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91–489 2014

TWENTY-FIRST CENTURY CURES: EXAMINING THE 

ROLE OF INCENTIVES IN ADVANCING TREATMENTS AND CURES FOR PATIENTS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON HEALTH 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

SECOND SESSION 

JUNE 11, 2014 

Serial No. 113–151 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

(II) 

COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

RALPH M. HALL, Texas 

JOE BARTON, Texas 

Chairman Emeritus 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

Vice Chairman 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

CORY GARDNER, Colorado 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

BILL JOHNSON, Missouri 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

HENRY A. WAXMAN, California 

Ranking Member 

JOHN D. DINGELL, Michigan 

Chairman Emeritus 

FRANK PALLONE, JR., New Jersey 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DORIS O. MATSUI, California 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

JERRY MCNERNEY, California 

BRUCE L. BRALEY, Iowa 

PETER WELCH, Vermont 

BEN RAY LUJAN, New Mexico 

PAUL TONKO, New York 

JOHN A. YARMUTH, Kentucky 

(III) 

SUBCOMMITTEE ON HEALTH

JOSEPH R. PITTS, Pennsylvania 

Chairman 

MICHAEL C. BURGESS, Texas 

Vice Chairman 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

MIKE ROGERS, Michigan 

TIM MURPHY, Pennsylvania 

MARSHA BLACKBURN, Tennessee 

PHIL GINGREY, Georgia 

CATHY MCMORRIS RODGERS, Washington 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

RENEE L. ELLMERS, North Carolina 

JOE BARTON, Texas 

FRED UPTON, Michigan (ex officio) 

FRANK PALLONE, JR., New Jersey 

Ranking Member 

JOHN D. DINGELL, Michigan 

ELIOT L. ENGEL, New York 

LOIS CAPPS, California 

JANICE D. SCHAKOWSKY, Illinois 

JIM MATHESON, Utah 

GENE GREEN, Texas 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

HENRY A. WAXMAN, California (ex officio) 

(V) 

C O N T E N T S 

Page 

Hon. Joseph R. Pitts, a Representative in Congress from the Commonwealth 

of Pennsylvania, opening statement ................................................................... 1 

Prepared statement .......................................................................................... 2 

Hon. Frank Pallone, Jr., a Representative in Congress from the State of 

New Jersey, opening statement .......................................................................... 4 

Hon. Fred Upton, a Representative in Congress from the State of Michigan, 

opening statement ................................................................................................ 6 

Prepared statement .......................................................................................... 7 

Hon. Henry A. Waxman, a Representative in Congress from the State of 

California, opening statement ............................................................................. 8 

WITNESSES

Marc Boutin, Executive Vice President and Chief Operating Officer, National 

Health Council ...................................................................................................... 10 

Prepared statement .......................................................................................... 12 

Answers to submitted questions ...................................................................... 121 

Sam Gandy, Chair, Mount Sinai Alzheimer’s Research Center, on Behalf 

of Dr. Kenneth Davis, President and CEO, Mount Sinai Health System ....... 21 

Prepared statement .......................................................................................... 23 

Answers to submitted questions ...................................................................... 128 

Alexis Borisy, Partner, Third Rock Ventures ........................................................ 31 

Prepared statement .......................................................................................... 33 

Answers to submitted questions ...................................................................... 135 

Mike Carusi, General Partner, Advanced Technology Ventures, on Behalf 

of The National Venture Capital Association .................................................... 40 

Prepared statement .......................................................................................... 42 

Answers to submitted questions ...................................................................... 144 

Steven Miller, Senior Vice President and Chief Medical Officer, Express 

Scripts Holding Company .................................................................................... 51 

Prepared statement .......................................................................................... 53 

Answers to submitted questions ...................................................................... 150 

Fred Ledley, Professor, Natural and Applied Sciences, and Management Director, Center for Integration of Science and Industry, Bentley University ... 58 

Prepared statement .......................................................................................... 60 

Answers to submitted questions ...................................................................... 154 

C. Scott Hemphill, Professor of Law, Columbia Law School ................................ 72 

Prepared statement .......................................................................................... 74 

Answers to submitted questions ...................................................................... 156 

SUBMITTED MATERIAL

Statement of the Premier Healthcare Alliance, submitted by Mr. Pitts ............. 110 

Statement of the Generic Pharmaceutical Association, submitted by Mr. Pitts 113 

Statement of the California Public Employees Retirement System, submitted 

by Mr. Pallone ...................................................................................................... 116 

(1) 

TWENTY-FIRST CENTURY CURES: EXAMINING 

THE ROLE OF INCENTIVES IN ADVANCING 

TREATMENTS AND CURES FOR PATIENTS 

WEDNESDAY, JUNE 11, 2014 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON HEALTH, 

COMMITTEE ON ENERGY AND COMMERCE, 

Washington, DC. 

The subcommittee met, pursuant to call, at 10 a.m., in room 2322 

of the Rayburn House Office Building, Hon. Joe Pitts (chairman of 

the subcommittee) presiding. 

Present: Representatives Pitts, Burgess, Shimkus, Murphy, 

Blackburn, Gingrey, McMorris Rodgers, Lance, Cassidy, Guthrie, 

Griffith, Bilirakis, Ellmers, Upton (ex officio), Pallone, Engel, 

Schakowsky, Matheson, Green, Barrow, Christensen, Castor, 

DeGette, and Waxman (ex officio). 

Staff present: Clay Alspach, Chief Counsel, Health; Gary Andres, 

Staff Director; Matt Bravo, Professional Staff Member; Noelle 

Clemente, Press Secretary; Paul Edattel, Professional Staff Member, Health; Brad Grantz, Policy Coordinator, Oversight and Investigations; Sydne Harwick, Legislative Clerk; Robert Horne, Professional Staff Member, Health; Carly McWilliams, Professional Staff 

Member, Health; Krista Rosenthall, Counsel to Chairman Emeritus; Chris Sarley, Policy Coordinator, Environment and Economy; 

Heidi Stirrup, Health Policy Coordinator; John Stone, Counsel, 

Health; Tom Wilbur, Digital Media Advisor; Ziky Ababiya, Democratic Staff Assistant; Eric Flamm, Democratic FDA Detailee; 

Karen Nelson, Democratic Deputy Committee Staff Director for 

Health; and Rachel Sher, Democratic Senior Counsel. 

OPENING STATEMENT OF HON. JOSEPH R. PITTS, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH 

OF PENNSYLVANIA 

Mr. PITTS. The subcommittee will come to order. The chair will 

recognize himself for an opening statement. 

Today’s hearing provides us with an opportunity to examine an 

important aspect of the 21st Century Cures Initiative: whether current economic and regulatory incentives are sufficient to encourage 

robust investment in the research and development of innovative 

new drugs and medical technologies. 

I am particularly interested in better understanding what we can 

do to make it more attractive for companies and venture capitalists 

to invest in the development of therapies that would provide hope 

2 

to patients without adequate treatment options. After all, as we 

have learned, there are only effective treatments for 500 of the 

7,000 known diseases impacting patients today. 

To help close this innovation gap, as part of 21st Century Cures 

Initiative, we must take a fresh look at the challenges facing innovative companies and make certain the right incentives are in 

place so America is home to the next generation of cures. 

The Hatch-Waxman Act created the modern generic drug industry as we know it and has brought great benefits to our Nation’s 

patients and health care system. Nonetheless, as Senator Hatch recently explained, since the early 1980s, ‘‘the cost of developing a 

drug has doubled, as has the number of clinical trials necessary to 

file a new drug application. Further, the number of participants required for those trials has tripled.’’ 

