[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
LOST OPPORTUNITIES FOR VETERANS: AN EXAMINATION OF VA'S TECHNOLOGY
TRANSFER PROGRAM
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON VETERANS' AFFAIRS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
SECOND SESSION
__________
WEDNESDAY, FEBRUARY 3, 2016
__________
Serial No. 114-52
__________
Printed for the use of the Committee on Veterans' Affairs
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COMMITTEE ON VETERANS' AFFAIRS
JEFF MILLER, Florida, Chairman
DOUG LAMBORN, Colorado CORRINE BROWN, Florida, Ranking
GUS M. BILIRAKIS, Florida, Vice- Member
Chairman MARK TAKANO, California
DAVID P. ROE, Tennessee JULIA BROWNLEY, California
DAN BENISHEK, Michigan DINA TITUS, Nevada
TIM HUELSKAMP, Kansas RAUL RUIZ, California
MIKE COFFMAN, Colorado ANN M. KUSTER, New Hampshire
BRAD R. WENSTRUP, Ohio BETO O'ROURKE, Texas
JACKIE WALORSKI, Indiana KATHLEEN RICE, New York
RALPH ABRAHAM, Louisiana TIMOTHY J. WALZ, Minnesota
LEE ZELDIN, New York JERRY McNERNEY, California
RYAN COSTELLO, Pennsylvania
AMATA COLEMAN RADEWAGEN, American
Samoa
MIKE BOST, Illinois
Jon Towers, Staff Director
Don Phillips, Democratic Staff Director
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public
hearing records of the Committee on Veterans' Affairs are also
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C O N T E N T S
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Wednesday, February 3, 2016
Page
Lost Opportunities For Veterans: An Examination of VA's
Technology Transfer Program.................................... 1
OPENING STATEMENTS
Honorable Jeff Miller, Chairman.................................. 1
Prepared Statement........................................... 32
Honorable Corrine Brown, Ranking Member.......................... 3
Prepared Statement........................................... 33
WITNESSES
David Shulkin, M.D., Under Secretary for Health, Department of
Veterans Affairs............................................... 5
Prepared Statement........................................... 34
Accompanied by:
Kyong-Mi Chang, M.D., Chief Research and Development Officer,
Veterans Health Administration
Marisue Cody, Ph.D., Director of Operations, Office of
Research and Development
LOST OPPORTUNITIES FOR VETERANS: AN EXAMINATION OF VA'S TECHNOLOGY
TRANSFER PROGRAM
----------
Wednesday, February 3, 2016
Committee on Veterans' Affairs,
U. S. House of Representatives,
Washington, D.C.
The Committee met, pursuant to notice, at 10:30 a.m., in
Room 334, Cannon House Office Building, Hon. Jeff Miller
[Chairman of the Committee] presiding.
Present: Representatives Miller, Lamborn, Bilirakis, Roe,
Benishek, Huelskamp, Coffman, Wenstrup, Abraham, Zeldin,
Costello, Bost, Brown, Takano, Kuster, O'Rourke, and Walz.
OPENING STATEMENT OF JEFF MILLER, CHAIRMAN
The Chairman. I would like to welcome everyone to today's
hearing and we have entitled it Lost Opportunities for
Veterans: An Examination of VA's Technology Transfer Program.
Let me begin today's hearing by stating that the issues
that we are going to address show how that despite VA's
objections, it is really critically important for this
Committee to look at both the past and current failures that
exist within the department in order to improve the future of
veterans' care.
Without our investigative effort and our notice to conduct
this hearing, VA would not have reviewed what we are going to
talk about this morning. Moreover, VA would not be aware of the
apparent exploitation of its Technology Transfer Program from
those that are inside the Department of Veterans Affairs.
My concern is that the issue we will discuss today may not
be limited to one single researcher. For those who are unaware,
Federal agencies are, in fact, authorized to assert ownership
in inventions made by Federal employees using Federal
resources.
VA's Technology Transfer Program was developed as the
mechanism to determine ownership and then to transfer the
benefits of VA-owned technology to veterans and the public
through patenting and licensing. Unfortunately, this program
appears to be habitually underused resulting in tremendous
losses to veterans and American taxpayers.
A glaring example of where the Technology Transfer Program
perhaps should have been used is in connection with the
hepatitis C drug Sofosbuvir which is claimed to cure up to 99
percent of those infected with this ultimately fatal disease.
This drug reportedly developed by a VA employee resulted in an
$11 billion sale and a $444 million personal profit to that VA
employee.
However, VA appears to have nothing to show for it except a
bill from the drug's current owner for VA's use to treat
veterans. More than 200,000 veterans have been diagnosed with
hepatitis C and VA pays upward to $40,000 for treatment for
each veteran that is infected with this disease. That is about
$8 billion to treat veterans with a drug reportedly developed
using VA resources.
During last summer's financial crisis, VA had to ask
Congress for additional funds to pay for the treatment. So the
question is, why is VA paying so much? What we know is the
drug's reported creator, Dr. Raymond Schinazi, was a 7th VA
employee when the hepatitis C drug was developed. He worked for
VA for more than 25 years and retired shortly after we asked
him to testify at this hearing.
In fact, we sent an email over to VA on January 20th
informing them that we would be asking him to participate and
testify along with Dr. Shulkin. We sent a hard copy to Dr.
Shulkin on the 21st. Dr. Schinazi put in his papers to retire
from the department on January the 21st. He retired two days
ago.
He's listed as a senior career researcher and has received
hundreds of thousands of dollars in VA research funding. Yet in
a letter to me dated the 1st of February, the day of his
retirement, VA asserts that no money was given to Dr. Schinazi
for his research on the drug.
But questions remain whether earlier research on a
different drug was used in the development of the hepatitis C
treatment. Additionally, Dr. Schinazi filed patents while he
was a VA employee, but he never disclosed those inventions and
patents to the VA.
So how is it that none of his claimed life-saving
inventions belonged to VA or our veterans? Interestingly, as I
mentioned earlier, I asked Dr. Schinazi to appear at this
hearing, but after being requested to testify, he did retire
from VA effective two days ago.
Secretary McDonald rightly promotes VA as having invented
many cutting-edge technologies like the Nicotine Patch, the
cardiac stent, and the CT scan. And although these inventions
were developed prior to the inception of VA's Technology
Transfer Program, I think these lost opportunities should serve
as a lesson to be learned by everyone that VA should be
supporting and developing the program so that no other
potential opportunities are lost. Our veterans and taxpayers
should be benefitting from these inventions. It is as simple as
that.
VA oversees $1.8 billion in research every year. Yet in
2014, it only received 304 invention disclosures, filed only 25
patents, issued only 15 license agreements, and earned only
$375,674 in royalties.
To put that into perspective, the National Institutes of
Health has a $3 billion intramural research budget and in 2014,
they received 370 invention disclosures, filed 153 patents,
issued 222 license agreements, and earned $137 million in
royalty income or about 360 times more than VA's reported
royalties.
Similarly at the USDA, they have got a billion dollar
research program. In 2014, they received 117 invention
disclosures, filed 119 patents, signed 412 license agreements,
and received $3.6 million in royalty income or about nine times
more than VA.
So it begs the question why has VA not seemed to capitalize
on the many research successes that it claims? We have already
seen the results of one potential lost opportunity regarding
the new hepatitis C drug. How many more are there out there,
and how many more will there be? If VA wants to take credit for
the tremendous medical accomplishments, it should have
something to show for it, certainly more than just talking
about it.
Veterans deserve the right to reap the benefits of those
inventions given the fact that they were created by employees
and with taxpayer resources specifically designed for their
use.
With that, I now yield to the Ranking Member, Ms. Brown,
for any opening statement she may have.
[The prepared statement of Jeff Miller appears in the
Appendix]
OPENING STATEMENT OF CORRINE BROWN, RANKING MEMBER
Ms. Brown. Thank you, Mr. Chairman.
Since 1980, the Federal Government has worked to make
taxpayer-funded research more available to the private sector
while making sure that taxpayers also gain from these research
investments.
This allows all of us to share in the important research
breakthroughs.
University of Florida developed Gatorade and got a patent
for it, so anybody who used it had to pay University of Florida
royalties for its use. This concept of VA keeping its
intellectual property rights for its employee's invention can't
be hard.
But we need to strike the right balance here so academic
institutions want to partner with VA to conduct research and
get funding for research from royalties from inventions, and so
research is available for businesses to develop products that
help veterans and the public.
This important program that should be overseeing, this
balance may not have received the leadership focus that it
needs and employee turnover has been high.
There are questions as to whether the process in place is
sufficient to strike that balance from the Veterans Health
Administration to the Office of General Counsel.
For this reason, I believe we should have an outside
organization look into this program. I believe we should
request that the GAO to look into this program and provide us
with the facts so that we can make sure the program strikes the
proper balance.
Finally, I believe that if this program is not working as
it should, VA, the taxpayers, may end up holding the bag.
Just last week, the Chairman raised questions and concerns
over the price paid by the VA for hepatitis C drugs. He also
pointed out that the drug was invented by a team led by a VA
doctor.
This doctor subsequently sold the company that developed
the drug to Gilead Sciences.
According to the Chairman, Gilead is charging the VA
''upward $40,000'' while Egypt, the same drug costs $900.00.
Voice. Nine hundred dollars.
Ms. Brown. Oh, I am sorry, that is a big difference. Let me
go back and make a correction on that. We charged 40,000.
Voice. Forty thousand.
Ms. Brown. I am sorry. Forty-thousand. That is a lot of
money.
Voice. Egypt pays $900.
Ms. Brown. And Egypt pays $900. Let me try that again. We
pay $40,000 per individual and Egypt pays $900 per individual.
And this is for the same drug? Uh-huh. The milk isn't clean in
that one.
Without the VA, this drug would not exist.
In this case, we do not know if the process worked and
whether the VA properly asserted its rights in this matter.
I believe that we should have a hearing on drug pricing and
how, moving forward, we can make sure that veterans are getting
the drugs that they need and the VA is paying a fair price.
In addition, according to the recent New York Times
article, drug manufacturing issues have caused shortages and
rationing. We need to make sure that we get to the bottom of
this to make sure that veterans are not unduly affected. Let me
repeat myself. We need to get to the bottom of this and make
sure veterans are not unduly affected.
Making sure that taxpayers are not ripped off, and that the
veterans get the medicine that they need is vital.
I look forward to working together to explore these issues
in the weeks to come. Thank you, Mr. Chairman, and I yield back
the balance of my time. One team, one fight.
[The prepared statement of Corrine Brown appears in the
Appendix]
The Chairman. Thank you, Ms. Brown.
Members, I would ask that you waive your opening statements
as is customary in this Committee.
And I would like to welcome Dr. Shulkin to the table as the
only witness testifying today. Of course, he is the Under
Secretary for Health of the Department of Veterans Affairs. He
is accompanied by Dr. Kyong-Mi Chang, Chief Research and
Development Officer for VHA, and Doctor, is it Marisue, Marisue
Cody, Director of Operations for the Office of Research and
Development.
