 
integrating comparative effectiveness research finding into 
care delivery through economic incentives. So, I guess the 
question is, first of all, why are you involved in economics 
when we have hundreds of Federal agencies that deal with that. 
And as it relates to the President's health care reform 
legislation or act, why not take the money and put it into the 
grants and the basic sciences as opposed to using this, I do 
not want to call it a slush fund, but essentially every 
director has one, and you do. Why are you involved in the 
economics of health care anyhow as an institute?
    Dr. Collins. So, Mr. Chairman, I will probably have to 
respond to the record about the specifics of the two grants 
that you mentioned because I am not familiar with the details.
    The Common Fund, I would say, maybe ``slush fund'' is not 
the term I would have chosen. It is our venture capital space, 
and it was very much advocated for by my predecessor, Dr. 
Zerhouni, and then became a reality in the NIH Reauthorization 
Act passed by this Congress in 2006. It is where we try to 
support research that no single institute would be able to do.
    Mr. Rehberg. But this is not research. This is an economic 
study----
    Dr. Collins. Well, it is research trying to understand----
    Mr. Rehberg. What I am talking about.
    Dr. Collins. Again, I am not sure I can respond about the 
specifics of one or two grants. The overall program in health 
economics is an effort on the part of NIH to understand 
particularly what are the economic benefits of the research 
that we conduct. We are asked oftentimes, including by the 
Congress, what are you doing in terms of being able to support 
the economy, jobs, and so on. And we have not always been 
confident we had sophisticated answers to that, and this part 
of a program to try to figure out whether, in fact, what we are 
doing is maximizing the taxpayer's investment.
    I do not know about those two grants, but that was the 
overall plan behind the fund.
    Mr. Rehberg. But at that time there were $2 and a half 
million worth of grants given in that year, and I would like to 
have an explanation because it is something I am going to be 
looking at as chairman----
    Dr. Collins. I would be happy to provide that for the 
record.
    Mr. Rehberg. As to whether that is an appropriate role for 
the NIH as opposed to others looking into the same issue.
    Dr. Collins. I would be happy to provide that.
    Mr. Rehberg. Thank you. Ms. DeLauro.

                     SUPPORT FOR YOUNG RESEARCHERS

    Ms. DeLauro. Thank you, Mr. Chairman. Just a quick comment.
    Fifteen years ago, this subcommittee made a determination 
on a bipartisan basis to double the amount of money that went 
to the NIH to specifically do the kinds of things that would 
lead us to, you know, to hold on to our cutting edge in terms 
of research--and both basic research and applied efforts. So, 
that ought to be our goal again with this subcommittee.
    Let me try to get in two quick questions for you, Dr. 
Collins. I will not go through explanation here. What would be 
the--well, for young researchers, what are your chances of 
winning a grant from the NIH these days? How does it compare to 
your chances 10 years ago? What has happened to the average age 
of researchers typically? And when they receive their first 
grant as an independent investigator? We are always concerned 
about getting new, bright young minds into this effort. What is 
the status of that effort? And what would be the effect on the 
biomedical research conducted and sponsored by NIH if across 
the board cuts in the realm of 8 to 9 percentage range were to 
occur in 2013?
    Dr. Collins. Very quickly.
    Ms. DeLauro. Young researchers.
    [The information follows:]


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Dr. Collins. The young researcher, your chance of getting 
funded today when you send in your grant to NIH is about 1 in 
6, the lowest in history. And 10 years ago it was 1 in 3. And 
you can imagine what that does to a young investigator's 
circumstances.
    In terms of the age at getting your first grant, it has 
been constant over the past several years at age 42, which we 
believe is much older than is healthy for the biomedical 
research enterprise, and we have a number of new programs that 
are trying to do something about that.
    In terms of your question about a cut, I assume you are 
referring to the sequesters.

                        IMPACT OF SEQUESTRATION

    Ms. DeLauro. That is right.
    Dr. Collins. If, in fact, the sequesters were to kick in on 
January 2nd, 2013, that would result, according to the CBO, in 
a loss of about 7.8 percent of the NIH budget, $2.5 billion. As 
a result of that, 2,300 grants that we would have planned to 
give in Fiscal Year '13 would not be able to be awarded. It 
would be devastating.

                        INTERNATIONAL INVESTMENT

    Ms. DeLauro. So, your buying power would continue to 
decrease between 18 and 20 percent. The research, if it is not 
done here is done elsewhere. What is happening internationally? 
Are they eating our lunch?
    Dr. Collins. It is interesting if you look across the 
board. China just announced a 26 percent boost in one year for 
their support of basic research. India has been in double digit 
increases for several years. European, despite their 
difficulties, plan to increase research spending by 40 percent 
over the next seven years, and even Vladimir Putin last week 
announced the intention to increase support for Russian basic 
research by 65 percent.
    Ms. DeLauro. We ought to double the amount of money so that 
we continue on that trajectory of providing the NIH with the 
resources that it needs in order to be able to look at new 
efforts as well as to continue the research and other efforts 
which are important to the well-being of this Nation both 
physically and economically.
    Thank you, Mr. Chairman.
    Mr. Rehberg. Thank you. Mr. Alexander.
    Mr. Alexander. Do I get a star if I do not ask----
    Mr. Rehberg. Absolutely. [Laughter.]
    Mr. Rehberg. I will give you a cupcake, but somebody quit 
bringing those. [Laughter.]
    Mr. Rehberg. All right. Ms. Roybal-Allard.

                          NIMHD INFRASTRUCTURE

    Ms. Roybal-Allard. Dr. Collins, the National Center on 
Minority Health and Health Disparities has been elevated to a 
national institute, which expanded its responsibilities and it 
has given it a more defined role in the NIH research agenda.
    The Institute has also assumed additional responsibilities 
with the transfer of the research centers and minority 
institutions program. Yet despite this expanded authority and 
the fact that the law provides for administrative support, the 
NIMHD continues to be understaffed and underfunded.
    How do you expect that the Institute on Minority Health and 
Health Disparities will meet its core mission, administer the 
RCMI program, and fulfill the Institute's other expanded 
responsibilities without the adequate funding it needs and 
staff?
    Dr. Collins. Thank you, Congresswoman, and you have been an 
eloquent and consistent supporter of health disparities 
research at NIH, which is a personal priority for myself and 
many of us who lead that enterprise.
    The National Institute--now it is an institute--for 
Minority Health and Health Disparities has, in fact, in the 
course of the last year expanded its efforts by the arrival of 
the RCMI program, which is, I think, a wonderful place for that 
important part of what we are doing in terms of minority 
institution research to be placed.
    We have also worked with Dr. Ruffin, the director of the 
Institute, to deal with the concerns about shortages of staff, 
and have identified ways to assist with that by the addition of 
quite a number of additional staff positions to NIMHD, even 
above the ones that were coming through the RCMI program 
migrating into that Institute.
    And we are supporting strongly, the formation of an 
intramural program in NIMHD to provide them with additional 
health research capabilities to undergird all of their efforts 
in health disparities.
    It is important, though, also to point out that while NIMHD 
is the hub of this activity at NIH, that all of the institutes 
have engagement in health disparities. The total spending in 
health disparity research stands right now at about $2.7 
billion this year.