We continue to hear about the many unique challenges of developing and testing therapies for patients with rare diseases and certain types of cancer. However, we cannot lose sight of the fact that 

new products targeting diseases that impact large patient populations such as diabetes and Alzheimer’s take much longer to get 

to market and are therefore becoming less attractive for investors 

and companies to pursue. Innovative trial designs with surrogate 

endpoints are almost unheard of in some of these areas, despite the 

fact that patients and our health care system would greatly benefit 

from new treatments. If and when they ultimately get to the market, these products are often left with the least amount of patent 

life and are granted the shortest exclusivity periods. We must reexamine the incentive structure, particularly for small-molecule 

drugs, before we are left wondering who will be developing the next 

generation of treatments and in which country. 

Finally, for a variety of what are oftentimes different reasons, investment in new medical technology companies is at startlingly low 

levels. There are only 11 venture capital firms remaining in this 

space, down from almost 40 in in 2007. In 2013, we witnessed the 

lowest level of initial funding activity in more than two decades. 

This is not only a cures issues; this is a jobs issue and one we must 

address head on. 

I want to welcome our witnesses today and look forward to learning more about the incentives necessary to encourage vital investment in biomedical innovation across the board. 

[The prepared statement of Mr. Pitts follows:] 

PREPARED STATEMENT OF HON. JOSEPH R. PITTS

The Subcommittee will come to order. 

The Chair will recognize himself for an opening statement. 

Today’s hearing provides us with an opportunity to examine an important aspect 

of the 21st Century Cures Initiative: whether current economic and regulatory incentives are sufficient to encourage robust investment in the research and development of innovative new drugs and medical technologies. 

I am particularly interested in better understanding what we can do to make it 

more attractive for companies and venture capitalists to invest in the development 

of therapies that would provide hope to patients without adequate treatment options. After all, as we have learned, there are only effective treatments for 500 of 

the 7,000 known diseases impacting patients today. 

To help close this innovation gap, as part of 21st Century Cures Initiative, we 

must take a fresh look at the challenges facing innovative companies and make cerVerDate Nov 24 2008 13:06 Dec 02, 2014 Jkt 037690 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-151 CHRIS
3 

tain the right incentives are in place so America is home to the next generation of 

cures. 

The Hatch-Waxman Act created the modern generic drug industry as we know it 

and has brought great benefits to our nation’s patients and health care system. 

Nonetheless, as Senator Hatch recently explained, since the early 1980s, ‘‘the cost 

of developing a drug has doubled, as has the number of clinical trials necessary to 

file a new drug application. [Further,] [t]he number of participants required for 

those trials has tripled.’’ 

We continue to hear about the many unique challenges of developing and testing 

therapies for patients with rare diseases and certain types of cancer. However, we 

cannot lose sight of the fact that new products targeting diseases that impact large 

patient populations such as diabetes and Alzheimer’s take much longer to get to 

market and are therefore becoming less attractive for investors and companies to 

pursue. Innovative trial designs with surrogate endpoints are almost unheard of in 

some of these areas, despite the fact that patients and our health care system would 

greatly benefit from new treatments. If and when they ultimately get to the market, 

these products are often left with the least amount of patent life and are granted 

the shortest exclusivity periods. We must reexamine the incentive structure-particularly for small-molecule drugs-before we are left wondering who will be developing 

the next generation of treatments, and in which country. 

Finally, for a variety of what are oftentimes different reasons, investment in new 

medical technology companies is at startlingly low levels. There are only 11 venture 

capital firms remaining in this space-down from almost 40 in in 2007. In 2013, we 

witnessed the lowest level of initial funding activity in more than two decades. This 

is not only a cures issue; this is a jobs issue and one we must address head on. 

I want to welcome our witnesses today and look forward to learning more about 

the incentives necessary to encourage vital investment in biomedical innovation 

across the board. 

Thank you, and I yield the remainder of my time to 

——————————————————————. 

Mr. PITTS. Thank you, and I yield the remainder of my time to 

the vice chairman of the subcommittee, Dr. Burgess. 

Mr. BURGESS. Thank you, Mr. Chairman, and I want to join you 

in welcoming our panel of witnesses. I certainly look forward to 

hearing your testimony today. 

Once again, we are examining the role of various market incentives on the development of new drugs, biologics and devices. From 

bench to bedside, the timeline right now is about 12 years, and 

that is a long time. Of all the drugs that enter pre-clinical testing, 

only five of 5,000 will make it to human testing. Balancing the importance of facilitating innovation and expediting patient access 

has been a priority of this committee. Many of these incentives 

have been actually quite successful over the years. Hatch-Waxman—we have a robust market. The Orphan Drug Act—we have 

encouraged manufacturers to develop and test existing products for 

the treatment of rare diseases. The bottom line in each instance, 

patients have benefited. 

The greatest market incentive is a developer knowing that there 

is a market for their product and that it will be covered. Whether 

the payer is the Federal Government or the private insurance, payers need to know what is coming down the road so that they are 

prepared to integrate the new treatments into their coverage because really, what difference does it make to the patient that a 

product was developed if they have got no access to it. 

Really, the headline in all of this should be, we have the ability 

to develop cures that no generation of doctors has been able to deliver to patients ever, and we can’t let the regulatory side get in 

the way. We want to be facilitators. We want to be catalysts. 

4 

And again, we thank you for being here. We welcome your testimony this morning, and I yield back. 

Mr. PITTS. The chair thanks the gentleman and now recognize 

the ranking member of the subcommittee, Mr. Pallone, for 5 minutes for an opening statement. 

OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW JERSEY 

Mr. PALLONE. Thank you, Chairman Pitts. 

When we talk about medicines and disease, there is a natural 

emotion that comes from the personal stories we hear from our constituents as well as from our own lives, and many of us know all 

too well about the pain and suffering families face when battling 

an illness and losing those we love. 

As Members of Congress, we typically speak about treating disease in sound bites. Innovation, cures, discovery, incentives and, of 

course, access are some of the key words that we use. In today’s 

hearing, we will hear about the thousands of diseases with little or 

no treatments and we will examine whether additional steps need 

to be taken to accelerate biomedical discoveries in this country. 

Innovative new drugs for decades have made major contributions 

to our lives. In many instances, they have allowed us to watch our 

loved ones get better and live longer, sometimes even healthier 

lives, and now we are even seeing some new drugs curing diseases 

outright, discoveries certainly worthy of praise. 

But we must be careful in this debate. We can’t look at these 

issues filled with emotion and we certainly can’t look at these 

issues in a vacuum. It is complicated with far-reaching effects, and 

we continue to battle thousands of rare diseases affecting small 

populations for which there are no known causes or cures. We need 

to address this problem. The Orphan Drug Act, which includes tax 

incentives and market exclusivity, has been successful, leading to 

a number of medical treatments, and many of these treatments, 

while they can be expensive, serve a fairly small number of patients. 

When we think about diseases like Alzheimer’s or chronic conditions like diabetes, we may be talking about treating millions of 

people for decades, and what is more, baby boomers are aging into 

Medicare at a pace of thousands a day, so we absolutely need to 

encourage innovation and help to ensure that new treatments 

emerge but we also need to make sure that patients have access 

to affordable treatments. Otherwise we will bankrupt families for 

which new medicines may be the difference between life and death. 

And we will strain our federal health care system. Cures and cutting-edge medicines are of no value if their high costs put them out 

of reach of the patients who need them. 

Thirty years ago, Congress sought to address the high costs and 

access to medicine, and as a result, the Hatch-Waxman Act was negotiated to strike an important balance between providing incentives to innovative new and better medicines and access to lowercost medicines. Since then, there has been a tremendous public 

health and economic benefit. Today, generic drugs account for 84 

percent of all prescriptions in the United States with savings 

5 

amounting to $217 billion annually. But Hatch-Waxman isn’t just 

about lower-cost drugs. Fundamentally, I believe its existence has 

resulted in competition, innovation, and great discoveries. Without 

the threat of generic alternatives, brand companies would have little reason to engage in research on new drugs to outpace their competitors. Furthermore, there are real examples of brand companies 

spurring innovation amongst other brands. 