And as I have already told you originally, we had requested
that Dr. Schinazi who retired on Monday and another physician,
the Deputy Under Secretary for Health and Policy Services, to
attend. Dr. Agarwal is out of the office and won't be available
for a couple weeks. I understand the reasons for that. And, of
course, we have already talked about Dr. Schinazi retiring two
days ago.
I have made numerous requests, and I think Dr. Shulkin is
aware of that, for answers to several questions that were sent
to VA starting back in December of last year, but after those
attempts by the Committee staff to get VA to provide this
information, you only provided some of the requested
information as of Monday.
So I would ask, if you would, to stand, so I can swear you
in, and if I could have the two folks that are joining as well
stand, so I can swear you in as well. If you would raise your
right hand.
[Witnesses sworn.]
The Chairman. Thank you very much. You may be seated.
Dr. Shulkin, your complete written statement will be
entered into the record. You are recognized for five minutes.
STATEMENT OF DAVID SHULKIN, M.D.
Dr. Shulkin. Thank you.
Good morning, Chairman Miller, Ranking Member Brown, and
Members of the Committee. Thank you for the opportunity to
discuss the Technology Transfer Program at the Department of
Veterans Affairs.
The Chairman has already introduced my two colleagues to my
right and my left.
VA's Transfer Technology Program is housed within the
Office of Research and Development through which VA conducts a
robust research program whose fundamental mission is to advance
the health care of veterans.
VA research supports over 2,000 research projects at over
100 VA medical centers throughout the country with a fiscal
year 2016 direct appropriation of $620 million. The VA research
program is further enhanced by private and Federal funds
awarded to VA researchers, meaning total resources available to
VA researchers will exceed $1.8 billion this year.
VA research projects focus on VA relevant biomedical
laboratory, clinical rehabilitation, health services research
through four research services, a cooperative studies program
for large clinical trials, and a quality improvement program
that uses research evidence to improve clinical care.
For over 90 years, VA research has worked to improve the
lives of veterans, performing the first successful liver
transplant, developing high-performance prosthetic devices,
establishing the value of aspirin therapy in improving heart
health, and showing the effectiveness of the shingles vaccine,
as well as developing the Nicotine Patch.
Established in 2000, VA's Technology Transfer Program
reflects our research focus on the veteran, ensuring that
products and innovations created by VA researchers are
accessible to all veterans.
Prior to the establishment of this Technology Transfer
Program, VA had no policy on intellectual property rights and
generally waived ownership rights to inventions tasking the
inventor and usually the academic partner with patenting,
marketing, licensing responsibilities.
My written testimony includes the specific details of the
Technology Transfer Program. The primary goal of the program is
to ensure veterans have access to cutting-edge technologies and
to enable VA to effectively partner with academic and private
organizations.
To support this, the program manages over 1,500 cooperative
research and development agreements per year, most for clinical
trials that grant veterans access to new and potentially
beneficial medications.
Often as opposed to patenting inventions and delaying their
availability in the public domain, the Technology Transfer
Program works to ensure veterans have immediate access to these
technologies by releasing them publicly.
The program is crucial to the dissemination of products
that are of limited commercial value to private institutions,
but can greatly improve veterans' quality of life. This has
included the development of several kinds of prosthetic feet
such as a foot that allows veterans with lower leg amputations
to easily change shoes without experiencing balance issues.
This allows for easier wear of high heels or cowboy boots.
This is an important quality of life issue for veterans
with lower limb amputations, but is not particularly
commercially viable. Every year, VA researchers develop dozens
of new health care related technologies and other inventions
like these that benefit VA patients, other veterans, and all
Americans.
Research at work at more than 100 medical centers
conducting research, most of which have formal affiliations
with academic institutions and hospitals. Many full and part-
time VA employees also have academic appointments. Many
clinicians and researchers have laboratory access at both VA
and academic affiliates.
Because of these arrangements, most VA inventions are
jointly owned by the VA and its academic affiliates making
technology transfer a collaborative effort.
VA research relies on researchers self-reporting invention
disclosures. This process is very similar to the one used by
academic partners. Without proper filing of invention
disclosures, VA is unable to review and appropriately make a
determination of rights.
VHA will review the Technology Transfer Program to ensure
compliance with regulations and statutes concerning invention
disclosures.
VA recently reviewed the Technology Transfer Program
materials related to Dr. Schinazi, a Ph.D. scientist who has
retired from VA service. As you know, certain information
regarding Dr. Schinazi's employment and invention disclosures
made to the department are protected from public disclosure
under the Privacy Act. This includes discussions of Privacy Act
protected information in public oversight Committee hearings
like this.
I did provide specific information in a letter to the
Committee pursuant to the ccongressional exception to the
Privacy Act in furtherance of your oversight function. While
I'm happy to address any specific additional questions
regarding Dr. Schinazi in a Committee briefing or a closed
hearing and, in fact, offered to do so in advance of this
hearing, I am prohibited from disclosing protected information
in this public forum.
I recognize the Technology Transfer Program requires an in-
depth evaluation, and I have directed VHA to begin that
evaluation internally, but also requesting assistance from
academic affiliates, other Federal agencies, and industry
leaders to advise VA on the current role, scope, and
configuration of our Technology Transfer Program.
Thank you for the opportunity to testify before you today.
My colleagues and I look forward to any questions.
[The prepared statement of David Shulkin appears in the
Appendix]
The Chairman. Thank you very much, Doctor. I appreciate you
being here and your colleagues that are with us to testify
today.
I just want to, for the record, make sure that the dates
that I am using are correct. We emailed your office and
followed up with a hard copy on the 21st inviting Dr. Schinazi
to be along with you while you testified. I received
information this morning and I just want you to confirm that he
officially put his papers in to retire on the 21st, so that
would be the day after we asked you to testify; is that
correct?
Dr. Shulkin. I think that is correct.
The Chairman. Okay. Although his retirement went into
effect a couple of days ago, he did have a research lab and a
program at the Department of Veterans Affairs. So what is the
status of that facility and laboratory at this time?
Dr. Shulkin. My understanding is that he had numerous
active research programs and grants and that they will be
appropriately transferred over to other researchers who will
assume those responsibilities.
The Chairman. Does he have any access at all to any of that
laboratory or any of the information that you are aware of?
Dr. Shulkin. After a person leaves Federal Government,
they--they relinquish their access to Federal information and
resources.
The Chairman. And so you say he has got a couple of active
projects now and those will be picked up by--he can't carry
that with him? It stays within the VA?
Dr. Shulkin. Anything that's done with VA resources or time
or effort will remain with the VA, cannot be transferred, no.
The Chairman. I don't think this is going to affect privacy
rules and regulations, but did Dr. Schinazi make any
disclosures of what he was doing at the VA?
Dr. Shulkin. As you know, Mr. Chairman, I have sent you a
letter and--and a couple to the Ranking Member as well that has
given that specific information to you, but I am not able to
discuss any specific disclosures in a public hearing. I
certainly would be glad to discuss in a closed hearing or any
other forum that's private for that information.
The Chairman. And I do appreciate that. I am not asking
about any specific disclosures. I am saying did he make any
disclosures?
Dr. Shulkin. I--again, I've provided that information to
you. There is a listing of those, yes.
The Chairman. So he did make specific disclosures?
Dr. Shulkin. In the--in--in the letter that I sent you, I
provided you that information.
The Chairman. Help us understand a little bit. If, in fact,
it is found that he didn't make appropriate disclosures, is
there any statute of limitations that would prevent the
Department of Veterans Affairs from going backwards after the
appropriate licensing and recoupment of any of the dollars that
may be out there?
Dr. Shulkin. Yeah. I am equally as concerned to make sure
that the rights of the Veterans Administration and the
taxpayers are being upheld here. As you are aware, I am asking
that this entire situation be looked at.
I am not aware of a statute of limitations, although that
may be in a statute that I'm not aware of. But it would
certainly be my intent to understand this situation in complete
detail so that we could make sure that everything that should
have been followed was followed.
The Chairman. And if, in fact, when there is a look-back
and it is found out that disclosures were not made, that there
are some rights that can be asserted by VA, does VA intend to
assert those rights?
Dr. Shulkin. I don't want to make any presumptions about
what we will find. As I said, I want to do a thorough review,
get to the bottom of this. But I can assure you it would be my
intent to fully pursue every option that would be available to
the government to protect the rights and to make sure that
everything that should have been done was done.
The Chairman. Okay. Thank you.
Ms. Brown.
Ms. Brown. Thank you.
During the summer, I think, we put up an additional billion
dollars for this drug which is one of the best drugs out. It
has a 99 percent rate and it is very, very good. But you see I
have a little problem with figures. I don't understand why
other countries can spend $900 and we are spending $40,000. I
mean, it was very confusing. I can't see the disparity.
Can you explain it to me?
Dr. Shulkin. That would definitely be beyond my expertise
to understand the pharmaceutical industry's pricing schemes.
But, you know, I think--I think that everyone who knows even a
little bit about this topic understands that the prices charged
by many companies in the United States are higher than what's
available in many third-world countries.
Ms. Brown. Are we talking about the same formulary, though?
Dr. Shulkin. Yes. Yes, it's the same--it's the same
molecule. There is pricing differences between what U.S.
customers are charged and the--and, as you know, most of the
press focused on the Canadian drugs that--that you can get the
same drugs in Canada often cheaper as well. But, you know--
Ms. Brown. And Mexico, too?
Dr. Shulkin. What's that?
Ms. Brown. And Mexico, too?
Dr. Shulkin. Yes, yes. So--but, you know, that--that
certainly is not determined by the government. We're a
customer. We make sure that when the government buys drugs
through the VA that we obtain the very best pricing possible,
but we don't get to determine the price.
Ms. Brown. I am going to ask that the Chairman, can we have
a hearing just on the drug pricing because one of the things
that we do, we push that the Department of Defense and the
Department of VA negotiate the prices of the drugs so we can
keep the costs down.
I think that is extremely important because if we buy it in
volume, the taxpayer, the veterans or the military or the
spouses should benefit from the research that we are doing. So
this is very disturbing to me, Mr. Chairman. I hope we can have
a hearing just on drug pricing, in the immediate future
And with that, I yield back the balance of my time.
The Chairman. Thank you very much, Ms. Brown. We will look
at that possibility. You and I can have an opportunity to
discuss it.
And I would let you know that even at the $40,000 number or
$42,000, that is a discounted rate of what the drug actually
retails for out there. And that is another discussion. I am not
into price fixing. I am not into setting the government doing
that.
But if, in fact, it is found that it was a Department of
Veterans Affairs' employee that did, in fact, discover the drug
and did not do what was appropriate, I think that it is
important that this Committee do its oversight. And I
appreciate Dr. Shulkin and certainly the secretary and the
deputy really trying to get to the bottom of it by going to the
inspector general.
And with that, Mr. Lamborn.
Mr. Lamborn. Thank you, Mr. Chairman, and I really
appreciate your leadership on this issue and having this
hearing today. And I appreciate the hard work of the staff and
their research in bringing this to light. And I am really
concerned about this.