                    PANCREATIC CANCER GRANT FUNDING

    Ms. Roybal-Allard. I would like to go back to the 
pancreatic research issue. It is my understanding that in the 
Fiscal Year '2011 plan, that 17 newly competing grant proposals 
and 59 grant renewals focusing exclusively on pancreatic cancer 
were funded after falling within what you call the zone of 
uncertainty. I would like to know how do we figure comparative 
grants for other cancer types in the zone of uncertainty, and 
what is the difference in overall funding levels? And also, 
what criteria are used to determine whether or not a proposal 
in the zone of uncertainty is being funded?
    Dr. Collins. So, Congresswoman, all of the NIH institutes 
have a two-level basis of doing decision making about grant 
funding. There is the initial study section which reviews the 
proposals, assigns a priority score, and then there is a second 
level, an advisory council that then looks at program relevance 
and balance, and tries to make sure we are spending every 
dollar in the best way. That is where this second level of the 
zone of uncertainty kicks in.
    In terms of the specifics about pancreatic cancer, I would 
need to ask my colleague, Dr. Varmus, to answer that for the 
record because I do not know the specific details of how that 
compares with what has happened with other cancer applications.
    Mr. Rehberg. This would be an appropriate time to say that 
the opportunity exists for the subcommittee members to ask 
additional questions in written form and have them----
    Ms. Roybal-Allard. If you would submit that information for 
the record----
    Mr. Rehberg. And have that submitted, correct.
    Dr. Collins. Happy to do that.
    [The information follows:]


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    
    Mr. Rehberg. Dr. Simpson.
    Mr. Simpson. Well, for the benefit of my chairman, the 
reason we study economics and the reason we have economists is 
to make astrology look respectable. [Laughter.]

                            DENTAL RESEARCH

    I would be doing less than my job if I did not ask a dental 
question. On March 6th, the New York Times ran a feature story 
about the rise in the number of preschoolers with cavities, 
citing that in some cases, the decay is severe enough to 
require surgery under anesthesia. What is the NIH research 
doing about cavities in this early childhood group? And also, 
where are with saliva research?
    Dr. Collins. Thank you for the question. And my good 
colleague, Dr. Tabak, who is now my principle deputy, indicated 
to me that you might potentially ask dental questions, Doctor.
    So, in terms of early childhood caries, yes, there are 
serious difficulties encountered, particularly in minority 
communities, and it may relate to a combination of a limited 
access to fluoride, but also to dietary practices that are 
resulting in sometimes very severe consequences.
    The National Institute of Dental and Craniofacial Research 
(NIDCR) is certainly very interested in this and has a research 
program to try to uncover the causes both in terms of 
biological and behavioral, and is conducting research through 
centers in dental research that are focused particularly on 
particular populations that are vulnerable to this problem. So, 
this is a health disparity, just like what we were talking 
about a moment ago.
    In terms of saliva as a window into the body, maybe not the 
soul, but the body, these days if you are going to have a 
genome test, what you usually do is spit in a tube, so you know 
there must be DNA in there. And there is a lot of other stuff, 
too. Saliva does sort of become a filtrate of what is going on 
inside the body, and so it is a way in which experimental 
protocol, looking to see early evidence of a heart attack from 
saliva. And certainly this is also a place where with some new 
technology, one can develop tools for looking at possible signs 
of oral cancer. The NIDCR has investments in research in both 
of those areas, and they are going quite well.
    Mr. Simpson. Thank you, and thanks for all you do out 
there.
    Dr. Collins. Thank you.
    Mr. Rehberg. Ms. Lummis.

                            DRUG REPURPOSING

    Ms. Lummis. Well, thank you, Mr. Chairman.
    I want you to know I really have a lot of regard for what 
you are doing. I want to echo what Dr. Simpson said. This is an 
area where I believe the Federal government has a role because 
there are so many diseases that are suffered by people that 
will never have a cure because unless the Federal government 
gets involved in research because the economics just is not 
there.
    So, I want to give you a chance to put NCATS' best foot 
forward. One of the areas where it looks to me like there may 
be duplication with what the private sector can already do is 
in the area of a drug repurposing program. So, I want you to 
explain to me how that might operate.
    It seems to me if there is already a drug out there that 
has one application, that the entity that would be the most 
interested in seeing if there are any other efficacious 
applications would be the drug company that holds the patent. 
So, why would you want to spend time and dollars duplicating 
what the private sector might do with its own patents rather 
than exploring areas where there has been almost no research 
into a disease solution?
    Dr. Collins. Again, let us talk about rare diseases. I 
think that is a big part of the answer because drug companies 
because of their commercial circumstance and their 
stockholders' expectations are not likely to see it as 
commercially viable to try to develop a new treatment for a 
disease that only affects a few thousand people.
    But maybe in the freezer is the drug developed for some 
other purpose which turned out not be successful for that 
purpose that now with many new discoveries coming forward with 
rare diseases might be just the thing.
    NIH's goal here is not to step in here and pry things loose 
from any company that does not want to offer it. But we hear 
companies saying, we are really interested in this, and in 
having NIH serve as an honest broker, a sort of clearinghouse, 
for compounds to find new uses, and to enlarge, therefore, the 
universe of opportunities beyond what a company might 
themselves see as a practical way of repurposing.
    Ms. Lummis. So, you would only use the repurposing program 
for a currently existing drug if the patent holder or 
intellectual property holder asked you to?
    Dr. Collins. Exactly. They would have to make the compound 
available and say we are interested in having this one looked 
at by other investigators who might have a new idea about how 
to use it.

                            NCATS PRIORITIES

    Ms. Lummis. Okay. And with regards to other components of 
NCATS, can you give examples of specific diseases that you see 
as being priorities for your initial foray?
    Dr. Collins. Again, NCATS' focus is really on finding those 
bottlenecks in the pipeline, and so it is more of a generic 
strategy. There is a component of NCATS called Trend. Dr. Insel 
might mention a couple of the program's specific diseases, but 
they are sort of proofs of principles to show that this de-
risking process can work.
    Mr. Rehberg. Very quickly, please.
    Dr. Insel. Right. So, there are 14 projects across 14 
diseases, many of which you have never heard of because they 
are very rare. But they are not chosen because of the disease. 
They are chosen, as Dr. Collins just said, because they provide 
a prototype for us to reengineer. This is what NCATS is all 
about. It is looking at the pipeline, figuring new ways to 
develop compounds, new ways to develop diagnostics.
    Ms. Lummis. Thank you, Mr. Chairman.
    Mr. Rehberg. Thank you. This segment will conclude. As I 
suggested, the record will be left open for additional 
questions if you would respond in a timely fashion.
    Mr. Rehberg. And we will invite the next panel up, please. 
Thank you, gentleman.
    Dr. Collins. Thank you.
                              ----------                              --
--------

                                           Tuesday, March 20, 2012.