So as we move forward, it is important that we do not alter the 

central construct of Hatch-Waxman. However, that doesn’t mean 

there aren’t additional ways to find further balance in our development ecosystem. In 2012, the committee worked to pass the FDA 

Safety and Innovation Act, or FDASIA, which included a number 

of additional economic incentives. One example was the GAIN Act 

for antibiotics for serious or life-threatening infections. In that provision, we carefully constructed narrowly focused incentives for 

companies to advance in the antibiotic space. At only 2 years old, 

there is promise with nearly 17 applications in the pipeline and one 

approval so far. 

So Mr. Chairman, I believe that there are many factors to encouraging and ensuring robust investment in medicines. Federal 

funding is one notable example. It is the foundation of our biomedical ecosystem and is one of the best investments we can make 

to spur economic prosperity, drug and device development and 

cures for the 21st century. 

And I would like to yield the remainder of my time, Mr. Chairman, to Ms. DeGette, a member of the full committee who joins us 

today. 

Ms. DEGETTE. Thank you very much. I appreciate you yielding, 

and I am very proud to be co-chairing the 21st Cures Initiative 

with Chairman Upton. 

This is our second hearing focused on the initiative. The first 

hearing broadly touched on the eight recommendations provided in 

the President’s Council of Advisors on Science and Technology report on propelling innovation and drug discovery development and 

education. The hearing today focuses on one of those recommendations, studying current and potential economic incentives to promote drug innovation. 

We know there are many types of incentives in place right now— 

some of the other members have mentioned them—to help spur research and development in both the drug and device space. These 

range from funding for research and public-private partnerships to 

tax credits and various exclusivity periods. 

I look forward to hearing form the witnesses talking about some 

of these incentives. For example, the recently implemented exclusivity provided under the GAIN Act seems to be spurring investment in antimicrobial and antifungal drugs. And so there are other 

initiatives too. 

I want to thank you, Mr. Chairman, for having this hearing and 

I look forward to this continuing discussion that we are having. 

Mr. PITTS. The chair thanks the gentlelady and now recognizes 

the chairman of the full committee, Mr. Upton, for 5 minutes for 

an opening statement. 

6 

OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN 

Mr. UPTON. Thank you, Mr. Chairman. 

We did launch the 21st Century Cures Initiative with the goal 

of accelerating the discovery, development, and delivery of innovative new treatments and cures to patients, ensuring that the 

United States remains the biomedical innovation capital of the 

world. 21st Century Cures aims to close any gaps between the 

science of cures and how we regulate those therapies, and this 

must be an ongoing conversation. 

Today we are going to hear testimony about whether our current 

legislative and regulatory framework encourages innovators to pursue the development of drugs and devices that are crucial to helping our Nation’s patients. I am so proud of the fact that this committee recently came together on a bipartisan basis to address this 

innovation gap in the context of antibiotics, but it is clear that our 

work is far from over. 

We lack effective treatments for almost 95 percent of the known 

diseases affecting patients today and over 95 percent of drugs in 

development do not make it to market. In addition to working with 

the FDA and others to decrease the time and cost it takes to bring 

new products to patients, we have got to heed the advice of the 

President’s Council of Advisors and take a fresh look at current 

and potential economic incentives to promote innovation. As we 

have seen in the context of orphan diseases and most recently for 

antibiotics, periods of market exclusivity are powerful tools for us 

to consider in ushering in the next generation of treatments and 

cures. This is certainly a balancing act, and I am committed to pursuing any such changes only after engaging in a thorough and 

thoughtful dialogue with all interested stakeholders, which is precisely why we are here today. 

The Hatch-Waxman Act is an enduring piece of legislation that 

will undoubtedly form the basis for any such conversation. I agree 

with Senator Hatch, who recently said, ‘‘The foundation laid by 

Hatch-Waxman Act 30 years ago will continue to be the mechanism 

by which the management incentives development of lifesaving 

drugs but we do have an obligation to periodically reevaluate how 

the balance can be adjusted to account for the sweeping changes 

in the broader health care sector.’’ 

The time and cost of bringing an innovative product to market 

today is much different than it was in 1984, and yet under HatchWaxman, the same baseline exclusivity period is still granted to 

new drugs. We have an opportunity today to assess whether we 

still have the right balance in place, particularly for products meeting unmet medical needs. 

We also have an opportunity to hear about incentives for new devices. This committee has worked with FDA and stakeholders to 

help make the regulation of devices more predictable and consistent, but it is clear that we have to continue that collaboration 

to not only improve FDA but also coverage and reimbursement. 

So I want to thank everyone that is here. Please continue to 

share your ideas with cures@mail.house.gov. Working together, we 

are going to make a difference. 

7 

I yield the balance of my time to the vice chair of the committee, 

Ms. Blackburn. 

[The prepared statement of Mr. Upton follows:] 

PREPARED STATEMENT OF HON. FRED UPTON

We launched the 21st Century Cures initiative with the goal of accelerating the 

discovery, development, and delivery of innovative new treatments and cures to patients, ensuring that the United States remains the biomedical innovation capital 

of the world. Twenty-First Century Cures aims to close any gaps between the 

science of cures and how we regulate those therapies. This must be an ongoing conversation. 

Today we will hear testimony about whether our current legislative and regulatory framework encourages innovators to pursue the development of drugs and devices that are crucial to helping our nation’s patients. I am proud of the fact that 

this committee recently came together on a bipartisan basis to address this innovation gap in the context of antibiotics. But, it is clear that our work is far from over. 

We lack effective treatments for almost 95 percent of the known diseases affecting 

patients today and over 95 percent of drugs in development do not make it to market. In addition to working with FDA and others to decrease the time and cost it 

takes to bring new products to patients, we must heed the advice of the President’s 

Council of Advisors and take a fresh look at current and potential economic incentives to promote innovation. As we have seen in the context of orphan diseases and 

most recently for antibiotics, periods of market exclusivity are powerful tools for us 

to consider in ushering in the next generation of treatments and cures. 

This is certainly a balancing act, and I am committed to pursuing any such 

changes only after engaging in a thorough and thoughtful dialogue with all interested stakeholders, which is precisely why we are here today. 

The Hatch-Waxman Act is an enduring piece of legislation that will undoubtedly 

form the basis for any such conversation. I agree with Senator Hatch who recently 

stated, ‘‘The foundation laid by the Hatch-Waxman Act thirty years ago will continue to be the mechanism by which the government incentivizes development of 

lifesaving drugs’’ but we do have ‘‘an obligation to periodically reevaluate how the 

balance can be adjusted to account for the sweeping changes in the broader health 

care sector.’’ 

The time and cost of bringing an innovative product to market today is much different than it was in 1984, and yet under Hatch-Waxman, the same baseline exclusivity period is still granted to new drugs. We have an opportunity today to assess 

whether we still have the right balance in place—particularly for products meeting 

unmet medical needs. 

We also have an opportunity to hear about incentives for new devices. This committee has worked with FDA and stakeholders to help make the regulation of devices more predictable and consistent, but it is clear that we must continue our collaboration to not only improve FDA but also coverage and reimbursement. 

In closing, I want to thank those folks who have responded to our call for input 

in this 21st Century Cures initiative—we appreciate the thoughtful contributions, 

especially the responses from everyday Americans. Please continue to share your 

ideas with cures@mail.house.gov. Working together, we will make a difference. 

Mrs. BLACKBURN. Thank you, and I appreciate that we are having this hearing today and focusing on 21st century cures. 

The United States has done so much to advance health and 

wellness in the country. Just looking back over some of the recent 

accomplishments, in children, 90 percent of all leukemia is cured. 