Dr. Shulkin, are there other possible inventions, whether
it is pharmaceuticals or prosthetics or anything else, Nicotine
Patches, that we rightfully claim as part of the heritage of
what the VA has researched and developed that might be out
there that we have not gotten the fair share for the taxpayer
and for your budget?
Dr. Shulkin. Congressman, I, too, am equally concerned
about this. And I can't tell you today that I have a good
enough understanding to say that I can assure you that there
aren't other issues out there. That's one of the reasons why I
am going to take a thorough review of this both internally and
externally and I want to get to the bottom of it to make sure
that I can tell you that there aren't issues out there.
Anything that was done prior to the year 2000 like the
Nicotine Patch and other inventions that we've talked about, we
have no claimed intellectual property. That was our policy pre
2000 that VA didn't want anything.
Since 2000, though, if there was VA resources and time, we
would expect that information would be disclosed and that we
would have our right to assert or not to assert ownership over
that. So I'm--I'm going to get to the bottom of this.
Mr. Lamborn. And I know the Chairman has already started
probing on this, but if there were any disclosures not properly
and fully made by Mr. Schinazi, does that give grounds to
review and perhaps claw back some of the money that it sounds
to me should have gone to the taxpayer?
Dr. Shulkin. Yeah. You know, Congressman, although I'm
going to--I'm not going to comment on any specific individual
here, there is enough concern that has been raised here that I
am asking for a review of all these facts. And should there be
anything that comes out of that review where we have violated
the policies or procedures including disclosure or anything
else, we are going to take full rights to make sure that VA
does get its proper ownership.
Mr. Lamborn. And I have no objection to people working hard
and becoming wealthy as a result of that, but I think the U.S.
Government, the taxpayers, and the veterans should have their
share if they were entitled to that.
Dr. Shulkin. That was the purpose of setting up the
Technology Transfer Program, absolutely.
Mr. Lamborn. And I am glad that the VA is now starting to
get behind this. It sounds a little belated to me, a little
behind the power curve. I wish the VA had been more on top of
this from the year 2000.
Okay. How can we be assured--I know you are saying some
good things and I appreciate it--
Dr. Shulkin. Yeah.
Mr. Lamborn [continued]. --but how can we be assured that
this is not going to be a pattern in the future like it has
apparently been in the past?
Dr. Shulkin. Well, first of all, I just want to make sure
you have the right information. I think the Chairman gave--gave
some statistics. But we have been disclosing, our researchers
have been disclosing, VA has been asserting its ownership. We
have been patenting and licensing inventions.
But I think you're asking about the internal controls. How
can we be assured that we're not missing anything? And today, I
cannot tell you that I have good enough confidence that we have
the right internal controls in place.
We absolutely have internal controls. I just can't tell you
that I think they're robust enough and that they're working
well enough. And that's one of the reasons why I'm going to be
doing this review to make sure that I have confidence that
those internal controls are in place. And it's something that I
absolutely will get back to you on.
Mr. Lamborn. That is really good, but it sounds like when
other agencies have ten times the amount or way beyond the
amount of royalties coming back, it sounds like VA has dropped
the ball.
So you say that you have been taken advantage of this
program. It doesn't really sound like it has been taken
advantage of very much up until now.
Dr. Shulkin. Well, let me just give you my perspective
which is--which is--I share this with you which is that--which
is that, again, until I have confidence that we have the right
controls in place, I can't tell you for sure that we are doing
everything we should be doing.
But as--as the Chairman said, we have $1.8 billion in
funding. One point two billion are external funds into the VA
from NIH and outside grants. Six hundred and thirty million,
$637 million to be precise is internal VA money. That internal
VA money isn't like other research labs in the Federal
Government.
We use $93 million for health services research which never
generates really patentable or licensable ideas. We use
internal money for prosthetics research which when it generates
licenses or patents, it doesn't generate commercially very
financially viable ones. They help veterans. That's what we're
doing, but they're not really meant to do that.
The money that you would look at that would say is
comparable to other agencies is about $171 million for
biomedical research. So--so our number is a little bit smaller
in comparison. That's not to say that--that we're not going to
look at this very hard.
Mr. Lamborn. Okay. Thank you, Mr. Chairman.
The Chairman. Mr. O'Rourke.
Mr. O'Rourke. Thank you. Mr. Chairman, thank you for
bringing this issue to the attention of the Committee and to
the public.
And, Dr. Shulkin, thank you for your commitment to try to
resolve this.
I think some of the questions that I would like to know the
answer to, you have already said you cannot answer. I would
like to know what additional controls need to be in place, and
you said that you are going to review that process and make
that determination hopefully soon or shortly.
You mentioned earlier that what the VA is doing when it
comes to technology transfer is similar to what the academic
world does. I would just ask that you ensure that we are
absolutely following the best practices and precedents from the
academic world where we have seen tremendous success in
transferring marketable technologies.
And then, of course, I think all of us want your assurance
that you are going to aggressively pursue the interests of the
taxpayer and ensure that their rights and returns are protected
and sought after and that we actually receive that benefit if,
in fact, it is owed.
Lastly, I will say that there is no one in Federal service
that I respect more than you given your commitment to come into
the VA with very little time to implement a significant
transformation. And you have hit the ground running, have come
up with some very bold proposals which I think the majority of
this Committee supports. You had a tremendous conference
yesterday on veteran suicide which I thought was great.
And it is too bad that Dr. Schinazi can't be here in
person, but just his story, the selling this company for $11
billion after working at the VA ostensibly to help veterans, a
company which then charges $40,000 per treatment, just to put
it in context, one of the gentlemen sitting behind me, David
Combs who is himself an Iraqi combat veteran and is on my staff
and supports me here, makes just a little bit more than one of
those treatments. But he is here because of his sense of
purpose and service to his country.
And you and I have had this conversation when we try to
address veteran suicide, for example. We need more mental
health care providers. If you are just graduating from medical
school, this is probably not the most desirable place to work
right now.
How do we connect with people's sense of public service to
draw them in to help prevent more veteran suicides, to provide
more mental health access, to pioneer the kinds of treatments
that we see here that truly are life saving and transformative?
You almost don't want to have to have the controls in
place. You want the people in there who are doing this for the
right reason. So I don't know what questions, frankly, you can
answer today, so I just thought I would use my time to make
that appeal, commend you for your service. I know that you are
going to aggressively pursue this.
I have got a little over a minute and a half left. If there
is anything you would like to add on any of those themes, we
would love to hear your comments.
Dr. Shulkin. Well--well, thank you and thank you for your
commitment to veterans' issues. And--and I think that our
passion for making this better is very much appreciated.
I would like to add I take this very seriously. As I said,
I'm going to get to the bottom of this. As you also said, I
come from the private sector where I have a lot of experience
in this. And I have already begun to reach out to my academic
colleagues because I want to make sure that the VA has the very
very best processes in place for technology transfer. And I do
believe that that exists among our academic affiliates and that
we will come up with improvements that we're going to put in
place. I'm pretty confident of that.
I also appreciate your concern making the VA a place where
physicians and other professionals in health care want to come
to serve because this is a terrific place to spend your time
and to do something very meaningful and to give back to your
country. And I want this to be the type of environment, and
that's what we're working hard to do, where people do want to
come to work. And I hope that together we can create that
environment.
Mr. O'Rourke. Thank you, Mr. Chairman. I yield back.
The Chairman. Thank you very much.
Dr. Abraham, you are recognized.
Mr. Abraham. Thank you, Mr. Chairman, and thanks so much
for holding this hearing.
Certainly the taxpayers should be outraged and certainly
even from a moral bankruptcy point, I think we could argue that
this hearing is very important.
Dr. Shulkin, thank you for being here. I know you aspire,
and I truly believe that you do aspire to make the VA a better
system. And I understand you are treading water on a daily
basis on some of these issues.
Let's go back to Dr. Schinazi just for a minute and then we
will move on. When an employee at any company, whether it is
Federal, civilian, it does not matter, if he works 26 years and
he is going to retire, there is usually a big party and a
watch. There is usually notice of months of advancement. And
certainly in his position as a lead researcher where you have
ongoing projects, he needs to groom those under him to take the
torch, so to speak, carry that research on to make sure that
all the research before that is not repeated not so much for
the money, just for the expediency of time.
So my question was, did Dr. Schinazi, did he give a two-
week notice, a four-week notice, a six-week notice, or did he
just go?
Dr. Shulkin. I think--I think the Chairman already gave the
dates that--that I am aware of. I---I got--I've never spoken to
Dr. Schinazi.
Mr. Abraham. We got an email and he was out the door the
next day. Is that a fair statement?
Dr. Shulkin. I'm sorry. Repeat it again.
The Chairman. Excuse me. If the gentleman would yield. For
the record, he put his papers in on the 21st of January and
retired on the 1st, so less than ten days.
Mr. Abraham. I understand. Thank you. And there was no
prior notice that we know of. Okay. Thank you.
Go back to the post 2000 internal reset, so to speak--
Dr. Shulkin. Uh-huh.
Mr. Abraham [continued]. --about the patents, royalties,
those types of deals. Is there anything now in place where if a
researcher develops a home-run drug--
Dr. Shulkin. Uh-huh.
Mr. Abraham [continued]. --that can saves lives of veterans
and civilians, just a great drug like Harvoni, these types of
drugs--
Dr. Shulkin. Uh-huh.
Mr. Abraham [continued]. --does the VA have in place a
policy to incentivize for that research if it comes to fruition
that it is a great drug or does that researcher get a
percentage of the profits now as compared to pre 2000?
Dr. Shulkin. Yeah. First of all, the VA currently and since
2000 has in place a number of controls to make sure that it is
the investigator's obligation to disclose information such as
that. Once--once a disclosure and a form is completed, it then
goes to our Office of General Counsel and there's generally
three decisions that happen.
One is, is that the VA asserts no rights and says you
didn't use VA resources. You didn't use any time. We're not
going to assert rights. The VA can assert its right of
ownership total--
Mr. Abraham. Okay.
Dr. Shulkin [continued]. --totally, absolutely.
Mr. Abraham. So the researcher, he just gets his or her
salary?
Dr. Shulkin. The--the VA could do that, absolutely, and
assert a hundred percent ownership. What typically happens, 95
percent of our researchers are called duly appointed. That
means that they share an appointment with an academic
affiliate.
So for 95 percent of these, they actually go between a
negotiation. We have a--what's called a cooperative tran--
transfer technology agreement with the academic affiliate where
we negotiate with the academic affiliate. We say you're going
to get a piece of this. VA is going to get a piece of this. The
research potentially could get a piece of that.
Mr. Abraham. But whether the researcher gets a piece of the
pie is up to the academic institution and not the VA. Is that a
fair statement?
Dr. Shulkin. A duly appointed--a duly appointed personnel
which, again, 95 percent of our researchers are, would have to
negotiate that with their academic affiliate and with the VA.
Mr. Abraham. Okay. Thank you.
Mr. Chairman, I have three more questions I will ask to
submit for the record for a written response later if that
would be okay.
The Chairman. That would be fine.
Mr. Abraham. All right. I will yield back. Thank you, sir.
The Chairman. Thank you, Doctor.