    BUDGET HEARING FOR DEPARTMENT OF HEALTH AND HUMAN SERVICES--NIH


                               WITNESSES

SCOTT KOENIG, M.D., PH.D., PRESIDENT AND CEO, MACROGENICS, ON BEHALF OF 
    BIOTECHNOLOGY INDUSTRY ORGANIZATION
TODD SHERER, PH.D., CHIEF EXECUTIVE OFFICER, THE MICHAEL J. FOX 
    FOUNDATION FOR PARKINSON'S RESEARCH, NEW YORK, NEW YORK
P. ROY VAGELOS, M.D., CHAIRMAN OF REGENERON PHARMACEUTICALS, INC., 
    RETIRED CHIEF EXECUTIVE OFFICER AND PRESIDENT OF MERCK CO., INC., 
    AND POLICY ADVISOR TO THE PUBLIC AFFAIRS ADVISORY COMMITTEE, 
    AMERICAN SOCIETY FOR BIOCHEMICAL AND MOLECULAR BIOLOGY
    Mr. Rehberg. All right. We will begin. Dr. Koenig, why 
don't you start, if you would, please.
    Dr. Koenig. Good morning, Chairman Rehberg, Ranking Member 
DeLauro, members of the committee, and ladies and gentlemen. I 
am Scott Koenig, president and CEO of MacroGenics and chairman 
of the board of AGTC.
    I worked at the NIH and the biotech industry for the past 
28 years. I have been involved in the development of biological 
products. I am appearing today on behalf of the Biotechnology 
Industry Organization.
    It is my privilege to testify before the subcommittee. I 
have submitted testimony discussing the importance of NIH 
funding in order to maintain our global leadership position in 
biomedical innovation to ensure a robust biotechnology industry 
in the United States, and to deliver the next generation of 
medicines to patients.
    My comments today will focus on the National Center for 
Advancing Translational Sciences, or NCATS.
    BIO is supportive of the NCATS' stated mission to catalyze 
the generation of innovative methods and technologies that 
enhance development, testing, and implementation of diagnostics 
and therapeutics. It is important for NCATS to establish a very 
focused set of priorities for each of its initiatives that 
individually and collectively will serve to improve research 
and development processes.
    BIO also agrees with the language in the 2012 
appropriations report and statements made by the NIH that 
research undertaken by NCATS should not be duplicative of the 
research and development done by industry.
    The primary metric for determining the success of NCATS is 
whether the initiatives will yield significant reductions in 
time and expenses in the development of new therapeutics, 
expanded terrain of novel targets and pathways, and ultimately 
improve the delivery by drug developers of the next generation 
of medicines to patients.
    In order for NCATS to achieve its goals, they must develop 
substantive partnerships and collaborations with industry 
regulators, principle investigators, life science investors, 
and patient organizations. It is crucial that research 
priorities are developed with input for those who are working 
in the trenches and are most knowledgeable about where 
scientific barriers lie and where adjustable inefficiencies 
exist.
    Among the inaugural programs that have been highlighted by 
NCATS is NIH-DARPA-FDA collaboration to identify methods and 
tools that will enable drug developers to better predict 
toxicology in humans, and early in the drug development 
process, the so-called tissue chip that Dr. Insel showed you 
this morning.
    Such an initiative should be universally endorsed. It is a 
winning proposition if they are successful. Likewise, efforts 
to identify and validate drug targets more efficiently would 
help to maintain a robust pipeline and potential breakthrough 
treatments.
    The question that was asked at the end of the last session, 
the program to repurpose and rescue drugs, is a perfect example 
where collaboration between NCATS and industry is vital. 
Industrial partners will be required to develop, manufacture, 
and market these drugs, and we encourage NCATS to identify 
partners early with industry so they may ensure that they are 
addressing issues, such as intellectual property, quality 
assurance, and the design and conduct of clinical trials.
    NCATS' efforts should not be redundant with translational 
work being done at other centers at the NIH, but we believe 
that NCATS can serve as a point of contact and convener for 
meetings as a way for public/private partnerships, industry, 
and other stakeholders to reach out to NIH with potential new 
research collaborations and maintain a dialogue in a systematic 
and transparent manner. The vast majority of NCATS' budget is 
dedicated to the CTSAs that you heard about earlier.
    We encourage the engagement of CTAs and clinical 
investigations that help to validate bio markers, identify the 
impact of specific genes or epigenetic factors that would 
predict clinical efficacy or safety signals within certain 
populations or within particular classes of drugs, and 
establish principles to conduct in clinical studies with 
innovative designs, particularly those that demonstrate 
synergies among classes of molecules that would lead to better 
therapeutic options for patients.
    NCATS has a real opportunity to take a leadership role in 
improving the science of drug development. The success of these 
discoveries will only be realized if they are adopted in 
advance by industry, and it is imperative that NCATS work 
closely with the FDA to foster the development and adoption of 
these new tools and practices.
    Finally, I would like to briefly discuss the Cures 
Acceleration Network Program. BIO has long supported this 
initiative. We think this provides a unique opportunity for 
industry and other stakeholders to collaborate with NIH and FDA 
on innovative drugs to treat diseases of critical importance to 
public health, and to fund programs, such as treatments for 
ultra-rare diseases that are generally not supported by the 
private sector. BIO is interested in continuing to work with 
NIH as this new program evolves.
    So, in conclusion, Mr. Chairman, we believe that there is a 
real opportunity to systematically identify key scientific 
areas of research, such as predictive toxicology, tools and 
methodologies to accelerate target identification and 
validation, and to improve clinical trial efficiency so that 
ultimately it would serve to enhance the development of new 
drugs as a whole. And I thank you for the opportunity to 
testify today, and we look forward to continuing to work with 
Congress and the NIH as this new center evolves.
    Mr. Rehberg. Thank you, Dr. Koenig.
    And welcome, Dr. Sherer.
    Mr. Sherer. Thank you, Chairman Rehberg, and Ranking Member 
DeLauro for inviting me to testify today on the National Center 
for Advancing Translational Sciences.
    I am the CEO of the Michael J. Fox Foundation for 
Parkinson's Research. Our foundation has a single mission: fund 
research that will speed the cure for the 1 million Americans 
suffering from Parkinson's disease, a debilitating 
neurodegenerative disease without adequate treatment.
    Since our launch in 2000, our foundation has developed more 
than 100 Parkinson's disease therapeutic targets, pushing 
dozens of these closer to the clinic for relevance in patient's 
lives. Our urgent goal is to prioritize our limited resources 
within the complicated drug development process for the maximum 
impact for patients' lives. To produce one drug for Parkinson's 
disease can take over 15 years and up to a billion dollars of 
investment. I frequently have used the alphabet as an analogy 
to highlight the complexities that result in the high costs and 
long lead times.
    In the first part of the alphabet, say, letters A through 
F, there were aha moments where an academic scientist looks at 
some aspect of biology and asks, can this be important? This 
discovery science is the backbone of all drug development that 
occurs. Our foundation's impact is possible because we 
strategically build off the Federal government's ongoing 
investment in discovery science through the NIH. But when it 
comes to developing cures, questions at this level are the 
first step of a thousand mile journey.
    The next chunk of the alphabet, say, letters G to P, is 
translational research. This is the applied work where 