You have survival rates for melanoma post 5 years that have doubled. Kalydeco for cystic fibrosis. Diabetes—they have done away 

with the twice-daily shots. You have got the pump. Now they are 

working on the artificial pancreas. The list could go on and on talking about different vaccines, but I have to tell you, I am very concerned because when you look at the investment that has taken 

place in medical devices from 2007 to 2013, it is down 40 percent. 

This isn’t good for us and we want to make sure that the incentive 

is there to come back into that marketplace just as the chairman 

8 

and Ms. DeGette have both mentioned. We have got to reverse that 

trend for 21st century cures. 

Some of the incentives, the protection of intellectual property, the 

use of new pathways in order to move through the maze of FDA 

regulation and of course FDASIA has the breakthrough therapy 

designation, clarity around reimbursement issues that focuses on 

the value of treatment. These incentives provide an investment in 

our Nation’s fiscal future as well. 

Alzheimer’s disease is a great example of this. It is one where I 

have a particular interest and focus. It is something that costs our 

Nation $215 billion a year. That is about $50,000 per patient, or 

the median household income, to care for an Alzheimer’s patient. 

So to focus on these cures is an imperative. It is the proper use 

of our time. I welcome you and I yield back the balance of my time. 

Mr. PITTS. The chair thanks the gentlelady and now recognizes 

the ranking member of the full committee, Mr. Waxman, 5 minutes 

for an opening statement. 

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. WAXMAN. Thank you very much, Mr. Chairman. 

This hearing today has very real implications for patients everywhere. How do we ensure that drug and device companies have the 

right incentives to discover important new treatments for disease? 

We cannot legislate scientific advances. In some areas, the lack of 

new treatments is attributable to a lack of scientific knowledge, not 

the lack of incentives. To tackle these problems, we will need more 

investment in research. 

That is why our country has been so far ahead of the rest of the 

world. Our taxpayers want basic research to be funded through the 

National Institutes of Health, and I would assume everybody that 

cares about this problem is outraged when we see cuts at the NIH 

budget. But in other areas, incentives can play a key role in sparking and sustaining innovation. That is why it is important for us 

to consider how the incentives that exist today are working and 

whether they can be improved. 

The good news is that innovation in this country is flourishing. 

More important new drugs are launched here than any place else 

in the world. A key reason is that our system recognizes that both 

competition and market exclusivity can spur innovation. We have 

led the world in developing new treatments because we have 

sought to get the balance right. 

There are a variety of types of incentives: tax credits, monetary 

prizes, and public funding of basic scientific research, to name a 

few. I hope we will focus today on this wide range of incentives. 

I suspect, however, that much of our time will be spent on patents 

and marketing exclusivities. 

Let me say a few words about these tools because I don’t think 

anyone in Congress has worked longer or harder on getting their 

use right than I have. I authored the Orphan Drug Act, which provides 7 years’ exclusivity to incentivize development of drugs for 

rare diseases. The 7 years was justified because the small populations in need of these drugs did not provide an adequate market. 

9 

The Act has been a resounding success. Prior to enactment, only 

ten drugs for rare diseases had been developed. In the 30-plus 

years since enactment, over 400 have been approved and many are 

in the development stage and are being used without the final approval. 

I was the co-author of the Hatch-Waxman law, which established 

our generic drug system. The Act struck a balance between generic 

competition and maintaining adequate incentives for brand companies to continue to innovate. We allowed generics to rely on the 

brands’ safety and effectiveness data in order to avoid wasteful duplicative clinical trials. In exchange, we gave the brands 5 years of 

exclusivity to store some of the patent time lost during the FDA review process. The law has been an enormous success. Today, over 

86 percent of prescriptions are generics, yet spending on generics 

accounts for only 29 percent of total drug spending, and at the 

same time, the brand industry is booming. 

Most people understand that the introduction of generic competition has drastically lowered our national drug bill. But generic 

competition also has another critical effect that may seem counterintuitive: it also spurs innovation. An innovator company that 

knows generic competition is just around the bend needs to develop 

new products. In contrast, excessive periods of exclusivity allow 

innovators to sit back and relax. Why spend a lot of money on discovering the next groundbreaking product, if it can continue to 

charge monopoly prices for 10, 12, or even 15 years on a drug that 

has already been approved? Too much exclusivity is as bad as too 

little, if not worse. Innovation is stifled by the lack of competition, 

and American patients foot the bill by paying higher prices for 

their drugs. 

When our committee considers these issues, the first question 

should be whether new or additional incentives are really needed 

in any particular area and what is an appropriate incentive. We 

should insist on getting the answers that are supported with data 

demonstrating this need. If new marketing protections are warranted, they should be narrowly focused to achieve a targeted aim. 

Otherwise we run the risk of allowing companies to reap huge 

windfall profits, windfalls that are paid for by American patients 

and the government and insurance companies in this Nation. 

So I urge caution when considering patents and exclusivity as incentives. These are not the only tools, and in many cases, they are 

not the best ones for ensuring the development of new cures. 

Thank you, Mr. Chairman. 

Mr. PITTS. The chair thanks the gentleman. The written opening 

statements of all members will be made a part of the record. 

That concludes our opening statements by the members. We will 

now go to our witnesses. We have one panel with seven witnesses. 

I will introduce them in the order of their speaking. 

First is Mr. Marc Boutin, Executive Vice President and Chief Operating Officer of National Health Council. Then Dr. Sam Gandy, 

Chair, Mount Sinai Alzheimer’s Disease Research Center on behalf 

of Dr. Ken Davis, the President and CEO of Mount Sinai Health 

System. Then Mr. Alexis Borisy, Partner, Third Rock Ventures; Mr. 

Mike Carusi, General Partner, Advance Technology Ventures on 

behalf of National Venture Capital Association; Dr. Steven Miller, 

10 

Vice President and Chief Medical Officer, Express Scripts Holding 

Company; Dr. Fred Ledley, Professor, National and Applied 

Sciences, Management Director, Center for Integration of Science 

and University, Bentley University; and finally, Mr. Scott Hemphill, Professor of Law, Columbia Law School. 

Thank you all for coming. You will each have 5 minutes to summarize your testimony. Your written testimony will be made a part 

of the record. There is a little system of lights on your desk so you 

have 5 minutes when the green light will be on. When the red light 

goes on, we ask that you wrap up your opening statement. 

So at this time, Mr. Boutin, we will start with you. You are recognized for 5 minutes for an opening statement. 

STATEMENTS OF MARC BOUTIN, EXECUTIVE VICE PRESIDENT 

AND CHIEF OPERATING OFFICER, NATIONAL HEALTH COUNCIL; DR. SAM GANDY, CHAIR, MOUNT SINAI ALZHEIMER’S RESEARCH CENTER, ON BEHALF OF DR. KENNETH DAVIS, 

PRESIDENT AND CEO, MOUNT SINAI HEALTH SYSTEM; ALEXIS BORISY, PARTNER, THIRD ROCK VENTURES; MIKE 

CARUSI, GENERAL PARTNER, ADVANCED TECHNOLOGY 

VENTURES, ON BEHALF OF THE NATIONAL VENTURE CAPITAL ASSOCIATION; DR. STEVEN MILLER, SENIOR VICE 

PRESIDENT AND CHIEF MEDICAL OFFICER, EXPRESS 

SCRIPTS HOLDING COMPANY; DR. FRED LEDLEY, PROFESSOR, NATURAL AND APPLIED SCIENCES, AND MANAGEMENT DIRECTOR, CENTER FOR INTEGRATION OF SCIENCE 

AND INDUSTRY, BENTLEY UNIVERSITY; AND C. SCOTT 

HEMPHILL, PROFESSOR OF LAW, COLUMBIA LAW SCHOOL 

STATEMENT OF MARC BOUTIN 

Mr. BOUTIN. Good morning, Chairman Pitts, Ranking Member 

Pallone, Ms. DeGette, members of this subcommittee. 