Mr. Walz, you are recognized.
Mr. Walz. Thank you, Mr. Chairman.
And, Dr. Shulkin, I am going to also echo a little bit what
my colleague, Mr. O'Rourke, said. I think it is important for
folks to know what you were doing yesterday convening a
national summit on veteran suicide, everyone from the Chairman,
Mr. O'Rourke, others in this Committee, Elizabeth Dole, the
work she has done, and this Nation's leading researchers as
well as Clay Hunt's family and Daniel Somers' family.
So thank you for that. We are very grateful. I think what
you have heard here is reestablishing the trust in the VA is a
critical component as well as the delivery of health care and
everything else.
And looking at this, and it is premature, and I think I
have no frustrations with your inability to answer because this
is all fast and that is what you are supposed to do and there
are rules for that, I totally get that, but you can see where
this thing is made for TV and the frustration of the American
public that, again, feeds back into the idea that the VA is not
doing things right.
The sad part of this is, this is a huge success story or
should be for what the VA does, from the research we do, what
we do collectively as a Nation to solve problems. There should
be a mechanism to move these for efficiencies into the private
sector.
The interesting thing is, is that we socialized the risk
and the investment and privatized the rewards to this. And
there is an irony in this discussion going on here that I am
sure is not being missed on anyone.
For me a couple things, though, really stand out. My first
concern, though, comes to this issue, the cost of this drug and
delivery of life-saving care to our veterans. That is the main
priority here. We will go back and figure out what Dr. Schinazi
did and there is need to recoup, fix the system, but that is
the one.
And I know you have spoken a little bit about it. We as a
Nation, I would say not just the VA, have to get a handle on
this. It is unacceptable. It is stunning to me that you have a
veteran. You have this miracle drug. We are going to have to
have the discussion of life-saving principles or how expensive
they are and the care we give.
So I know you are very aware of that, but just the second
part is just, I mean, it is mind boggling. I was thinking of
this one-eighth of the time to develop this. I was thinking to
myself, Vice President Biden needs to get this guy on board for
the cancer project because this is a go-getter apparently. And
it is frustrating me because you see where we are coming from.
I am pontificating to you, but I just want to be clear on
this that, again, it is another good thing that is happening in
the VA. There is life-saving ability here. There are some
things we can do to streamline the system to get this drug to
our veterans, and to the private sector who need it, at the
same, time understanding that collective research that can't be
done or won't be done by the private sector in many cases is
still a role of government, but not at this type of expense.
And I know you have articulated. I don't want to ask you
anything specific. I want you to know we get it. I think the
Chairman is right in calling this and bringing it to the
public's attention. They want to hear about it. There is a lot
more that needs to be done before we can say what happened.
But, again, I can't stress enough that the public's
perception of the VA is tenuous right now. Any story like this
comes out, sets us back and it sets back the great work that
you and your team and others were doing yesterday.
So thank you for that and please know we know it.
Dr. Shulkin. Well, thank you. First of all, I do want to
thank you for your leadership as we approach the anniversary of
the Clay Hunt Act. It was you who was the cosponsor in the
House and thank you for that.
And thank you, Mr. Chairman and Mr. O'Rourke, for being
there yesterday as well and Ms. Brown.
But establishing the trust with the American people and our
veterans is our top priority and I couldn't agree more. That's
why I take this very seriously. I do appreciate the Chairman's
leadership in this, and we are going to make sure that we get
to the bottom of this with all the facts, with the external
reviews that we've set in place and the internal reviews.
The issue of hepatitis C, this is truly a miraculous new
drug. We have, thanks to the support of Congress, have the
resources now to make sure that we are going to treat
thousands. In fact, this year, 36,000 veterans we are going to
be able to deliver this drug to and hopefully cure at very very
high rates. So thank you.
Mr. Walz. No, we appreciate that. And, again, I can say
this is a great story. And I don't know and I don't want to
pass judgment on Dr. Schinazi.
Dr. Shulkin. Uh-huh.
Mr. Walz. This is a miraculous achievement and it is one
that it is unfortunate that we are in a position where things
seem to be clouded and we can't all celebrate this. And he
should see the fruits of his labors to a certain degree, but
not to the numbers we are talking.
So I yield back. Thank you, Mr. Chairman.
The Chairman. Before I recognize Mr. Huelskamp, is there
anything that would prevent the VA from buying a veteran a
first-class ticket and allowing them to fly to one of these
countries and purchase the drug for $900?
Dr. Shulkin. I am sure there is something that would
prevent us in--in spending our money that way, but--but--but--
but I understand. I understand the point of your question. And
so I'm going to give you my personal opinion as a physician
having practiced for as many years as I have and patients
asking me this question.
I tell my patients that you are safest when you get your
drugs in the United States of America with the FDA protections
and our controls and our systems. When you go to a foreign
country, we don't have as many protections as we have here in
America for safety.
And so you're not always sure exactly what you're getting.
So I wouldn't recommend that a policy that we send our veterans
to Egypt for that, but--but--but certainly it's hard to
understand the price differential. I understand that point.
The Chairman. I don't believe you would find a whole lot of
argument from the Congress that would allow you to purchase a
first-class airline ticket at $7,000, $8,000 to reap a $900
drug regime. And, you know, maybe we ought to look at it. I
understand the efficacy issue, but this is the exact same drug
made by the exact pharmaceutical company and so I asked that
question.
Mr. Huelskamp, I will tee it up for you. You are
recognized.
Mr. Huelskamp. Thank you, Mr. Chairman. I don't know if you
were suggesting a one-way first-class ticket for me, but thank
you. I appreciate the doctor being here.
But based on what I have heard now, I just want to make a
statement. If I understand correctly, if the VA would assert
ownership on just a few of these issues such as the hep C or
HIV treatment, that could create an influx of billions of
dollars into the VA for our veterans. Is that accurate?
Dr. Shulkin. This is--this is all hypothetical because--
because I don't know what percent ownership we potentially
could assert. But potentially, this drug is a--certainly a
multi-billion dollar drug, absolutely.
Mr. Huelskamp. Have we asserted any ownership in this drug?
Dr. Shulkin. No, we haven't.
Mr. Huelskamp. Okay. Five questions I would like to quickly
get through just for the record, Doctor. What were the total
number of invention disclosures received by TTP for fiscal
years 2013 and 2014?
Dr. Shulkin. I believe that we disclosed in '13 272 and in
'14 304.
Mr. Huelskamp. And how many inventions did VA assert in
ownership interest in fiscal year 2013 and 2014?
Dr. Shulkin. How many--
Mr. Huelskamp. Ownership interests.
Dr. Shulkin [continued]. Oh, of those, 100 in '13 and 98 in
'14.
Mr. Huelskamp. Okay. Is there a backlog or what is the
backlog of invention disclosures waiting to be processed by
TTP?
Dr. Shulkin. There is a backlog. In '13, there was still
five pending and in '14, there were 23 pending.
Mr. Huelskamp. Okay. And how many of these VA-owned
inventions are jointly owned with the academic affiliate?
Dr. Shulkin. Most are jointly owned with the academic
affiliate. Around 95 percent are jointly owned.
Mr. Huelskamp. And you are able to identify what percentage
is owned by the affiliate?
Dr. Shulkin. Yes. Yes. It's a high percentage. About 95
percent are owned jointly with our affiliates.
Mr. Huelskamp. And what percentage is generally owned by
the affiliate? Is that variant?
Dr. Shulkin. Oh, oh, what percent. That would--that would
really vary, depending upon where the research was done and
where the time and effort was--was put in. Sometimes VA has a
small amount. Sometimes VA has the majority amount.
Mr. Huelskamp. Okay. And how many patent applications did
VA file in fiscal year 2013 and 2014 for solely owned
inventions?
Dr. Shulkin. In both fiscal year 2013, 25 and also the same
number, 25, in '14.
Mr. Huelskamp. And were those patent applications approved?
Dr. Shulkin. They were filed. They're not approved. So--so,
you know, the patent process, as I'm sure you're aware, often
takes a couple years, but those are the numbers that were
filed. I think that three patents were approved in '13 and four
in '14.
Mr. Huelskamp. And, Dr. Shulkin, how long have you been in
this position again?
Dr. Shulkin. Almost seven months.
Mr. Huelskamp. Almost seven months. And were you with the
VA before and what position?
Dr. Shulkin. No, no, no. I'm--I have spent my entire life
in the private sector. I had a pretty good job before doing
this, and I was asked to come in to help turn around the VA.
Mr. Huelskamp. Apparently not as good as Dr. Schinazi had
as well, Doctor. But what is bothersome to me amongst many of
these things is the fact that the sale was, I guess, public
four years ago.
I mean, what has the VA been doing to establish an
ownership interest? I mean, could you describe what has been
occurring? And obviously you have only been there six months,
but this occurred three years before you even came and we are
talking about billions of dollars. Can you describe the process
that the VA has done to establish an ownership interest and to
investigate this issue?
Dr. Shulkin. I--well, I'm going to--I'm going to refrain
from--from anything specific about Dr. Schinazi. I think that
much of what we've been looking into when I became aware of
this is a result of the Chairman's letter to us. So--
Mr. Huelskamp. And that raises the question, the concern.
Again, this is four years ago when he sold this $400 million
profit. And we are sitting in the hearing today and this is the
first time I heard about it.
When did you first hear about this and, again, has the VA
done anything until January of 2016?
Dr. Shulkin. I--the Chairman's letter to us was dated
December 17th of 2015. I first became aware of it January 15th
of 2016.
Mr. Huelskamp. What is the status of an investigation and
did anything happen before you were made aware of it? Again,
three years after the sale. I mean, this drug has been on the
market and the VA finally discovered this guy works for you and
was working for you a year ago when you first discovered this.
Dr. Shulkin. Yeah.
Mr. Huelskamp. And tell me what investigation has occurred.
Dr. Shulkin. So we were certainly aware that Dr. Schinazi
has been an employee of VA for 33 years. No question about
that. That wasn't a surprise.
Mr. Huelskamp. But he just sold a company for $400 million.
Did anybody know about that?
Dr. Shulkin. I'm not aware of who knew what three or four
years ago. That's one of the reasons why I'm going to make sure
that we take a look at everything that's involved in this to
make sure that we do get answers to the types of questions
you're asking.
Mr. Huelskamp. Well, I want an answer. The question is, why
an investigation has not occurred more quickly? Why are we
talking about it years after the fact? We are talking about
millions of dollars that should go probably to the VA.
I mean, what we also need to investigate is what did he
leave with in the last ten days. He is seven-eighths of his
time. I can see where he walked out with a lot of stuff. I
don't know.
Dr. Shulkin. Yeah.
Mr. Huelskamp. Is he allowed to maintain an email network
on his own that--do we even know any--
Dr. Shulkin. No.
Mr. Huelskamp [continued]. --answer to these questions?
Dr. Shulkin. No. Once you leave Federal employment,
everything will stop in terms of that. There--there--
Mr. Huelskamp. Unless he took stuff home beforehand or took
it to the affiliate. My question is we are talking about
millions of dollars and I still--Mr. Chairman, I don't know why
they didn't look into this before your letter. Thanks for the
letter. I mean, this is shocking.