scientists hone in discoveries from the A to F phase, looking 
for disease specific effects. Translational research asks the 
questions that must be answered before we can take the critical 
leap to test the potential therapy in humans. The problem is 
this is far easier said than done.
    This phase has been dubbed the valley of death because of 
the chronic funding and expertise gap that is crying out to be 
addressed like an institute, like NCATS. For now and 
fortunately, this is where potential treatment breakthroughs go 
to die.
    The very few novel approaches that do make it out of this 
middle phase still have to navigate the final part of the 
alphabet--call it Q to Z--which is largely handled by the 
private sector. In this final stage, potential new drugs 
initiate clinical testing and ultimately will seek regulatory 
approval. But funding capital here is becoming more and more 
risk adverse.
    NCATS can play a vital role in making drug development more 
efficient and effective for generations of Americans, and I 
would like to share a few learnings from the time and work at 
our foundation that may be helpful in thinking about NCATS.
    First, the research enterprise is made up of multiple well-
intentioned, but differently incentivized stakeholders. For an 
academic researcher, success means publication and promotion. 
For industry, it is patentable assets. But for patients, it is 
critically needed new treatments. No one is orchestrating the 
efforts of all these different players. As Michael J. Fox has 
said, there is no department of cures.
    Progress requires a conscious decision to elevate 
translational science, including an appreciation for what it 
is, why it is vital, and what strategies can help foster 
success. Creating a culture of translation within the NIH is 
bigger than any single disease and bigger than the work of our 
foundation.
    Second, our foundation realized early on that to drive 
Parkinson's breakthroughs, we need to make investments in 
applied biology to transform basic discoveries into practical 
treatments. This does not happen on its own. The tough truth is 
that our system largely fails us right where it should be 
working the hardest. A successful NCATS would make a tangible 
difference by strategically building the right pools of 
expertise where they are needed most, at the Q to P 
translational phase by supporting creative, higher risk 
approaches to drug development and leveraging collaborations 
with patient organizations, academia, and industry. This will 
ultimately move projects faster through the drug development 
pipeline for the benefit of all Americans.
    Third, at the core of our foundation's daily work lies a 
single purpose: allocating resources wisely with Parkinson's 
patients benefit in mind. NCATS can seize the opportunity to 
represent patient relevant investment on a larger scale, 
impacting the lives of countless Americans. This means not only 
orchestrating work within the translational stage, but also 
stepping in to champion projects that would otherwise languish 
because they hold no incentive for the private sector. It means 
repositioning existing drugs that hold promise for untreated 
disease, and importantly investing in pre-competitive research 
tools that can move the entire field forward faster.
    Fourth, we have heard from those who believe that the 
private sector alone bears the responsibility for bringing new 
treatments to market. In our experience, this just does not 
work. The challenge is not getting the private sector to pick 
up a promising idea that has made it all the way to letter Q in 
the clinic. The challenge is getting it that far in the first 
place, particularly when economic realities and research 
challenges are making it harder, not easier, for companies to 
invest in high risk science.
    The drug development system impacts generations of 
Americans. I hope the core values for translation I have shared 
today, aligning stakeholders to enable better handoffs from one 
stage of research to the next, adequately investing in applied 
science, maintaining a patient oriented perspective, and 
reducing risk in order to position projects for private sector 
investment will be helpful in shaping the future of NCATS. It 
is one of our greatest hopes that we will have the opportunity 
to work with NIH and NCATS leadership to usher in this new 
institute.
    I would like to thank the committee for the opportunity to 
be here today. As Michael J. Fox has said, the answers we want 
are not going to fall out of the sky. We have to have ladders 
and climb up and get them.
    Thank you, and I am happy to take any questions.
    Mr. Rehberg. Thank you. Dr. Vagelos, welcome. Good to have 
you.
    Dr. Vagelos. Chairman Rehberg, Ranking Member DeLauro, I am 
happy to be here. You have seen my statement, so I am not going 
to read it.
    Mr. Rehberg. Thank you.
    Dr. Vagelos. Yes. I would like to just make a couple of 
comments that might be helpful.
    The reason I outlined my background is that I have had, 
because of a long history, experience in clinical work, having 
taken care of heart patients. I have done basic research. I was 
10 years leading the Merck Research Laboratories, and then for 
9 years I led the company. I had to retire at age 65 because of 
board policy, and then became chairman of two biotech 
companies. So, I have a broad experience across the field.
    My message to you is one, and that is we have heard it two 
times. Dr. Insel and Dr. Collins both referred to the lack of 
knowledge to do various things. Pancreatic cancer for one. I 
have forgotten what Dr. Collins landed on.
    The history of the success in our country in the biomedical 
sphere is based on the basic research that is funded almost 
entirely by NIH and in public funding. The translational or 
applied research typically is done in industry and done well. 
We have a wonderful history.
    I have outlined the history of the development of the 
statins, which the first one introduced by Endo in Japan, that 
is a compound was discovered, was found to have problems in 
humans, and that is when the Merck competitive spirit took over 
and produced the first statin in the world. And then that was 
lovastatin, Mevacor. And then when the doctors who believed in 
the cholesterol hypothesis used it, others did not because they 
said, lowering cholesterol, what good is that? Merck brought 
along the second statin, which was simvastatin, Zocor, and did 
a huge outcome study which demonstrated over a 5-and-a-half-
year period that one could reduce mortality by 30 percent and 
decrease that from heart attacks by 43 percent. That was 
introduced and started the statin revolution of cardiovascular 
disease treatment.
    So, we have a history at Merck. We introduced the first 
vaccine against Hepatitis B, a virus that causes liver cancer. 
And, of course, Merck introduced a second vaccine that prevents 
cancer, and that is a vaccine that gets human papilloma virus 
that prevents cervical cancer. So, the company has been 
involved in first drugs for glaucoma, osteoporosis. It goes on 
and on. And much of that started while I was at Merck.
    And so, my issue is that we have an enormous need for more 
basic research. We have succeeded up until now. We do not want 
to change that paradigm. Is the paradigm broken? Is basic 
research evolving that is now picked up quickly? Thank God. 
Now, I do not have to shout. [Laughter.]
    And my answer is no. When basic research, which we 
desperately need in all disease areas, becomes available, 
companies move fast. I will give you two examples that are in 
racing in the clinic today. One is we know very definitely that 
LDL-cholesterol, lowering that causes a reduction in coronary 
heart disease. And there is a new mechanism that has been 
identified in the last four or five years that targets a new 
enzyme other than what the statins do. And that is PCSK9. And 
if you can block that as found in people who are normal, 
walking around, and never get coronary heart disease, but have 
extremely low density for protein cholesterol, if you can do 