There are more than 133 million people living with one or more 

chronic conditions. That is more than 40 percent of the population. 

Effective treatments are available for some but for many patients, 

all they have is hope. 

My name is Marc Boutin. I am the Executive Vice President and 

Chief Operating Officer at the National Health Council. We provide 

a united voice for people with chronic disease and disabilities. 

As a child, I remember growing up in a tiny town in northern 

Maine. Every surface of my home was covered in floral wallpaper, 

including the light switches. You actually had to rub the wall to 

find the switch. The wallpaper, the rugs, the furniture, everything 

was covered in flowers, and when my mom sat perfectly still in her 

floral dress, you couldn’t see her. In my 30s, I remember sitting in 

the doctor’s office when my father was told he had incurable cancer. My mom became his primary caregiver even though she had 

multiple chronic conditions herself. I held my father’s hand when 

he took his final breath. My mom soon died on my birthday. Dismantling our family home was difficult. All the memories, all that 

wallpaper. Getting the house ready to sell was not easy but it had 

to be done. 

Nearly every person in this room has been touched by the burden 

of disease. Michael Gollin sitting behind me is an intellectual-property lawyer. He is also living with ALS, or Lou Gehrig’s disease, 

11 

which progressively robs you of your ability to walk, talk, swallow 

and even breathe. 

Thirty years ago, Representative Waxman coauthored the HatchWaxman Act, which updated our innovation ecosystem and made 

medications affordable for millions of Americans. But as Senator 

Hatch recently wrote, ‘‘We cannot rest on our laurels. We have an 

obligation to periodically reevaluate and adjust to account for the 

sweeping changes in the health sector.’’ 

Our current innovation ecosystem was built decades ago, long before we mapped the human genome, had supercomputers or advanced diagnostics. Much like my family home, the ecosystem has 

not kept pace with time. No one is to blame for this. It just happens. You get used to the wallpaper. 

The 21st Century Cures Call to Action provides an opportunity 

to update, to modernize. While we may not all yet agree on the specific solutions, consensus is emerging on some of our most pressing 

challenges. Let me address two. 

First, we all know that you need a patent to develop a new medicine but just because you cure Parkinson’s or lupus doesn’t mean 

you get a patent. Some of the best science is not translated into 

treatments simply because they don’t meet the technical requirements of the law. From a patient perspective, this makes no sense, 

and Congress can fix it. 

Second, our current system encourages the fastest, least expensive innovation, not necessarily the treatments that are most important to society or individual patients. As you know, patents run 

concurrently with clinical and regulatory review. As a result, the 

best and most promising medicines sometimes receive the shortest 

protection from general competition. For example, conditions which 

progress slowly like Alzheimer’s can come to the market with the 

shortest periods of protection. This also encourages the development of treatments for late-stage illness rather than early-stage illness despite the huge social and economic value of addressing and 

preventing disease early. From a patient perspective, this makes no 

sense, and Congress can address it. 

The MODDERN Cures Act, introduced by Representative Lance 

with bipartisan support, is the first legislative attempt to address 

these two challenges. It promotes the best science, not the best patent, but only for drugs that address an unmet medical need. 

On behalf of my dad, my mom, Mr. Gollin and nearly everyone 

in this room affected by disease, thank you for including the patient community in this multi-stakeholder approach. We stand willing, ready and able to help you solve this and other complex challenges. It is time to take down the wallpaper. It is time to modernize our innovation ecosystem. Thank you. 

[The prepared statement of Mr. Boutin follows:] 

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Mr. PITTS. The chair thanks the gentleman and now recognizes 

Dr. Gandy 5 minutes for an opening statement. 

STATEMENT OF SAM GANDY 

Dr. GANDY. Chairman Pitts, Ranking Member Pallone, distinguished members of the Subcommittee on Health, thank you for inviting me here today. I am Dr. Sam Gandy. I am Professor and 

Chair of Alzheimer’s Disease Research at Mount Sinai Medical 

Center and Director of the Center for Cognitive Health Care. Dr. 

Ken Davis was meant to be here addressing you but he became ill 

at the last minute and was unable to come. Thank you for allowing 

me to present in his stead. 

In the 1970s, as a young researcher, Dr. Davis was the first to 

show that Alzheimer’s symptoms could be improved by restoring 

levels of a brain chemical called acetylcholine as required for memory function. His work eventually lead to FDA approval of three of 

the four drugs currently on the U.S. market for Alzheimer’s disease 

but that was decades ago, and incredibly, in terms of caring for 

Alzheimer’s patients, almost nothing has changed. 

The need for breakthrough medications for Alzheimer’s is greater 

than ever, and the public health impact and the economic impact 

of Alzheimer’s are both escalating. 

Alzheimer’s affects more than 5 million American seniors today, 

and by 2050, that number will rise to 15 million. Fully one-half of 

everyone over age 85 is demented. That means that everyone 

across the country and everyone in this room who lives past age 

85 will be either a patient or a caregiver. 

The financial implications are staggering. This year, Medicare and Medicaid are expected to pay $150 billion in acute, chronic and 

hospice care for individuals with Alzheimer’s. The Medicare cost of 

caring for Alzheimer’s will increase more than 600 percent over the 

next 35 years, rising to $627 billion. 

Alzheimer’s symptoms begin when people are in their 70s, so if 

we were able to slow the progression of the disease by half, most 

of these individuals would not develop symptoms until their 90s, 

and indeed, many would not live long enough to develop the disease at all. If we could simply delay the onset of Alzheimer’s by 5 

years, that would cut costs to all payers by half a trillion dollars 

by 2050. 

Scientific opportunities for breakthrough oral medications, in 

other words, pills, have never been more promising. An extraordinary series of recent studies have found that most people who 

will eventually develop Alzheimer’s accumulate in their brains 

clumps of a material known as beta amyloid, and this begins two 

decades or more before symptoms. My own research career began 

in the 1980s when my team identified the first model drugs that 

reduce amyloid buildup. 

The FDA appropriately requires that safety and efficacy of new 

drugs must be demonstrated in two independent and most commonly sequential trials. Developing a drug for Alzheimer’s is a slow 

process. Unlike antibiotic medications, for example, that can be 

tested over a few weeks, Alzheimer’s trials require 3 to 5 years. 

When that is added to, say, 2 years to recruit patients and another 

year to analyze the results, virtually all the drug’s patent life will 

22 

have lapsed. Because of this, many drug companies, I would say 

most, are reducing their emphasis on Alzheimer’s. 

As you well know, Congress has stepped in before to provide 

market incentives for research. We now need an exclusivity policy 

for orally administered pills that slow Alzheimer’s. Why do I stress 

the need for a pill? Because infused biologics can cost as much as 

20 times the cost of ordinary medication. For Alzheimer’s, that 

kind of cost would provide no fiscal advantage. 

In conclusion, Alzheimer’s science is poised to accelerate but 

business incentives must be realigned in order to provide for the 

public’s best interest. By providing market exclusivity for pills, we 

would allow innovators to receive a return on their expenditure of 

resources. In exchange, we would bend the dementia cost curve and 

reduce the number of individuals suffering from Alzheimer’s disease. 

I would like to thank the subcommittee for inviting me here 

today and for shining a spotlight on this important issue. Thank 

you. 

[The prepared statement of Dr. Gandy follows:] 

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Mr. PITTS. The chair thanks the gentleman and now recognizes 

Mr. Borisy 5 minutes for an opening statement. 

STATEMENT OF ALEXIS BORISY 

Mr. BORISY. Good morning, Chairman Pitts, Ranking Member 

Pallone and members of the subcommittee. My name is Alexis 

Borisy, and I am a Partner at Third Rock Ventures. At Third Rock, 

our mission is to create, launch, and grow innovative companies 

that will make a meaningful difference for patients, for physicians, 

for our health care system overall. I applaud this committee for initiating the 21st Century Cures Call to Action to ensure that U.S. 

biopharmaceutical and life sciences industry is best equipped to 

maintain global leadership and deliver lifesaving medicines. 