Dr. Shulkin. Yeah.
Mr. Huelskamp. And we are talking about billions of
dollars. So I would appreciate if you would provide the
Committee as soon as possible--
Dr. Shulkin. Yeah.
Mr. Huelskamp [continued]. --evidence that an investigation
occurred long before this comes up before the VA Committee.
Dr. Shulkin. I think there--Congressman, I think there are
two things. One is, I would be willing and absolutely at any
time that you want to sit down in a closed hearing or--or
privately, I just can't do this in a public forum, and share
with you everything that I know right now, abs--and--and I have
provided a letter with some of that, but I would be glad to
share everything that I know to this date.
But as I said, my intention is to actually find out more
and to do a thorough review of the details. So we could either
sit down now or sit down later, but absolutely, I will share
that with you.
The Chairman. Your time is expired, Mr. Huelskamp. Thank
you.
And I will be happy to provide for any Member of the
Committee the information that Dr. Shulkin has provided to us.
We do want the IG to have an uninhibited opportunity to review
this because this is extremely serious and this is one
individual.
And I would be remiss in saying, you know, this is one of
the good things that is happening now in what Dr. Shulkin is
saying. Regardless of what has taken place in the past, the
change in leadership throughout the agency is beginning to
change the culture, some of the lax oversight that was done
internally.
And this is the way it is supposed to work. We do our job
as the oversight Committee, provide the information or ask the
questions of the department. The department doesn't get
defensive about it. They go about what needs to be done and we
don't have a political football which, by the way, we try to
keep it as bipartisan as we can in this Committee and bicameral
as well.
So, you know, again, I think the line of questioning is
appropriate. I think the answer is appropriate as well and we
do want to say thank you.
Mr. Takano, you are recognized.
Mr. Takano. Thank you, Mr. Chairman.
Regarding the $40,000 price, I am a little bit confused as
to why we know it is $40,000, because I recall asking Sloan
Gibson the same question. I asked them, what is the price of
this hep C drug? And he says--he told me he couldn't--he would
rather not answer the question.
So, is it that that question cannot be answered or he
rather--or the VA would rather not? All of a sudden we are
talking about the exact price or--
Dr. Shulkin. Right.
Mr. Takano [continued]. --is this an estimated price?
Dr. Shulkin. Right. That is an estimate price. We are
prohibited from giving out confidential pricing information.
That $40,000 figure, I think I have seen 41,000 also in the--in
the public domain, in newspaper articles, but VA does not give
out its exact pricing.
Mr. Takano. So, I am confused as to how we can sort of say
it is $40,000. So, it is off by a few thousand, not off by tens
of thousands?
Dr. Shulkin. I--
Mr. Takano. Because, in California, I recall reading in--
Dr. Shulkin. Yes.
Mr. Takano [continued]. --in the LA Times, this case of a
doctor and a patient in a dispute with an insurer over when the
insurer would approve the drug. The woman definitely had
hepatitis C, but it was a matter of the timing. The doctor said
we need to administer it sooner because it was going to impart
damage to her body.
Dr. Shulkin. Yes.
Mr. Takano. The insurer said, no, we have a different
opinion, and so they were bending much higher numbers. And I
was trying to get a handle on how much the VA pays.
Dr. Shulkin. The list price of the drug is approximately--
you know, it depends. The average course of treatment is
somewhere between eight and twelve weeks, so it depends on the
individual, so the price varies, so these are all estimates.
But the average list price is $84,000.
VA's--the numbers that are in the public domain of
approximately $40,000, again, we don't give out our pricing,
but these aren't bad estimates.
Mr. Takano. Well, how are your budget estimates made, with
respect to the hep C drug?
Dr. Shulkin. We know exactly how much we pay--
Mr. Takano. You know internally?
Dr. Shulkin. Yes.
Mr. Takano. My--you know, I just had a chat with somebody
in the industry last night, the pharmaceutical industry, and he
says that two-thirds of new drug discoveries happen in our
country, and, really, we finance both, through basic research
from the Federal Government and investment in private research,
as well as the back end where consumers also pay these prices.
And Americans are really not understanding why other countries
can benefit from all of this. Countries like Australia,
European countries, they pay far lower amounts, but it is
because we--our market develops all of these drugs; is that
right?
Dr. Shulkin. Two-thirds of them, yes.
Mr. Takano. Two-thirds, I mean that is a huge share of the
market.
Dr. Shulkin. Yes.
Mr. Takano. And, of course, we don't want to see this
innovation stop, but it doesn't seem quite fair that American
consumers and taxpayers are the ones that are primarily funding
these discoveries, and there is something amiss here.
How much research does the VA do? I wasn't aware--this
technology transfer was--I was kind of scratching my head over
this Technology Transfer Program. But you say that most of
these researchers have a dual appointment.
Dr. Shulkin. Yes, sir.
Mr. Takano. So, is--are there VA laboratories or is it
mostly done at the universities?
Dr. Shulkin. No, there are VA laboratories.
VA has about 2,000 researchers, but 95 percent are dually
appointed, which means they share with an academic affiliate.
Our--our research program for internal funding is 637 million.
Our total funding is 1.8 billion, because we get external
funds.
Mr. Takano. I realize I can't ask specific questions about
Dr. Shinazi is it?
Dr. Shulkin. Yes.
Mr. Takano. But, is it theoretically possible for an
agreement to have been made where the researcher, a VA
researcher with a dual appointment, could have full ownership
without--full ownership of what they do? I mean can--could such
an agreement have been crafted?
Dr. Shulkin. Although--although, I am sure you appreciate I
am not going to talk about--specifically talk about Dr.
Shinazi--
Mr. Takano. You are not talking about--I am not asking--I
am just asking hypothetically, could that happen?
Dr. Shulkin. Yes, it could.
The way that--the way that this works is that we ask all
researchers to disclose conflicts of interest and financial
interests. We also look at whether any VA time or resources are
involved.
If there is no VA time or resources involved and there is
not a conflict of interest, it is possible that somebody could
own something outside of VA.
Mr. Takano. Well, thank you.
Mr. Chairman, I really thank you for your letter. This is
really, I think, a very important topic that you have raised,
and I will be eagerly wanting to see that information that you
got.
The Chairman. Absolutely. And we will make it available for
all of the Committee Members as soon as we get it in.
Dr. Wenstrup, you are recognized.
Mr. Wenstrup. Thank you, Mr. Chairman.
Thank you, Doctor, for being here. Thank you for leaving
that pretty good job from the private sector to join us and try
to do some good things.
And it is really a shame what has happened, because this is
pretty much a stain on an, otherwise, very great moment for VA
research.
Dr. Shulkin. Uh-huh.
Mr. Wenstrup. I think the first question I have is, what
prompted the VA to take up this type of research? What was the
stimulus for going in that direction? Was it a high number of
patients with hepatitis C or where did that come from, do you
know?
Dr. Shulkin. Yeah. I think that--I think there--there are
two things about this. If we are talking about the research
primarily that Dr. Shinazi has been doing--and this is in the
public domain that has been released through the Freedom of
Information Act; that is why I am sharing this--almost all of
his research has been done in antiviral medications and
treatments, and mostly related to HIV. So that has--that has
been where the focus of his advances in career have been.
The focus on hepatitis C, not necessarily research, has
been related to the fact that so many veterans, unfortunately,
have this disease. And prior to this particular new course of
treatment, the old treatments were so toxic and were not
curative, in fact, Dr. Chang, to my right, is actually--she is
a researcher and a clinician in hepatology and has spent her
career, 16 years at VA, dually working with the University of
Pennsylvania, and this is exactly what she does in treating
patients and studying this--this.
Mr. Wenstrup. So, typically, for VA research, there is high
evidence of a condition that drives the need for going in that
direction?
Dr. Shulkin. Our research program is dedicated to doing
research to help veterans.
Mr. Wenstrup. So, as we move forward and as we look at the
current situation, what are the rules as you begin research,
you know, as far as you mentioned disclosure and conflict of
interest. Does VA have, like, an ethics committee that
overlooks these types of things? Does the researcher sign
something and say what is proprietary, what belongs to the VA
and what doesn't? And what is going on and what do you envision
it should look like, I guess?
Dr. Shulkin. There--there are a number of things. We have
VA handbooks on--one on intellectual property, and one on
research oversight, as well as other VA handbooks. Every
researcher that is funded has to sign off on the fact that they
are following those handbooks and those policies, and that they
acknowledge their responsibility.
There is no research that is done, unless it is approved by
the associate chief of staff at the VA medical center. Our
research is actually decentralized; it happens at the medical
centers, these 100 medical centers.
We do have a research oversight committee who has to look
at and approve all protocols to make sure the resources are
used, and no researcher can begin research without the sign-
offs on the Committee and by the associate chief of staff.
So we do have a number of controls. What I am not
comfortable with to tell you today is that they are sufficient
enough.
Mr. Wenstrup. Okay. The intent is to have legal standing
with--
Dr. Shulkin. Absolutely.
Mr. Wenstrup [continued]. --legal intent.
Dr. Shulkin. Yes.
Mr. Wenstrup. Okay. Well, thank you very much.
I appreciate it and yield back.
The Chairman. Mr. Costello?
Mr. Costello. Thank you very much.
And, Dr. Shulkin, thank you for being here today and your
testimony. And I am--part of me, obviously, wants to ask
questions that I know that you can't answer, because I feel
there is, at least, a possibility that we could all end up
being outraged by what we find, and I respect the fact that you
are constrained, so I don't want to probe you--
Dr. Shulkin. Uh-huh.
Mr. Costello [continued]. --to try and answer questions
that you can't answer. And so, if you can't, I certainly can
respect the fact that you are not trying to conceal information
from us or are complicit in any way, it is just you need to
respect the integrity of the review process.
The other part of me is actually somewhat optimistic that
there can be, moving forward, after your review, a little bit
more of an entrepreneurial approach to the way you go about
research, mindful, though, that your research--and it says
right here, I think in your testimony, your focus is on
research areas most likely to benefit veterans and not
necessarily what a normal entrepreneur would do, is to make
money.
Dr. Shulkin. Right.
Mr. Costello. But I suspect that there might be some
potential there, and I think that all of us are eager to see
what your review yields.
You have used the word ``review,'' and so I want to sort of
disentangle various iterations of what the word ``review'' can
mean.
Dr. Shulkin. Uh-huh.
Mr. Costello. Again, if you can answer this, has this been
referred to the IG--and I am speaking specifically of Dr.
Shinazi--or would you prefer not to answer that question?
Dr. Shulkin. I would--I would prefer not to answer that.
Mr. Costello. And I am not going to follow-up.
Dr. Shulkin. I made--I made as much as I could, talk about
that, I made that clear in the letter to the Chairman.
Mr. Costello. Are you able to answer the question as to
whether or not Dr. Shinazi completed a Federal conflict of
interest form or would you prefer not to answer that question?
Dr. Shulkin. I can't answer that specific question right
now.
Mr. Costello. Fair enough.