that, they are predicting that one could take another step in 
prevention of heart attacks.
    There are probably at least four companies racing to do 
that. They have gone through phase two, and that has all 
happened in the last five years at one of those companies, 
which apparently is in the lead, is Regeneron, the company I 
chair, by the way.
    Now, the other one is SMA, skeletal muscular atrophy. This 
is a terrible hereditary disease that affects thousands of 
children in this country and the world. And the defect was 
identified very recently, and there are three companies racing, 
one of them already in the clinic, two others going into the 
clinic.
    So, my message is we lack basic research. Some of the 
things NCATS proposes to do are certainly worthy. There are 
some of them that I would say are not worthy of support. And 
when I know that only 17 percent of people who finish their 
work and are requesting their first grant, only 17 percent are 
being funded, that is a direction for disaster in this country 
competitively.
    Mr. Rehberg. Great. Thank you very much.
    You have done it all, which is interesting, and I 
appreciate the opportunity then to ask you, you know, there are 
some of us that are specialists and some of us that are all 
arounds. But it sounds like you have been involved in just 
about every segment.
    So, I would like to ask you what or who, if you were the 
NIH god and became the director tomorrow, how would you 
implement NCATS? What would you do to change the relationship 
between industry and the government, the Federal government? 
Obviously I think your focus was on basic research, which is 
fine. But could you expand a little on how you would design 
NCATS and change functions within the NIH to better provide the 
efficiencies that are necessary based upon the dollars we 
spent, but, more importantly, on providing the service to the 
public that we intend?
    Dr. Vagelos. Chairman Rehberg, I probably would not have 
started NCATS. In the priority of things, I think that while 
NCATS, the things that they are proposing to do can be helpful, 
they are not the limiting issues in development of new drugs. 
They just are not.
    Just look at relative budgets. The budget of the NIH is 
about $30 billion. NCATS is about $575 million. The budget of 
industry, pharmaceutical biotech industry, I do not know what 
it is. I think it is about $50 billion. Now, does anyone in the 
total audience believe that there is something that NCATS is 
going to do that the industry thinks is critical and that they 
are not doing? I think that is incredible to think that. If you 
believe that, then you believe in faeries.
    Mr. Rehberg. Okay. Dr. Koenig. Maybe you have had the 
experience. I do not know if you have been involved in clinical 
studies.
    Dr. Koenig. I absolutely have been involved in clinical 
studies. I have worked at two biotechnology companies for 22 
years, and have been involved in clinical research, actually 
improving the implementation of these studies. And it is sort 
of a vast field. I mean, we have been involved in immunology 
research that transcends autoimmunity, cancer, infectious 
diseases. So, we have a widespread view of the applications of 
various drugs and what they can do.
    With all due respect to Dr. Vagelos, I think that there is 
a unique opportunity that NCATS has sort of pointed out. We 
definitely agree that when a particular target has been 
identified, the drug industry, which includes biotech industry, 
is best suited to ultimately develop that drug and do it well. 
But what has proposed are sort of new initiatives to fill the 
gaps, and the things that I have sort of highlighted today in 
terms of predictive toxicology, this is not an initiative that 
drug companies would be working on to move advances in a 
particular drug for a particular indication.
    The idea of identifying surrogate markers. Now, one of the 
biggest troubles in terms of the whole development process is 
that we do not know what ultimately how a drug will work in 
every way, shape, or form. And so, if we are able to reduce 
this in a laboratory test to identify something that will give 
a response that ultimately years down the line will produce a 
clinical benefit, we have an ability now to shorten that whole 
process of drug development and get drugs to patients much 
earlier.
    Again, this is not something that the drug industry spends 
a lot of time and effort on. So, these are two of many things.
    Mr. Rehberg. If I could stop you there just so Dr. Sherer 
has an opportunity to answer. I have about a minute left on my 
time.
    Mr. Sherer. Yeah. Also I guess I have a different take on 
this than how it is presented because I know from the work of 
our foundation, we have about $50 million of research each 
year, and we feel we are making a significant impact because 
there are clear areas that the industry does not focus on. And 
I think things that NCATS can do that would actually make the 
$50 billion that industry is spending more efficient and have a 
greater chance of actually leading to more therapies, things 
like clinical trial efficiencies, how clinical trials are 
conducted, diagnostic tests.
    And then this comment about identifying targets, 
identifying targets, as I mentioned in my statement, is the 
first step. And with the technologies that Dr. Collins was 
talking about, we are identifying thousands of new targets. And 
there needs to be work done to really prioritize those for the 
industry because the industry is not going to pick up on all of 
these targets.
    So, I think there is a lot that can be done by NCATS with 
the budget that they have to make a significant difference.
    Mr. Rehberg. Great. Thank you.
    Ms. DeLauro.
    Ms. DeLauro. Thank you very much, and I want to thank the 
panel for their testimony. I want to get to Dr. Sherer.
    But, Dr. Vagelos, I think you have made the case for NCATS 
here this morning in that this is not an issue of what industry 
needs, quite frankly, or the top five illnesses. But it is a 
question of what patients need and the therapies and the 
treatments, et cetera. And it is what the rare diseases that 
are out there need, the orphan diseases that are out there, 
quite frankly which the top five or big pharma is not 
undertaking.
    And with that, let me move to Dr. Sherer because I want to 
just probe a little bit more with you what you started to talk 
about.
    I think your presence here today really keeps us focused on 
the prime effort of medical research, develop better ways to 
prevent and treat disease and to improve health. The foundation 
is very focused on not just improving our understanding of 
Parkinson's disease, but also translating that understanding 
into things that will actually be available to help patients as 
quickly as possible.
    What can the NIH do to help organizations like yours that 
are seeking to bridge that gap between advances in basic 
science and the availability of new treatments for patients? 
What role would you like to see NCATS play that individual 
organizations like yourself cannot? And if you have time, what 
issues related to Parkinson's or neurology would you like to 
see NCATS take on?
    Mr. Sherer. Thank you for the question.
    I think this is really an important issue in that every 
disease can have a champion like the Michael J. Fox Foundation, 
but there are pretty significant challenges about developing 
drugs for neurology that are beyond the scope of activity that 
an individual foundation can have. And they are not being 
picked up and dealt with right now by the pharmaceutical 
industry, who needs also the help that NIH can provide or 
NCATS, for the benefit of patients. And these include some of 
the issues that were talked around safety and toxicology, some 
of the issues around the fact that we work on Parkinson's.
    There are a lot of age-related neurodegenerative diseases 
that have commonalities--Alzheimer's, Parkinson's, Huntington's 
disease, some common challenges that NCATS can address related, 
again, to safety, toxicology, clinical trial efficiencies, 