Successful development of new medicines is dependent on policies that support the entire life sciences ecosystem from the lab to 

the patient. Disrupting any part of the ecosystem weakens the entire enterprise. This endeavor is high risk, taking over a decade 

and more than a billion dollars to deliver a single new drug. But 

there can be no question of the reward. Over the last 20 years, we 

have provided medicines that have changed and saved the lives of 

patients with diseases such as cancer, heart disease, HIV/AIDS. 

This hearing is focused on a critical component of ensuring a forward-learning biopharmaceutical industry, life sciences industry. 

What incentives are needed to advance treatments and cures? One 

key to a robust life sciences industry is a national commitment to 

support basic research. The United States has long been a world 

leader in basic research but funding for NIH has been flat or declining for the past several years. Diminished support for basic research will lead to a smaller pipeline of next-generation medicines 

and impede our country’s innovation potential. 

Building from that base, venture funding is the lifeblood of small 

biotech companies. However, early-stage venture investment is 

under significant pressure in the life sciences. A primary reason for 

its decline is the increased time and cost of developing new treatments. These struggles are especially acute for drugs designed to 

treat chronic diseases with larger patient populations. The decision 

to deploy capital is directly impacted by regulatory and reimbursement behaviors. Better enabling and encouraging FDA to utilize 

flexible approaches and modern tools would have a positive impact 

on venture funding. 

For example, since the implementation of the accelerated approval pathway, over 80 drugs have been approved, most in cancer 

and HIV. Likewise, in recent years, FDA has shown an increased 

willingness to work with companies to develop more effective clinical development programs for rare diseases. The majority of designations under the new breakthrough therapy program are also 

for cancer and for rare diseases. The time required to put a drug 

on the market is usually longer than the length of time of a typical 

venture capital investment fund. 

The modern approach to regulation that exists now for cancer 

and rare diseases attracts investment for three important reasons. 

First, the regulatory process is more interactive, flexible and reflective of the disease and patient being treated. Second, the amount 

of investment required to fund a company through proof of concept 

32 

is better understood, and third, the next step in the innovation ecosystem, be that a larger company or public investors, feel more confident about the development and approval process going form that 

step further. 

The results are clear. Over a third of recent drugs approved have 

been drugs for rare diseases, and oncology remains one of the hottest investment areas. However, the same cannot be said for chronic diseases where the regulatory requirements are greater. Without 

improving these processes, early-stage investment in those areas 

will continue to struggle. We must ask ourselves how we can learn 

from rare disease and oncology and work to improve how we treat 

conditions like obesity, diabetes and Alzheimer’s, which have a dramatic impact on our long-term health care costs. We must advance 

to a system that critically determines whether the information required is actually informative as to the potential use of the drug 

in the real world. Creating approval pathways that enable the development of drugs for subpopulations of patients in these chronic 

diseases could be a game changer. 

There is also a need to provide incentives for the development of 

new diagnostics. I applaud Congress for passing PAMA, which includes a provision designed to significantly improve reimbursement 

for diagnostics but its ultimate impact will be determined by the 

rule writing process. I would like to recommend that we consider 

a program for diseases important to the public health with high 

unmet dg needs where we could identify these diseases critical to 

the Nation’s health and establish a payment policy for these desired diagnostics. Clear reimbursement policies for personalizedmedicine tools combined with modern regulatory approaches would 

advance personalized medicine by leaps and bounds. 

Congress has the opportunity to support a policy environment 

that fosters the search for the next generation of cures and treatments, and I applaud the committee for taking steps to improve 

this process. 

Thank you for the opportunity to share my thoughts. 

[The prepared statement of Mr. Borisy follows:] 

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Mr. PITTS. The chair thanks the gentleman and now recognizes 

Mr. Carusi 5 minutes for an opening statement. 

STATEMENT OF MIKE CARUSI 

Mr. CARUSI. Chairman Pitts, Representative Pallone, members of 

the subcommittee, thank you for the opportunity to testify today on 

behalf of the National Venture Capital Association. Chairman 

Upton, Representative DeGette, thank you for spearheading the 

21st Century Cures Initiative. It is important work. 

My name is Mike Carusi. I have been in the venture capital business for over 16 years. Over the course of my career, I have had 

the privilege of helping innovative companies develop therapies for 

some of the most daunting diseases of our time including heart disease, diabetes and cancer. 

I am here today to share my perspective on what is happening 

with medical technology innovation. Simply put, we are facing a 

crisis, and the continued leadership of this committee is needed 

more than ever. Without changes in public policy, the United 

States will no longer lead the world in developing lifesaving treatments, and American patients face a grave risk of losing access to 

these innovative cures. 

The promise and importance of innovation has never been greater. Our understanding of the origins of disease and human physiology are growing. We see dramatic advancements in engineering, 

material science, information technology. As the population ages, 

new and improved medical technologies can play a critical role in 

not only helping to improve patient care but also in reducing longterm costs as well. But despite our patients’ needs and our ability 

to meet them, funding for innovative medical technologies has declined substantially in recent years. As Congresswoman Blackburn 

noted, between 2007 and 2013, medical device venture investments 

fell by a total of 40 percent. In 2013, we witnessed the lowest level 

of medical device initial funding activity in more than two decades 

with just 44 companies receiving first-time funding—44 companies. 

Poor investment returns have resulted in institutional investors 

such as universities, pension funds and foundations fleeing the device sector. It is important to note that these are the very groups 

that we get our money from. As a result, an estimated 70 percent 

of all medical device venture investors have or will exit the business over the next 5 years, and most of these departures are not 

by choice. 

Another equally troubling fact is that for those with capital, we 

are shifting more and more of our resources overseas. In my firm’s 

case in particular, 25 percent of our future investment will focus 

out of the United States. This is a big change from the way we 

have done business in the past. 

So why is this shift occurring? First, access to capital. Countries 

like Ireland and Singapore are offering powerful economic incentives to groups like Lightstone to invest. Second, and more importantly, the regulatory path in these markets is simply faster and 

more predictable. It is now commonplace for our companies to seek 

regulatory approval and commercialize new products in other markets ahead of the United States. 

41 

We have talked at length about the path to FDA approval, about 

the challenges in this path, about the delays in the unpredictability, and I am happy to say that progress has been made to 

begin reducing these regulatory barriers. The 2012 FDASIA bill included a number of important provisions which are beginning to 

have a positive effect. The veterinarian community and medical device incubators also has enjoyed a productive dialog with CDRH Director Shuren and other members of his leadership team in working to further improve the medical device regulatory process. We 

are by no means done and we have more work to do to continue 

to build on this progress, but FDA has no longer become the greatest obstacle to innovation. That obstacle is now reimbursement. 

Obtaining coverage and reimbursement for innovative products 

has become an increasingly difficult process that can add another 

3 to 5 years to the development of a new product. It is a process 

that lacks transparency, predictability and consistency. I have experienced this firsthand—changing standards for data, no clear 

benchmarks, an ever-moving bar. It is an extraordinarily frustrating process that you simply need to go through once to clearly 

see that the system is broken. 

In my written testimony, I have included several specific recommendations on how we can improve on the system. At its core, 

I would bring us back to transparency, predictability and consistently, similar themes that we echoed in our discussion on FDA. 

These are the three hallmarks that we need as investors to have 

confidence in moving ahead. 

Again, it is important to underscore that none of these steps 

alone will ensure a reinvigorated medical technology ecosystem. 

There is no silver bullet. But I believe a renewed focus on drastically improving the coverage and reimbursement situation is sorely needed. 