Dr. Shulkin. Yeah. And in closed session, I would be glad
to share that with you.
Mr. Costello. Okay. And, obviously, you know, I would just
say for the record that I think that a constituent of mine or
any American, in learning some of this information, would say,
there has to be--something is not right about that.
So if, in fact, Dr. Shinazi did not submit a completed
Federal conflict of interest form, or did not do it properly,
obviously that invokes a potential for criminal violations and
the extent to which this should be a criminal probe, on that
basis, I think, obviously, it should be.
The other piece of any use of the word ``review'' sort of
invokes whether or not an audit should be done. And I do--you
just were speaking a minute ago about you had some internal
controls and the ability to know who is doing research and in
what capacity and for what reason, but, yet, no audit has been
done, moving backwards.
You have been here seven months?
Dr. Shulkin. Uh-huh. Yes.
Mr. Costello. I have been here one year and one month, so I
don't pretend to know it all.
But do you think an audit is appropriate for patent
applications, issue patents, and royalties from co-owned
inventions?
Dr. Shulkin. From--from my--
Mr. Costello. Going backward.
Dr. Shulkin [continued]. --from my initial review, which
has been two weeks long--
Mr. Costello. Right. And initial.
Dr. Shulkin [continued]. Yes. I do believe that we are
going to want to strengthen this process. I think you have
identified something that I have also identified, which is that
we, the VA, have turned over much of the responsibility for
patenting and licensing and monitoring to our academic
affiliates, and I have to say I am not particularly comfortable
leaving it there without either a robust audit provision in
there or VA actually assuming some more of those
responsibilities. So I think you have identified an area that I
have concern about.
The second area that I have concern about is--and I have
identified so far--is, I want to make sure the conflict of
interest and financial disclosure forms are broader than what
we are doing. We are doing them project by project now, and I
think they should be blanket, across the board for researchers.
Mr. Costello. And as part of your review, is it possible
that you might be issuing recommendations to approve the
process? I mean I think you just said that you probably will be
doing that, but can you see even something broader, in terms of
improving the TTP system, which may actually, I would also say,
may actually be more welcoming to systems of higher-ed to be
more involved in this.
Because I think that there is a real--I mean, from what I
have reviewed, part of me really wants to ask a lot of
questions about Dr. Shinazi. Part of me wants to say, what are
the opportunities here to make this system and actually be a
revenue-enhancement measure for purposes of VA funding down the
line?
Dr. Shulkin. Well, I--I think that you are looking at it
exactly correct. I look at it both ways as well. One is, we
have to assure that we are protecting the rights of the
taxpayer in this. That is--that is one of the ways that this
was set up.
But another reason why the TTP program was set up was
actually to facilitate commercialization and access to
technology to veterans.
One of the things also, that I see as an opportunity out of
this is something Mr. O'Rourke said, which is that one of the
reasons why clinicians like to work at the VA is because they
actually have the opportunity to do both, clinical work and
research. That is becoming much less common in academic
centers, where you have to focus, you are either a researcher
or a clinician.
So I do think this is one of our recruitment tools, to make
it a place where you can come and both, see patients and do
research and do it easily. And so out of this process, I don't
want it to be more bureaucratic, I just want to make sure it is
fair, that we are not having the government taken advantage of,
but it is actually a place you can do research and do it
easily.
Mr. Costello. That is an excellent point.
I see my time is expired. Thank you.
The Chairman. Mr. Coffman, you are recognized.
Mr. Coffman. Thank you, Mr. Chairman.
Dr. Shulkin, are you outraged by all of this?
Dr. Shulkin. I don't know enough to be outraged. I will
tell you, Congressman, I am taking this very seriously, and I
reserve the potential to be outraged, but I don't know enough
to be able to say that.
Mr. Coffman. Well, that is the pattern we get here from the
VA; it is always somebody that they bring to testify that is
just new and they can't be held accountable for anything that
has occurred over any given issue.
So what you are doing is no different than the person
before you and the person before you testifying before this
Committee has been done. And it is interesting to me that the
VA is so bureaucratically incompetent, that they can never
figure out their own problems, that they have to come in from
the outside.
So you are here, not because you identified the problem or
because anybody in the VA identified the problem; it is because
you were asked by this Committee to be here, who has recognized
the problem. And how hard would it be to recognize a problem?
Somebody on your team develops this vaccine and VA contracts
for it at about $40,000 per patient and can't figure it out.
Can't quite--you know, how hard is that to do?
And what is also extraordinary, because this fits in the
same pattern that the person who is responsible always seems to
retire just before the investigation starts. In Colorado, we
have a billion-dollar cost overrun on a VA hospital, and just
before the individual in charge was to be interviewed, he
retired. He retired the day before.
So, I mean, this just fits this whole pattern. And, you
know, I think at the end of the day, what I hope comes out of
all of this is we give these research dollars to people that
know how to do it. The NIH, just like in the situation in my
town where that billion-dollar cost overrun of the VA hospital,
we stripped the authority of the VA to manage the construction
of another hospital, and it went to the Army Corps of Engineers
who builds the same facilities for the Department of Defense,
on budget, on schedule; they have taken that responsibility
over from the VA. It is their day job.
I mean, who was in charge of this doctor? Who--can you
identify who was in charge of him during this time that he
developed this patentable vaccine?
Dr. Shulkin. Yeah. As I said, VA research is decentralized,
so it would be the Atlanta VA that actually oversees this
research program.
Mr. Coffman. Who is the internal--who, can you tell me, was
in charge of this person?
Dr. Shulkin. The specific name of a person?
Mr. Coffman. Yeah.
Dr. Shulkin. I don't--I don't have that information. I
don't know whether my colleagues do.
Mr. Coffman. That is typical, because that is the question
I ask always when there is a problem, who was in charge? And
nobody can ever give me the name of anybody that was in charge.
Can you get me that name?
Dr. Shulkin. Well, I can find that out for you, absolutely.
Mr. Coffman. Can you find that out for me? I mean I just
think this is just a--just absolutely, I mean, extraordinary.
And the sad part about it, really about, you know, is it
bureaucratic incompetence or is it corruption or is it a
combination of the two that leads us to these massive problems?
You know, this wasted resource is why this Nation is unable to
take care of the men and women who have served this country in
uniform.
And I just think that, you know, if I were you, I would be
outraged.
And, Mr. Chairman, I yield back.
The Chairman. Thank you.
Dr. Benishek?
Mr. Benishek. Well, thank you, Mr. Chairman.
Well, Dr. Shulkin, welcome to your new job. Isn't this
something, aye? You are learning a lot about it, I am sure.
You know, frankly, I tend to agree with Mr. Coffman with
many of his thoughts, you know, and that once--you know, I
agree, once again, we have a new guy who wasn't here and
doesn't know the name of the person who is in charge.
Well, I don't want to dwell on the past too much. I am
hopeful, you know, from knowing you a little bit, that you will
continue to work on it. And you mentioned about this internal
review of this procedure for sharing information or technology
transfer.
Is there any consideration of an outside auditor of all
this, rather than a VA person? Because we have had VA internal
reviews before that--like wait times that turned out to be
completely wrong. So, can you delve into that a little bit?
Dr. Shulkin. This needs external review. That--that is
going to--that is going to occur in this, and--
Mr. Benishek. I am glad to hear that.
Dr. Shulkin. Yeah.
Mr. Benishek. The other question that always comes up in
this sort of circumstance is the timeline. You know, we were
going to do this, honest.
When will we have the report?
Dr. Shulkin. There is going to be two levels of report
here. One is the external review, and in my experience, the VA
doesn't have the ability to set the timeline of the external
review, so--so, I can't give you a specific answer to that.
The internal reviews, we are going to have done within 90
days.
Mr. Benishek. All right. Well, I am looking forward to
seeing that.
I want to talk a little bit more about this academic
partnership--
Dr. Shulkin. Uh-huh.
Mr. Benishek [continued]. --and the review of the
agreements and the accountability of what the academic partners
are doing.
How do you monitor that?
Dr. Shulkin. Right now, our system is set up--and this is
one of the things that I want to take a look at--but our system
is set up that we give the primary responsibility for the
patenting and licensing to the academic affiliate. This was--
our program was designed this way, saying that this is what
academic centers do. They have the competency. This isn't what
VA does well, so we have turned that over.
But I think, as we had mentioned before, my concern is
without the proper auditing of that and without the proper
oversight of that, that it is hard for VA to know that it is
getting its proper ownership rights.
Mr. Benishek. Yeah, well, that is what occurs to me, as
well, and I am sure to many people.
Dr. Shulkin. Yes.
Mr. Benishek. So, are we going to kind of review that whole
process? Is that a different review then?
Dr. Shulkin. No. This is--
Mr. Benishek. Part of the whole scheme.
Dr. Shulkin [continued]. --there is really--there is really
several aspects of the review.
Looking at the overall circumstances and concerns that have
been raised here, there is a review that we will use external
people for, to take a look at, do we have the best practices
for technology transfer that academic centers believe we should
have, and we are going to be looking internally at our own
policies and procedures.
Mr. Benishek. All right. Thank you.
I am going to maybe direct a couple of questions--I have
got a minute left--for Dr. Chang.
And, you know, I am familiar with this class of drugs that
treat hepatitis C a little bit and the dramatic effect they are
having on the course of the disease and, really, maybe the
eradication of the disease and, you know, a much lowering of
costs in the long run because we are going to--liver
transplantations and the long-term care, that is going to be
dramatically reduced.
As far as the VA population of patients with hepatitis C,
can you kind of review for me again, you know, how long is it
going to take us to get this treatment to the patients that are
there? Can you talk about that a little bit and, I mean, how
long is it going to take to treat all of the patients?
Dr. Chang. Right. So we have--first, I thank you for the
opportunity to speak in this--in this forum, and I really
appreciate all of your questions.
We have about 180,000, I believe, of veterans who have
hepatitis C, plus, perhaps another 20 to 40,000 or so that
might be uncounted for, as of yet.
I think in the past year, we have treated about 35,000
veterans already--I mean 35--yeah--thousand veterans already,
so I think we are well on our way to treat.
And I think the key thing with the hepatitis C--you know, I
started my career actually with hepatitis C as a major
challenge in my clinical and research goal. And I am actually
profoundly moved by the progress that we have seen, as all of
you guys are saying, about the miracle drug that this is.
I spent the last 15 years of my life trying to treat these
people with drugs that don't work--
Mr. Benishek. Right.
Dr. Chang [continued]. --or drugs that we tried not to give
to patients because they are suffering and they are actually
damaged by it and so forth.
So I am very happy to have these opportunities to really
cure people. And I want to emphasize the fact that we can cure
them of the virus and the progression of liver disease;
however, the disease that have already occurred over the 10 to
20, 30 years, that, we cannot actually cure.
So, in any case, I think we will--
Mr. Benishek. I appreciate your answer, but I am out of
time. Thank you very much.
The Chairman. Dr. Roe?
Mr. Roe. Thank you, Chairman, and thanks to staff for
bringing this up.
And I am not going to belabor all the points that have been
made.
Dr. Shulkin, I too, gave up a pretty good job to get here
and I appreciate the fact that you are here.