diagnosis, tracking of the disease. These are really critical 
issues that can be addressed by an entity like NCATS that would 
benefit not just people with Parkinson's, but people with all 
diseases.
    Ms. DeLauro. Okay. Let me just ask Dr. Koenig, do you want 
to comment on any of that? This was specific to Parkinson's, 
but go ahead.
    Dr. Koenig. Not specific about Parkinson's, but, again, 
actually if I think of what NIH can do with organizations like 
patient organizations and working with companies, I actually 
think back to my days at NIH and the evolution of how industry 
has interfaced with NIH. And I think over the years it has 
become closer and closer because we understand that there are 
gaps that industry can fill, and that NIH needs to provide. And 
this actually is reflected even in the granting process.
    What I have seen from the history of grants is that many of 
these grants now are actually seeking partnerships between the 
basic researcher and companies to work on new initiatives. And 
I actually implore that in this NCATS initiative that they 
actually spend a lot when they go out working with the new 
grants initiatives, that they include that as a preferred way 
of conducting research because actually as a team we can work 
together ultimately to get a better pathway and assure the 
development of new drugs.
    Ms. DeLauro. There is a short time, Dr. Vagelos, and we are 
going to come back. But you----
    Dr. Vagelos. I just wanted to say one thing to speak to the 
rare diseases and diseases that are not going to have profits, 
orphan diseases. A small company, Regeneron, worked on CAPS, C-
A-P-S, which is an acronym for a disease that affects a couple 
hundred people in this country, and developed a drug and put it 
on the market, really making very little money at all. A tiny 
company whereas Merck had a drug for animals, killing of 
parasites, called Ivermectin. And we discovered that it worked 
in parasitic diseases characterized as river blindness in Sub-
Saharan Africa. That was going to make no money at all. We knew 
that when we started.
    We carried out an eight-year development program to show 
that it was safe and effective, and then started giving it away 
in 1987 to all people in Sub-Saharan Africa and other parts of 
the world, and are treating at this time. Merck is now 
treating, let me see, 95 million patients a year free.
    Ms. DeLauro. I would just say, let me just finish this, Mr. 
Chairman.
    Mr. Rehberg. You may.
    Ms. DeLauro. My point was not about the money. My point was 
that the decision, as you put it, you know, it is what industry 
decides we should move forward on. I just do not happen to 
believe that that is the way that we ought to make a 
determination of what efforts, and what research, and what 
science we move into. That was my only point. It had nothing to 
do with money.
    Mr. Rehberg. Mr. Alexander.
    Mr. Alexander. Thank you, Mr. Chairman.
    The question is for whoever wants to answer it. But what 
can we do to coordinate efforts between the NIH and NCATS to 
improve the way the pharmaceutical companies can move more 
quickly from discoveries to treatments?
    Dr. Koenig. As I described in my testimony today and in 
testimony, I think that NCATS has a great opportunity now to 
sort of be the convener, the go to part of NIH that can be 
bridging the relationships between patient organizations, 
industry, and others where they can hold meetings, where they 
are very transparent on what their initiatives will be. And it 
gives an opportunity now for industry and NIH to get together 
so that industry can propose new research collaborations.
    I think that ultimately the aha moments that were described 
earlier occur when we put together the drug developers, the 
patients, and scientists who are working on basic research in a 
room. And it happens typically at meetings working on 
particular diseases.
    But this is an opportunity now with a focus on, again, the 
things we talked about, predictive toxicology, and looking at 
surrogate biomarkers, how these teams can work together.
    So, again, forming a sort of a consortium between the 
various members here could, I think, help to accelerate the 
development of new drugs.
    Mr. Sherer. I would just echo those comments, and I think 
the centralization of this information and expertise will be 
very critical. It does not just look necessarily at one 
disease, but can look at the application broadly for human 
health. Bringing the stakeholders together would be important.
    Dr. Vagelos. I do not think there will be any acceleration 
at all by the NCATS of things that are recognized as important 
by people in the community, by people in industry, and by 
people in academia because industry is so focused to get 
something done when the science is available, and the science 
can impact a disease. Whether it be a large disease or a small 
disease, they really are critical, and they have the passion 
for drug and vaccine development.
    And the amount of money that is funneled at that is huge, 
and, therefore, I think that the money that is going to NCATS, 
if it could support those other than the 17 percent of young 
Ph.D.s and M.D.s who are getting their first grant so that we 
support more of those, we would be doing a lot more good for 
getting important new drugs on the market.
    Mr. Sherer. I would actually just like to come back to what 
Ranking Member DeLauro said because we have seen even in our 
space, in Parkinson's, the changing landscape in the 
pharmaceutical industry, we have seen many of them merge and 
combine in the last couple of years. And I do not share the 
view that in all cases the decisions are solely made on a 
scientific or patient focused basis.
    So, I think obviously our foundation strategy is to de-risk 
projects and get industry more involved in Parkinson's, and 
work with them as part of the collaborative network. But I 
think it does need to be a collaborative network of patients, 
the government, and industry, and not just solely relying on 
one entity alone to sort of help us all in the end.
    So, just it is my view, but I think that is kind of the 
evolving framework of the industry, and we should understand 
that and now figure out our goal is to develop treatments for 
patients, and let us try everything we can and not just the 
same old thing that has been tried in the past.
    Mr. Rehberg. Ms. Roybal-Allard.
    Ms. Roybal-Allard. As you know, moving therapies further 
down the development pipeline is one of the focuses of the 
newly-formed National Center for Advancing Translational 
Science through its Therapeutics and Rare and Neglected 
Diseases Program. Yet in your testimony you encourage NCATS to 
otherwise focus primarily on pre-clinical and early clinical 
studies.
    What is your view of the proper boundaries between the work 
of NCATS and that of the private sector, and what is best for 
government, and what is best for industry? And how do you 
recommend that NCATS directly contribute to both early and more 
advanced translational research without being duplicative of 
efforts already under way by industry, medical research 
institutions, or other NIH grantees?
    Dr. Koenig. Thank you very much, Congresswoman, for the 
question.
    I did, in fact, emphasize in my written testimony that the 
focus of the NCATS should be on the early clinical assessment 
of these opportunities, again, in the context of things which I 
talked about, treatments for rare diseases, which could go a 
little further into phase two development, because, again, the 
concern that the private sector does not support this as well 
as it should.
    But I think there is an opportunity for NCATS to actually 
give a focus on smaller populations where they can get insights 
on how a drug may be developed, identifying these new surrogate 
markers that could be worked on.
    I agree with Dr. Vagelos here that once industry has a drug 
that has a proven safety record, that they do the latest stage 
development, phase two developments, the design of those 