Again, thank you for the opportunity to testify today. I love what 

I do, I love the process of innovation, I love developing treatments 

for patients. That is why the work of this committee is so important and so necessary. We look forward to working with you, and 

I am happy to answer any questions you might have. 

[The prepared statement of Mr. Carusi follows:] 

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Mr. PITTS. The chair thanks the gentleman and now recognizes 

Dr. Miller 5 minutes for an opening statement. 

STATEMENT OF STEVEN MILLER 

Dr. MILLER. Thank you, Chairman Pitts, Ranking Member 

Pallone and members of the committee. 

Mr. PITTS. Can you push the mic? 

Dr. MILLER. I appreciate the opportunity to testify today. I am 

the Chief Medical Officer for Express Scripts but a former transplant nephrologist and former Vice President and Chief Medical Officer for Washington University and Barnes Jewish Hospital. I 

started my career in primary drug discovery and hold many patents and have been with Express Scripts for the last 9 years. Express Scripts is the largest pharmacy benefits manager, administering the benefits for 85 million Americans on behalf of clients 

including health plans, large and small businesses, and the Department of Defense. Each day we work to make the use of prescription 

drugs safer and more affordable. 

The current system works very well to drive innovation. There 

is more than 5,000 drugs in human testing in the United States 

today, more than any time in my 30-year career. But for payers, 

this is concerning. Whether highly or mildly innovative, these advances come at enormous cost to patients and payers. These new 

therapies cost tens of thousands of dollars per patient, and the 

challenge is made clear by one recent approval, Solvadi. Solvadi is 

a new treatment for hepatitis C. In the first quarter of 2014, its 

sales exceeded $2 billion. Cost of Solvadi varies by nation, but in 

the United States, it is $84,000, or $1,000 per pill. You compare 

that to Canada or Europe where it is $55,000, and in Egypt, $900, 

which is less than a single dose in the United States. 

Solvadi is a breakthrough with a high cure rate but varied analysis suggests that Solvadi may not be worth the price. A study 

from the California Technology Assessment Forum found that even 

over a 20-year horizon, the cost-benefit is only two-thirds of the 

original $84,000. 

Solvadi is valuable to patients worldwide but should it be the 

United States’ role to pay the lion’s share where Solvadi manufacturers have the most incentives available to promote innovation. 

Americans will pay more for the medicine than anywhere else. Incentives available for Solvadi or other include, one, market exclusivity. In addition to the usual patent protection afforded to hightech products, brand drug manufacturers receive a period of exclusivity under Hatch-Waxman where they are protected for competition. Two is they get breakthrough approval designations. Since 

2012, drug makers have had the ability to see a breakthrough therapy designation by the FDA to expedite the review of new drug applications that demonstrate substantial improvements over existing 

therapies. Three, we have a free market to sell medicines. Unlike 

other nations, the new drug approval process doesn’t include costeffectiveness comparisons. Manufacturers are free to sell their 

medications at prices they determine without government intervention, validation or approval. And four, NIH support. The NIH supports drug makers with bench science, basic research and support 

for clinical trials. 

52 

The price of Solvadi should be disappointing to lawmakers, who 

have worked to foster innovation and encourage a marketplace in 

the United States for brand drugs. Any action that Congress considers should explore the need for an environment where America 

doesn’t pay the lion’s share for research and development that is 

benefited worldwide. Congress should consider the proven ideas. 

One: Support NIH with additional funding. Drug discovery begins 

with excellent work by the team at the NIH. Two: Support the 

FDA. Given the success of Fast Track, accelerated approval, priority review programs, without compromising safety and effectiveness of drugs, these hastened timelines can become the norm of 

new drug approval if additional funding is provided. And three: Reserve marketplace incentives for true innovations. Market exclusivity is invaluable to drug makers and it should only be granted 

to new drug applications that substantially improve upon existing 

therapies. What better way to promote innovation than to more 

carefully grant monopolies to drug manufacturers? 

In conclusion, existing incentives for innovation are working. 

Today we have more companies doing drug discovery than ever. 

The industry is healthy and profitable. Express Scripts is concerned by the idea that rewarding certain types of drug development with additional market exclusivity will pervert the commercial market for prescription drugs. It will inhibit innovation. It artificially restrictions competition and it affords the same reward to 

breakthrough therapy as to less innovative product improvements. 

Most importantly, it places the burden for funding this additional 

incentive solely on the back of payers of health care rather than 

socialized equally by society through the tax code. Proposals that 

seek to expand market exclusivity in any situation need to be approached very carefully, very narrowly to ensure the right solution 

to the underlying problem. 

Thank you very much for this opportunity. 

[The prepared statement of Dr. Miller follows:] 

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Mr. PITTS. The chair thanks the gentleman. Dr. Ledley, you are 

recognized for 5 minutes for an opening statement. 

STATEMENT OF FRED LEDLEY 

Dr. LEDLEY. Good morning, Chairman Pitts, Ranking Member 

Pallone, members of the committee. My name is Fred Ledley. I am 

Director of the Center for Integration of Science and Industry at 

Bentley University, where we focus on studies aimed at accelerating the translation of scientific discoveries for public benefit. I 

have been an investigator of the Howard Hughes Medical Institute, 

the founder of an early company in the field of gene therapy, gene 

medicine, the president and CEO of another startup, which was a 

pioneer of personalized medicine, and I am the holder of 10 U.S. 

patents. 

My takeaway message today is very simple, that the role of incentives should be exclusively to promote 21st century cures based 

on 21st century science. This requires sustained support for 

translational science from the early stages of basic research that 

comes out of the NIH through drug discovery and drug development. It requires patent rights that protect the inventor’s priority 

to novel art. It requires predictable pricing, and it can be inhibited 

by statutory exclusives granted to older products, which draw resources away from the discovery of new cures and innovations that 

could reduce the cost of health care. 

While testimony before this committee has celebrated the many 

advances scientific advances of recent decades, our research suggests that few of these advances are being translated into cures. 

Let me give you an example. Monoclonal antibodies are one of the 

most important classes of new medicines now covering the market 

but the basic science that enabled that dates to 1975. My colleague, 

Laura McNamee, has recently studied 100 new medicines approved 

by the FDA since 2010 and found that these products arose from 

basic science that was on average 40 years old. Thus, in the second 

decade of the 21st century, the pharmaceutical pipeline is not providing 21st century cures but rather cures based on 20th century 

science. 

One reason the pharmaceutical industry is facing the dwindling 

pipeline and a patent cliff is that it has depended for too long on 

the products of old science—‘‘me too’’ drugs, product extensions and 

the eternal hope that there will be a blockbuster around the corner. 

I urge the committee to focus on incentives that will move the 

pharmaceutical industry forward, forward from reliance on old 

science towards these 21st century cures. 

Now, patent rights are essential for this innovation. Patents 

transform scientific discoveries into economic capital that can be 

monetized through technology transfer, capital investments by our 

venture colleagues, licensing fees or royalties. Innovation can be 

incentivized by more efficient and timely patenting of these discoveries. 

Statutory exclusives can have the opposite effect. Extended exclusivity makes companies less likely to commit resources to the always risky business of translational science. Such companies are 

less likely to discover and develop modern cures, less likely to enter 

into alliances with startup companies and less likely to acquire 

59 

those companies. Extended exclusivity granted to products that are 

late in their lifecycle or dormant are particularly problematic since 

they explicitly favor the products of old science over modern 

science. Statutory exclusivity can promote science, as we have seen 

in Hatch-Waxman, in the Orphan Drug Act and in the Best practices Pharmaceuticals for Children Act, which I remind you 

achieved this goal with 6 months of extended exclusivity. 