And, Dr. Chang, what you said, as a clinician and
practitioner, it is nothing short of a miracle for patients.
And as Mr. Walz said, we should be celebrating this, because it
is a celebration of a real success.
And the NIH didn't bring this cure, the VA did. And I agree
with decentralization of the research. As you well know, you
put it all in one place, you will get one mindset, you will get
tunnel vision.
You need a lot of different eyes looking at this from a lot
of different directions, and so I would disagree with my
friend, Mr. Coffman, about that. I think it is a big shout-out
to the VA.
We will figure out what happened with the doctor that did
this, but this is a miracle. And even at the cost, it is
probably a savings. When you look at liver transplantation,
just the emotional that it does to patients--I had a patient
come up to me on Christmas Eve who had hepatitis C--her sister
had just died of a liver--a complication of a liver
transplant--and she was having problems with her private
insurance getting the coverage, and fortunately that has
occurred.
And as the Chairman brought up, and as Mr. Takano brought
up, we have a real ethical problem in this country, as a
physician going into the room, a real ethical problem of, I
know I have a cure, but I can't pay for it.
And I--there is just one of the drug companies--I know this
for a fact--that is grossing $4.5 billion a quarter--not a
year, a quarter--with this drug.
Now, hopefully we can eradicate this disease, and I hope
that that will happen.
And I have an ethical question for Dr. Chang or Dr.
Shulkin, either one: What happens if a patient becomes
reinfected due to behavior? I know we treat patients who smoke
if they get lung cancer and then bladder cancer and cancer of
the throat, cancer of whatever, directly related.
How, ethically--because it is an incredibly expensive--I
started thinking about this, what if your behavior leads you to
a second infection, what are we going to do? Have you all
thought about that?
Dr. Chang. Actually, we have thought about these things,
but I have to say I am not an ethicist. I think what we
typically see is patient in front of us, who we would like to
take care of.
I think, typically, the issues that I have had in my
clinical experience is not so much a reinfection, but a
recurrence or relapse of viremia, because the drugs that we had
were so inadequate.
I think, though, we may have to be ready for that
consideration.
Mr. Roe. Well, I think you need to be thinking about it
now, because it is not inexpensive.
And I, quite frankly, Mr. Takano, I might buy a--not a
first-class ticket, as you helped provide us on the way back
from Kuwait with your frequent flyer miles--but I might buy a
cabin seat and go take the--and then have my viral tire checked
and see if I was cured. If I didn't have the money, I might
make that trip and do that. I think that is a--I think that is
a huge issue that we have to think about.
And the other thing we have debated in this country for
years are the costs--there is no question, a majority of
drugs--new drugs brought to market are developed in the United
States. The research is done here. It is brought here, and then
other countries share in that wealth of knowledge that we get
that we share with the world, and we should.
The question is, our people are paying the price for that,
and when we look at a 42,000--it is 80,000 on the private
side--to get this treatment, that all goes toward less money in
your paycheck going home and all those things that other
countries are not doing. So I think the Chairman and Mr. Takano
make a great point; I don't know what the answer is. I don't
want to shut it off, but I also don't want to see gouging
either of--and make it impossible.
Dr. Chang?
Dr. Chang. If I may also add, I think, certainly, the
development of a drug is a great accomplishment, but I think it
also is standing on the shoulders of all the researchers
throughout the world who have actually furthered the cause of
understanding a viral hepatitis and developing a system in
which you can actually test these kinds of drugs, and without
which, none of this would have actually happened.
So I think there is a particular group of people that may
be benefitting, but I think this is really something that,
internationally, people have banded together over the last 25
years to develop.
Mr. Roe. And, hopefully, this is just a start of instead of
treating disease, curing disease. I mean just one of the things
that has really--I have looked at how many diseases I have just
treated over my career, boy it is remarkable you can walk into
a patient's room and actually cure them.
And I was somewhat mixed up in reading the testimony where
four percent of the veterans that you treat have hepatitis C,
but then I heard 180--the number is 180,000 active patients
that we have to treat?
Dr. Shulkin. No. The--the actual numbers, as I understand
them, today we have 116,000 patients with known hepatitis C in
VA.
The amount of unscreened people--
Mr. Roe. I got it.
Dr. Shulkin [continued]. --we think that that will add up
to the 170, 180,000 patients. So that is what we think is out
there, but documented, 116,000.
We also have 46,000 of those who have advanced liver
disease; those are the ones that we really want to treat now.
Mr. Roe. Now. And the sooner you can--look, if you are a
patient, why wait until--I know there are certain categories
and Dr. Chang knows about who would qualify and all of that,
but if I have the virus and I want to be cured, I don't want to
wait until my liver is half-destroyed before I get the
treatment.
So, Mr. Chairman, thank you for holding this hearing. I
yield back.
The Chairman. Thank you.
Mr. Takano?
Mr. Takano. Mr. Chairman and Dr. Roe, that question you
asked about we don't want to shut it off, we don't want to see
price gouging either, can I suggest a roundtable or--and this
is something that affects Energy and Commerce, as well, the
jurisdiction--I would like to get some expertise from
economists.
We don't want to see rent-seeking being incentivized by our
laws, but we know that the American people pay for a lot of
research and through the VA--I am learning something new--but
if we could get a handle on your question, I would think a lot
could come from that.
Mr. Roe. Would the gentleman yield?
Mr. Takano. Yes.
Mr. Roe. There is a fair ROI when you invest a billion and
a half dollars from molecule to market. There is a reasonable
expectation of a return on your investment.
But some of these, I think, are unreasonable returns on
investment. And I think when you have patients out there that
cannot get the treatment, a cure of a disease that is fatal
because of a cost that is outrageous--and as the Chairman
pointed out, perhaps as low as one percent of what they are
charging here, in a foreign country--there is something wrong
with that balance. So, I agree with you; we should do that.
Mr. Takano. Well, and then the Chairman mentioned to me in
a side conversation about the issue of our patents being
infringed upon in other countries--I mean there is also a trade
element there going on, but it is hard to know whether that is
really how valid those arguments are.
So I would love to see a far more in-depth--it is a big
issue. I mean I have smaller insurance plans have come to me,
labor unions, just one or two of their pool could blow up the
whole plan, so it is enormously disruptive, this drug pricing.
We have got to get to the root of it.
The Chairman. Thank you, Mr. Takano.
Thank you to the Members.
Also, let me throw another curve in the road to you. There
actually are those that claim that Dr. Shinazi did not, in
fact, discover this particular drug. So we have that to deal
with, as well, as we go through the process.
I want to ask Dr. Shulkin just a couple real short
questions. I think in your--not yours--but in the department's
2015 budget submission, VA stated that researchers collaborated
with MIT and Brown University on the first powered ankle-foot
prosthetic that is now commercially available for patients. But
in your testimony today, I think you said that the device is
not particularly commercially valuable.
And so my question is, does VA have ownership in the
technology?
Dr. Shulkin. I believe that that is one that we have
asserted rights on.
I don't know if you know, Marisue?
Ms. Cody. Yeah, the--what we talked about in testimony is
not that same ankle, so we will have to get back to you on
exactly what our rights are on the ankle you are talking about.
The Chairman. Okay. Let me also ask you about, there is a
disposable microchip that is being worked on right now that can
diagnose a heart attack within minutes, and so what I want to
know is, has this been disclosed to the VA? And if it has been,
is the VA pursuing patent protection? And will it be a licensed
product?
Dr. Shulkin. We will get back to you on that.
I don't think you are aware of that either.
The Chairman. Okay. If you would.
And the other thing, Doctor--and I appreciate the questions
that the Members have asked today and certainly your comments
and answers. I appreciate your letter of February 1st,
answering my request from back in December.
And I asked for the following--and I say this, because I am
going to ask why two things were inserted into this letter--
actually, three things--a list of all inventions disclosed to
the VA between 2000 and 2015; I asked for a list of VA-funded
research projects, same time frame; a list of all non-VA-funded
research projects, same timeframe; and all determination of
rights, issues--issued by VA.
I appreciate that. But in your response, you threw in you
needed budget flexibility. Why did you throw that in your
response to a very specific letter? In fact, you even talked
about purchased health care streamlining and modernization.
I mean, I was pretty specific. Whether you need it or not
is not a question. Why did you write this response?
Dr. Shulkin. Right. Right.
I--I appreciate the fact that that is not directly related
to your requests.
The Chairman. Not at all.
Dr. Shulkin. Yes, I appreciate that. You are correct.
The Chairman. It is showing up in every single letter that
comes to us and I am aware--I understand what the department
would desire and we want to help in that way, any way we can.
I just--you know, the other thing is, why did you feel it
necessary in the response to talk about all of the people that
had been directors of the program over the last few years, by
name?
Dr. Shulkin. Yeah. It--it was felt since there was such a
turnover of people and since Marisue is really in an acting
role, that if we got questions related to going all the way
back, that it was important to know that different people had
served in those roles.
But it--but--but you did not directly ask for that, sir.
The Chairman. Okay. And I just--it was interesting that you
specifically identified individuals.
I want to thank you again for being here. We have had a
chance to hear about one specific opportunity, but we think
there may be others where there had been lost opportunities in
the technology and transfer program. It appears to have been
misused, underutilized, and undersupported.
We appreciate, Dr. Shulkin, your response that it is going
to be a much more robust oversight on your part. You know, we
want to determine the extent of lost opportunities that VA has
experienced, why they were experienced, and what VA is doing to
ensure that they don't happen again, and to offer VA a chance
to explain how it has let the program languish for so many
years, and to establish the next steps to prevent these lost
opportunities from continuing, so that veterans from the
beneficiaries of the great inventions that come out of VA's
research program.
And, again, I want to thank your candor today, and we look
forward to the questions that you have taken for the record and
their answers.
I would ask unanimous consent that all Members would have
five legislative days, with which to revise and extend their
remarks and add extraneous material.
Without objection, so ordered.
I want to thank, again, the witnesses and everybody for
joining us today to discuss what we have, and this hearing is
adjourned.
[Whereupon, at 12:04 p.m., the Committee was adjourned.]
A P P E N D I X
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Prepared Statement of Jeff Miller, Chairman
I would like to welcome everyone to today's hearing titled, ``Lost
Opportunities for Veterans: An Examination of VA's Technology Transfer
Program.''
Let me begin by stating that the issues we will address today show
how, despite VA's objections, it is critically important for this
committee to look at both past and current failures of the department,
in order to improve the future of Veterans' care. Without our
investigative effort and our notice to conduct this hearing, VA would
not have reviewed what we will talk about today. Moreover, VA would not
be aware of the apparent exploitation of its technology transfer
program from those inside the department. My concern is that the issues
we will discuss today may not be limited to one researcher.
For those who are unaware, Federal agencies are authorized to
assert ownership in inventions made by Federal employees using Federal
resources. VA's technology transfer program was developed as the
mechanism to determine ownership and then to transfer the benefits of
VA owned technology to veterans and the public through patenting and
licensing. Unfortunately, this program appears to be habitually
underused, resulting in tremendous losses to Veterans and taxpayers.