studies much better than what would be done by NCATS and the 
NIH. And I think that it is important that when NCATS moves 
into phase two development, they reach out to industry for 
their advice because I have seen many cases, for instance, 
where a principle investigator wants to do a phase two study 
with a compound, and then will spend millions and millions of 
dollars doing that study, and it is done under circumstances 
that ultimately when that data comes out cannot be used for the 
registration of that drug down the line with the FDA.
    And so, I think there are lost moments there when in the 
rush and the design of these later stage studies by the NIH 
investigators supported by the NIH, they are not looking at 
sort of the full long-term view of the value of that clinical 
trial and later stage drugs for the ultimate registration of 
the product. So, that is where I think industry definitely 
needs to have a hand, work if it actually gets to phase two, 
with the NIH investigators. But ultimately I think it is 
industry that needs to move forward in phase two and three 
development.
    Ms. Roybal-Allard. And, Dr. Sherer, with regards to your 
foundation, can you elaborate a little bit on what progress the 
foundation has made on Parkinson's therapies, and what 
contributions has NIH sponsored research made to that progress?
    Mr. Sherer. Yes. So, one of the areas that we have focused 
a lot on is what we call target validation. This is really that 
first stage of translation where you are taking discoveries out 
of NIH funded labs that maybe have identified a new target that 
may have potential as a treatment for Parkinson's, and now you 
are doing some of the more specific direct tests for 
Parkinson's.
    And there are a number of specific examples where we then 
had funded some work in the pre-clinical testing, moved that 
target now to early clinical testing, and we now have phase two 
trials being conducted by the pharmaceutical industry on those 
targets for Parkinson's.
    So, it really was a targeted focus on that gap I talked 
about, the middle of the alphabet. NIH funded research had 
provided very clear promising new discoveries, and then we came 
in with our focus on Parkinson's, how to accelerate this as 
quickly to the clinic for patients. We had pharmaceutical 
companies working with us to prioritize the studies, and now 
they have molecules being tested in the clinic.
    So, our foundation has already been around for 10 years. I 
have talked about the timeline, so we are hopeful that some of 
these trials will result in new therapies, but we know that 
there are new trials happening because of that work.
    Ms. Roybal-Allard. This may have been somewhat answered in 
the past, but what role do you believe NIH can and should play 
in fostering the development of therapies for rare and 
neglected diseases where there is less incentive for 
involvement by industry?
    Mr. Sherer. So, I think it is a similar role that we have 
played for Parkinson's that could be looked at more broadly, 
and really looking at what is coming out of the basic science, 
what are the most promising avenues, and move those forward 
from a therapeutic perspective.
    But I think even more important if you even wanted to 
encourage more industry investment in some of these areas, is 
understanding the clinical testing in those diseases. How will 
that happen? Make it more efficient. Put the tools in place 
that could be used in future trials because it is a lot to ask 
a company to develop the drugs and the tools and all the 
information. And I think this is where NCATS could really 
coordinate all of that effort with the patient interest, the 
pharmaceutical expertise, and the academic knowledge.
    Ms. Roybal-Allard. Thank you.
    Mr. Rehberg. Ms. Lummis.
    Ms. Lummis. Well, thank you, Mr. Chairman.
    It was fun to hear that Ivermectin has found a use outside 
of our uses. You know, I will bet between Mr. Rehberg and I, we 
have administered tens of thousands of doses of Ivermectin to 
our livestock. And what a neat thing to find out that there was 
an application for human use and to alleviate human suffering.
    In my job, you know, I seek counsel from the Bible for my 
soul. I seek counsel from Merck's veterinary manual for my 
livelihood and my stewardship obligations. [Laughter.]
    Mr. Rehberg. Ms. Lummis, for those of us who maybe 
sometimes accidentally jabbed ourselves, it is also nice to 
know it is safe. [Laughter.]
    Ms. Lummis. Exactly. Yeah. I have been vaccinated for red 
nose, black leg, you name it, as have you. Yeah, Bang's 
disease.
    Let me go on to, I am trying to hone in on where the 
Federal role ends and begins, and where the private sector role 
ends and begins, if we can get there.
    It is my understanding that NIH uses a more academic model 
for its clinical trials, and industry may have to repeat 
clinical trials conducted by the NIH because they do not meet 
FDA standards. So, my question would be, how do we create some 
fairly clear lines? And have there been discussions between the 
private sector industry and NIH about how to set those lines? 
Yes, sir.
    Dr. Koenig. So, let me comment that the NIH conducts its 
clinical research with FDA guidance and approval, so they are 
not below standards, meeting what is appropriate for patient 
population with regard to safety and oversight for those 
trials.
    However, as I was trying to allude to before is that 
industry will sometimes include testing, oversight, quality 
assurance, that NIH does not have the infrastructure to do. And 
so, ultimately as the point I was making, it is fine for NIH to 
conduct phase zero and phase one studies and early phase two 
studies, again, particularly in the case of rare diseases 
where, again, I think industry could do a better job, but is 
not incentivized there. But once it gets to that phase, it is 
very important that we use drug industry standards, biotech 
industry standards for conducting these trials for oversight 
because it could be as important as is how that drug is made.
    So, in particular, biological molecules, if they are not 
appropriately characterized in full and they go through this 
clinical process and get into phase two without the right to 
oversight on how to manufacture this at scale. If you have to 
now go back to phase zero and one testing, you have now lost a 
lot of opportunity and a lot of money that was put into those 
phase two studies that cannot be used for registration of those 
drugs.
    So, I think, again, as a little blurring of the line, I 
would say phase zero, phase one, NIH some phase two for certain 
indications. Work with industry, but once it gets to phase two, 
particularly two development, three development, et cetera, 
that should be in the bailiwick of industry.
    Ms. Lummis. Dr. Vagelos, do you have a comment on that?
    Dr. Vagelos. My comment is that I cannot emphasize enough 
the need for new knowledge because it was referred to by both 
Dr. Collins and Dr. Insel to really make important new drugs. 
And that is what we lack. And that new knowledge is going to 
come from NIH funded research, young people finishing their 
post-doctoral training, and getting grants. It boils down to 
that.
    We are shrinking that groups whereas the Chinese are going 
into it, the Russians are going into it, the people in India 
are going into it big time.
    Ms. Lummis. Yep.
    Dr. Vagelos. We have been the leaders of the world up until 
this time.
    Our young people are still coming to the universities to 
get their degrees, but what they are hearing now is grumbling 
among their mentors and the professors who are struggling to 
get their research funded. And this is discouraging. It is 
discouraging to the young people who are the blood of the 
future of our competitive position in the world. And we cannot 
be in this position.
    Now, if we are going to be starting other initiatives and 
not fulfilling that need, I think we are not doing the right 
thing.
    Mr. Rehberg. Thank you. Mrs. Lowey.
    Mrs. Lowey. Thank you very much. And, first of all, Dr. 
Collins, Dr. Insel, Dr. Fauchi, Dr. Verma, I apologize because 
of an urgent commitment that I could not be here. But as you 
know, I am a strong supporter of the National Institutes of 
Health, and that is why I am so dismayed that the budget 
request proposes level funding. I understand we are in a 
difficult fiscal climate, but NIH research saves lives, creates 
jobs, makes us more competitive.
    I think it is imperative that we provide the NIH with a 
minimum of $32 billion, and then we could solve so many of the 
other problems.
    Secondly, I am sorry I missed your panel, but I am 
delighted to welcome Regeneron here. Regeneron is in my 
district, and I know that Regeneron started with four 
employees; you are up to 1,700 employees in the United States 
of America. And so, congratulations. I am very thrilled.
    Now, with regard to scientists, I remember very clearly at 
one of the roundtables I had where Regeneron participated, one 
of the smaller companies, three employees, said they went to 
China, they met with all the appropriate people, they said, 
what are you going to do for us. Come back at 4:00--it was 
about 1:00 I think. I do not remember it exactly. Come back 
about 4:00, and we can provide 40 scientists to you to work 
with you in this small company. So, what you are saying, Dr. 
Vagelos, is absolutely correct, and very frustrating to me.
    And I would like to ask you two questions. Number one, you 
already said something about the NIH. What else could this 
committee do to support the training of young scientists?
    And then I would like you all to respond. I read parts of 
the book, and I have been in discussions with people who are 
talking about industry doing ``me, too,'' drugs. And a lot of 
the energy and the focus can be put on new challenges rather 
than the ``me, too,'' drugs.
    And, thirdly, you talked, Dr. Vagelos, about statin drugs. 
Now, what should people like us do, choose between diabetes, 
losing our mind, or a heart attack? [Laughter.]
    You can answer in what order you choose.
    Dr. Vagelos. Whatever order. Yeah, thanks, Mrs. Lowey.
    Mrs. Lowey. Because I know we have limited time.
    Dr. Vagelos. It is nice seeing you in person.
    First, what can we do about training new people? I think 
support of graduate programs, both Ph.D. and MDPh.D. programs, 
and post-doctoral fellows is crucial to keeping the pipeline of 
exciting young people coming in in both academia, and NIH, and 
industry. That is crucial.
    What we are talking about is a finite amount of money and 
how you carve it up. I think that is a very important area to 
continue supporting.
    Secondly, ``me, too,'' drugs. ``Me, too'' drugs are 
generally when a company starts research on a drug target, they 
may or may not be the first one on the market. If they are not 
first, they hope to have a better follow-up drug, and so they 
continue. But if they finish and they have put now $100 million 
into it, and they have one that is only as good as what is out 
there already, the marketing people go ahead and sell it. So, 
that is sort of a mistake along the way, and I do not support 
those things on the market, but that is a different thing. 
Those are failures of the industry frankly.
    Thirdly, solution. What was your third aspect? Remind me.
    Mrs. Lowey. No. We have all read the research about statin 
drugs.
    Dr. Vagelos. Oh, the statins, okay. The statins are 
probably one--I would look around this room and say, how many 
people are on a statin? And those of you who are not raising 
your hand, you are making a mistake because they are 
incredibly--they have been studied probably more than any class 
of drugs that I am aware of. They are taken very broadly. They 
have enormous benefit.
    If there are risks that we still are not sure about because 
I am not sure if any of these things that have been raised, 
like fuzzy, loss of memory, diabetes, which have not been found 
in any of, I would say by now, hundreds of trials, they must be 
extremely rare, and the benefit is so enormous that I have 
continued taking statin.
    Mr. Rehberg. Mrs. Lowey, I am going to allow you to burn up 
the rest of the time. You kind of win the lottery today. I did 
intend to close the hearing at 12:30, which does not afford 
enough time for the rest of us to do a second round, so if you 
want to continue the questioning so that we can get a complete 
answer from everyone.
    Mr. Sherer. I just wanted to quickly comment----
    Mr. Rehberg. No, you do not have to hurry because you have 
got----
    Mrs. Lowey. The statin?
    Mr. Sherer. On the statin comment, because there was 
actually a discussion before about a role related to 
repositioning, and the role that someone like NCATS can play. 
There is a lot of data that shows that taking a statin could 
decrease your risk of Parkinson's including Zocor.
    So, someone should do a trial to test that as a treatment 
for Parkinson's disease. The patent is going to run out. Who is 
motivated to do it? This is a role that the government can play 
in something like that, you know, broadly across different 
diseases.
    Mrs. Lowey. Well, let me say this, because I do not want to 
get into personal situations. Some of us have been taking 
statin for years. The recent reports about diabetes and losing 
mental acuity are of great concern, and yet you do not want to 
go have a heart attack or something else in the meantime.
    So, the question is, when this information is released--I 
probably should ask the NIH about it, too--how carefully is 
that information--you want to answer. I would rather hear from 
you. You know what I want to know.
    Dr. Koenig. Yeah. I mean, I have a couple of answers to 
several of the questions. This drug has been given to so many 
people. Let us be very clear. Every drug has side effects, and 
the question is, do they have a frequent occurrence or a rare 
occurrence? And ultimately the way we are forced to make these 
decisions is to expose millions of patients to get a rare 
occurrence to find this thing.
    And so ultimately, the population has to understand this is 
not a risk-free situation, that there is a balance between the 
salutatory properties of a drug and potential side effect 
profiles.
    Having said this----
    Mrs. Lowey. Are you on statins?
    Dr. Koenig. Yes, I am. I have been taking statins for 15 
years.
    Mrs. Lowey. Which one? [Laughter.]
    Dr. Koenig. Actually the Merck compound. Okay.
    Mr. Rehberg. I may call this to a close.
    Mrs. Lowey. But we do not have any good studies as to 
adverse reactions.
    Dr. Koenig. But let me----
    Mr. Rehberg. Please either ask----
    Dr. Koenig. So, let me finish, I am sorry----
    Mr. Rehberg. To claim time or go through the chair. I will 
maintain control of this committee.
    Mrs. Lowey. Thank you. I just was seriously asking the 
question because among all of us, there have been many 
discussions, so we were using this opportunity.
    Dr. Koenig. So, I just want to finish off is that, again, 
what was described today in terms of predictive toxicology to 
be able to now find those rare safety events in the laboratory 
as opposed to exposing millions of patients would be a major 
advance that NCATS could do in their initiative.
    I have other comments on the other things, but it is----
    Mr. Rehberg. That will be----
    Mrs. Lowey. Thank you, Mr. Chair.
    Mr. Rehberg. Thank you very much. Thank you all for your 
insight. So I get this correct, and I will read this. We will 
hold the record open for 14 days for the subcommittee members 
to submit questions for the record.
    In addition, I understand the NIH's center directors have 
submitted statements for the record. We will distribute them to 
subcommittee members and include them in the record.
    [The prepared statements and biographies of the National 
Institutes of Health, Institute and Center directors follow:]


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    Mr. Rehberg. Again, gentleman, thank you, and the audience 
as well. Thank you.



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