A glaring example of where the technology transfer program perhaps
should have been used is in connection with the Hepatitis C drug,
Sofosbuvir, which is claimed to cure up to 99% of those infected with
this ultimately fatal disease. This drug, reportedly developed by a VA
employee, resulted in an $11 billion sale and $440 million personal
profit to the employee. However, VA appears to have nothing to show for
it, except a bill from the drug's current owner, Gilead Sciences, for
VA's use to treat veterans.
More than two hundred thousand Veterans have been diagnosed with
Hepatitis C, and VA pays upward of $40,000 for treatment for each
Veteran infected with this virus. That is about $8 billion to treat
veterans with a drug reportedly developed using VA resources. During
last summer's financial crisis, VA had to ask Congress for additional
funds just to pay for the treatment. So the question is, why is VA
paying so much?
What we know is the drug's reported creator, Dr. Raymond Schinazi,
was a 7/8th VA employee when the Hepatitis C drug was developed. He
worked at VA for more than twenty five years and retired shortly after
we requested he testify. Dr. Schinazi is listed as a senior career
researcher and has received hundreds of thousands of dollars in VA
research funding. Yet, in a letter to me, dated February 1, 2016, the
day of his retirement, VA asserts that no money was given to Dr.
Schinazi for his research on the drug.
But, questions remain whether earlier research on a different drug
was used in the development of the hep-c treatment. Additionally Dr.
Schinazi filed patents while he was a VA employee, but he never
disclosed these inventions and patents to VA. So how is it that none of
his claimed lifesaving inventions belong to VA and our Veterans?
Interestingly, as I mentioned earlier, I asked Dr. Schinazi to appear
at this hearing, but after being requested to testify, he retired from
VA, effective February 1 - two days ago.
Secretary McDonald rightly promotes VA as having invented many
cutting edge technologies like the nicotine patch, the cardiac stent
and the CT-scan, but in actuality, VA reportedly receives no credit and
no revenue from these inventions because it did not assert an ownership
interest.
Although these inventions were developed prior to the inception of
VA's technology transfer program, these lost opportunities should serve
as lessons learned and, in the future, VA should be supporting and
developing the program so that no other potential opportunities are
lost. Our Veterans and taxpayers should be benefiting from these
inventions. It is as simple as that.
VA oversees a $1.8 billion research program. Yet, in FY 2014, it
only received 304 invention disclosures, filed only twenty five
patents, issued only fifteen license agreements and earned only
$375,674 in royalties. To put that in perspective, the National
Institutes of Health has a $3 billion intramural research budget and in
FY 2014 received 370 invention disclosures, filed 153 patents, issued
222 license agreements and earned $137 million in royalty income, or
about 360 times more than VA's reported royalties. Similarly, the USDA
has a $1 billion research program and in FY 2014 received 117 invention
disclosures, filed 119 patents, signed 412 license agreements and
received $3.6 million in royalty income or about nine times more than
v-a's reported royalties.
This begs the question, why has VA not seemed to capitalize on the
many research successes it claims? We have already seen the results of
one potential lost opportunity regarding the new Hepatitis C drug. But,
how many more are there and how many more will there be? If VA wants to
take credit for tremendous medical accomplishments, it should have
something to show for it, certainly more than just talk. Veterans
deserve the right to reap the benefits of these inventions given the
fact that they were created by employees and with taxpayer resources
specifically designated for their use.
--------
Prepared Statement of Corrine Brown
Thank you, Mr. Chairman.
Since 1980, the federal government has worked to make
taxpayer funded research more available to the private sector while
making sure that taxpayers also gain from these research investments.
This allows all of us the share in important research
breakthroughs.
University of Florida developed Gatorade and got a patent
for it, so anybody who used it had to pay University of Florida
royalties for its use. This concept of VA keeping its intellectual
property rights for its employee's inventions can't be hard.
But we need to strike the right balance here so academic
institutions want to partner with VA to conduct research and get
funding for research from royalties from inventions, and so research is
available for businesses to develop products that help veterans and the
public.
This important program that should be overseeing this
balance may not have received the leadership focus that it needs and
employee turnover has been high.
There are questions as to whether the process in place is
sufficient to strike this balance, from the Veterans Health
Administration to the Office of General Counsel.
For this reason, I believe we should have an outside
organization look at this program. I believe we should request the GAO
to look into this program and provide us with the facts so that we can
make sure the program strikes the proper balance.
Finally, I believe that if this program is not working as
it should, VA, and taxpayers, may end up holding the bag.
Just last week the Chairman raised questions and concerns
over the price paid by the VA for Hepatitis C drugs. He also pointed
out that the drug was invented by a team led by a VA doctor.
This doctor subsequently sold the company that developed
the drug to Gilead (Jill-e-ad) Sciences.
According to the Chairman, Gilead is charging the VA
``upward of $40,000'' while in Egypt the drug costs $900.
Without the VA this drug would not exist.
In the case of Gilead, we do not know if the process
worked and whether the VA properly asserted its rights in this matter.
That is why we requested that Gilead be invited to
testify today.
I believe that we should hold a hearing on drug pricing
and how, moving forward, we can make sure that veterans are getting the
drugs they need and VA is paying a fair price.
In addition, according to a recent New York Times
article, drug manufacturing issues have caused shortages and rationing.
We need to make sure that we get to the bottom of this to make sure
that veterans are not unduly affected. Let me repeat myself. We need to
get to the bottom of this to make sure veterans are not unduly
affected.
Making sure that taxpayers are not ripped off, and that
veterans get the medicines they need is vital.
I look forward to us working together to explore these
issues in the weeks ahead.
One team one fight!
Thank you, Mr. Chairman and I yield back the balance of
my time.
---------
Prepared Statement of David Shulkin, M.D.
Good morning, Chairman Miller, Ranking Member Brown, and Members of
the Committee. Thank you for the opportunity to discuss the Technology
Transfer Program at the Department of Veterans Affairs (VA). I am
accompanied today by Dr. Kyong-Mi Chang, Acting Chief Research and
Development Officer, and Dr. Marisue Cody, Director of Research
Operations.
VA's Technology Transfer Program is housed within the Office of
Research and Development, through which VA conducts a robust research
program whose fundamental mission is to advance the healthcare of
Veterans. VA research supports over 2,000 research projects at over 100
VA medical centers (VAMC) throughout the country, with an FY2016 direct
appropriation of over $620 million. The VA research program is further
enhanced by private and federal grants awarded to VA researchers,
meaning total resources available for VA researchers will exceed $1.8
billion this year. VA research projects focus on VA-relevant biomedical
laboratory, clinical, rehabilitation, and health services research
through four research services, a Cooperative Studies Program for large
clinical trials, and a quality improvement program that uses research
evidence to improve clinical care. For over 90 years, VA research has
worked to improve the lives of Veterans: performing the first
successful liver transplants; developing high-performance prosthetic
devices; establishing the value of aspirin therapy in improving heart
health; showing the effectiveness of the Shingles vaccine; and
developing the nicotine patch.
Established in 2000, VA's Technology Transfer Program reflects our
research focus on the Veteran, ensuring that products and innovations
created by VA researchers are accessible to all Veterans. Prior to the
establishment of the Technology Transfer Program, VA had no policy on
intellectual property rights, and generally waived ownership rights to
inventions, tasking the inventor and usually the academic partner with
patenting, marketing, and licensing responsibilities.
The Technology Transfer Program has three main areas of focus: 1)
protecting and commercializing of intellectual property; 2)
facilitating technology transfer and cooperative research and
development activities among academic partners, local VAMCs, and
industry; and 3) educating researchers within VA about their rights and
obligations regarding intellectual property management and cooperative
research activities. Technology Transfer within VA involves multiple
integral individuals and entities nationwide, including researchers
within VAMCs, the Office of General Counsel, academic affiliates,
Nonprofit Corporations, and commercial partners.
Enabling greater cooperation with academic and private institutions
is one fundamental goal of the Technology Transfer Program. To support
this, the program executes over 1000 new Cooperative Research and
Development Agreements per year, most are for clinical studies, and
these agreements represent over $35 million in sponsored research
dollars available to VA research centers.
The Technology Transfer Program's public mission requires
aggressive dissemination of educational information to researchers, and
of products to the market. It is also necessary that VA asserts an
ownership interest in disclosed inventions whenever appropriate, so
that discovery can be built upon. This ensures Veterans have access to
these technologies. Often, as opposed to patenting inventions and
delaying their availability in the public domain, the Technology
Transfer Program works to ensure Veterans have immediate access to
these technologies by releasing them publicly.
The Technology Transfer Program has had several recent successes,
particularly in areas that are highly specialized. The program is
crucial to the dissemination of products that are of limited commercial
value to private institutions but can greatly improve Veterans' quality
of life. This has included the development of several kinds of
prosthetic feet, such as a foot that allows Veterans with lower leg
amputation to easily change shoes without experiencing balance issues
(allowing, for example, easier wearing of high heels or cowboy boots).
This is an important quality of life issue for Veterans with lower limb
amputation, but is not particularly commercially valuable, and would
likely not be available to Veterans without the Technology Transfer
Program. Other examples include products that make it easier for
Veterans to use wheelchairs, or prevent common injuries (pressure
ulcer, carpal tunnel syndrome) related to use of wheelchairs.
Every year, VA researchers develop dozens of new health care-
related technologies and other inventions that benefit VA's patients,
other Veterans, and all Americans.
Unlike other Federal agencies, VA has no laboratories whose
predominant function is research. VA includes research as part of the
mission of each VAMC, although the primary mission of a VAMC is patient
care for Veterans. In fact, the majority of VA researchers are active
clinicians. This leads to a focus on research areas most likely to
benefit Veterans. VA's research mission is entirely intramural. VA does
not have authority to award grants to parties outside VA and all VA
research funding is provided to VA-employed researchers.
Researchers work at more than 100 VAMCs conducting research. In
addition, 124 VAMCs have formal affiliations with academic institutions
and hospitals, and many full- and part-time VA employees also have
academic appointments or are employed at an affiliated academic
institution or hospital - they are dually appointed personnel. Many
clinicians/researchers have laboratory access at both VA and the
academic affiliate. Because of these arrangements, most VA inventions
are jointly owned by VA and its academic affiliates, making technology
transfer a collaborative effort. To better facilitate efficient
technology transfer, the Technology Transfer Program has executed
Cooperative Technology Administration Agreements on VA's behalf with
many academic affiliates, allowing the affiliates to take the lead in
the management of the co-owned inventions, while maintaining VA's joint
ownership. This arrangement is particularly beneficial to VA, as
affiliates are typically better positioned to manage these co-owned
inventions, having greater flexibility with licensing terms and greater
access to private sector partners.
VA research relies on researchers self-reporting invention
disclosures, and this process is very similar to the one used by our
academic partners. Without proper filing of invention disclosures, VA
is unable to review and appropriately make a determination of rights.
Any suspicion of wrongdoing or evidence of impropriety in this or any
other VHA program has, and will be, referred to the Office of the
Inspector General.
Thank you for the opportunity to testify today and we look forward
to your questions.
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