Even with market incentives, the path to 21st century cures 

needs to be nurtured. I started a gene therapy company 25 years 

ago. I have been working in the field for 30 years. There are no 

gene therapy products on the market. One of the reasons is that 

while more than $4 billion has been invested in gene therapy companies, all this money went to technologies that were immature 

and not likely to develop drugs. This is a long process that requires 

sustained, continuous investment. Incentives that engage stakeholders in the long-term success of innovation can promote innovation. These could include accounting standards that assign value to 

R&D spending, valuation models that consider the intermediate 

products of innovation or differential tax rates or even shareholder 

rights that favor long-term over short-term investments. 

The reason we are here today is that the treatments and cures 

that were developed from 20th century science are just not good 

enough. There are critical unmet needs and incurable diseases and 

the ever-increasing cost of health care. Incremental improvements 

are not what we are after. I urge the committee to focus on the 

mission of advancing 21st century cures that move the industry 

forward to using 21st century science. 

Thank you very much for the time. 

[The prepared statement of Dr. Ledley follows:] 

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Mr. PITTS. The chair thanks the gentleman and now recognizes 

Mr. Hemphill 5 minutes for an opening statement. 

STATEMENT OF C. SCOTT HEMPHILL 

Mr. HEMPHILL. Thank you. Mr. Chairman, Ranking Member, 

members of the subcommittee, my name is Scott Hemphill, and I 

am a Professor at Columbia Law School. I write and teach about 

innovation and competition. My research examines the incentives 

for drug innovation and affordable drug access provided by patents 

and regulation. Thank you for the opportunity to testify today 

about these important issues. 

I think we can all agree that innovative drugs have made an 

enormous contribution to longer and healthier lives. Patents and 

regulation are the key to that success by supplying incentive to innovate, thereby justifying large investments in research and clinical testing. Patents and regulation also serve a second goal, which 

is to ensure low-priced access to lifesaving drugs. This is the balancing act discussed by Chairman Upton and others. 

As an engine of drug innovation, of course, the patent system is 

not perfectly tuned. Sometimes a patent can’t be secured, for example, or a drug development takes too long and the patent expires 

too soon. 

Now, this issue is not a new problem but rather a longstanding 

focus of drug regulation. For example, as you have heard, the Waxman-Hatch Act fills in the gaps in patent protection by giving 

drugs special non-patent protection from competition, and to help 

make up for long development time, the Act extends the term of 

existing drug patents, and the Orphan Drug Act serves a similar 

purpose. 

Now, to the extent that there is a problem even after these extra 

protections, the question arises, what should we do about it, and 

we have heard a few options. One option is to rethink and speed 

up clinical trials. Another is targeted public support where appropriate. A third option is to expand existing legal exclusivity. Now, 

the key here, I think, is to limit the expansion and target it to situations where it is truly needed, and one possibility here is Dr. 

Gandy’s suggestion of narrower protection to help address Alzheimer’s disease. 

The MODDERN Cures Act also expands exclusivity but not in a 

way that is narrow or targeted. It would grant a large increase in 

protection for essentially all novel drugs. The Act gives 15 years of 

protection for so-called dormant therapies. Now, when I first heard 

the term ‘‘dormant therapy, ’’ I figured this would be a limited, targeted expansion along the lines of the Orphan Drug Act but I think 

that conclusion is incorrect. The key point is that a drug must address a so-called unmet medical need but unmet medical need is 

defined quite broadly. It is not just a drug for a disease that has 

no treatment but any sort of improved outcome. So even a drug 

that merely improved patient compliance or increased convenience 

would count under the Act. 

Now, in effect, the Act grants 15 years of protection to any drug 

with a novel active ingredient, and 15 years is a long time. It is 

about 3 years longer on average than even novel drugs get today, 

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tection in Europe. The result, I fear, is a large windfall through 

longer exclusivity for many drugs that would have been developed 

anyway. Billions of dollars will be transferred from drug purchasers to drug makers, and worse, where patients pay in whole 

or in part for the drugs, this would also reduce access to drugs. 

How big is this problem? Well, we can consider just the novel 

drugs that experienced generic entry over the decade between 2001 

and 2010 and imagine that all of these drugs had gotten a 15-year 

term instead of the average 12 or so that they do today. That 

roughly 3-year extension would suggest an overpayment for these 

drugs of more than $120 billion. In other words, purchasers are 

likely to pay a lot more for drugs that would have been produced 

even without the extra protection. Beyond the windfall problem, 

the Act seems quite vulnerable to evergreening strategies that 

would extend protection beyond the 15 years, and as we have already heard, risks placing a disproportionate burden on U.S. purchasers, and I am happy to discuss these issues during the question-and-answer period. 

To conclude, claims that larger drug maker rewards would increase innovation are easy to make but hard to pin down. The right 

next step here is careful study to determine the scope of the lost 

innovation problem in practice, and if warranted, a solution narrowly targeted at that problem. 

Thank you again for the opportunity to discuss these important 

issues with the subcommittee. 

[The prepared statement of Mr. Hemphill follows:] 

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Mr. PITTS. The chair thanks the gentleman, and that concludes 

the opening statements of our panel. 

I would like to ask unanimous consent to submit for the record 

a statement submitted by the Premier Health Care Alliance and a 

statement submitted by the Generic Pharmaceutical Association. 

Without objection, so ordered. 

[The information appears at the conclusion of the hearing.] 

Mr. PITTS. We will now begin questioning, and I will recognize 

myself 5 minutes for that purpose. 

In a statement issued by the California Public Employees Retirement System related to this hearing, they state that ‘‘Despite historic breakthroughs in scientific research, clinical trials and new 

lifesaving therapies, many common diseases remain incurable. 

Heart disease and stroke continue to be leading causes of mortality. Psychiatric diseases are serious burden on patients, their 

families and society as a whole, and infectious disease presents 

new critical challenges in terms of drug resistance.’’ 

I will note that the committee acted in an overwhelmingly bipartisan manner to pass the GAIN Act as part of FDASIA, which was 

a needed first step towards addressing this innovation gap by 

granting an additional 5 years of exclusivity to new qualified infectious-disease products. We must build on this momentum in the 

antibiotic space as well as in other areas of unmet medical need 

and where public health demands innovation. 

We will start with you, Mr. Borisy. Have there been breakthroughs in clinical trial designs for chronic diseases that impact 

large patient populations? 

Mr. BORISY. So we have seen—if the goal is ultimately to get 

medicines to patients and to our society that needs them, we have 

seen through breakthrough therapy, through accelerated approvals 

in multiple different disease areas an adoption of approaches that 

have helped to speed those therapies to the patients that need 

them. So it becomes a question of, what is the information that is 

necessary to understand how a drug will be in the real world setting and are we applying the current best understanding of biomarkers, of personalized medicine subsets of patients in some of 

these other disease settings, could we move things more quickly. 

Mr. PITTS. How long does it typically take to conduct a clinical 

trial for a new therapy targeting a chronic condition such as heart 

disease or stroke? 

Mr. BORISY. The total time in clinical development for those 

types of chronic diseases are usually longer than 10-plus years. 

Mr. PITTS. Are venture capitalists investing in the development 

of new products targeting chronic diseases? 

Mr. BORISY. It is very difficult to do so. If our focus is on patients 

and bringing through those innovative breakthrough medicines, if 

the time in clinical development is going to be on the order of 10- 

plus years, building from wonderful basic research that has been 

done, there still is usually additional years before you ever get to 

the clinic to create that drug that can then go be in the clinic for 

another 10 years of development. So as a venture capitalist, if you 

are considering deployment into an area that is going to take 15- 

plus years before it may get to the market, that is very challenging. 

It is challenging in that time period is longer than the length of 

81 

our investment funds, which means that we will be dependent on 

other entities, recognizing that that is an important product for patients, but other entities, if they have uncertainty about how long 

it will take them to continue developing it or what risks may be 

involved, we will not recognize the value that we have created 

early on. So that long period of time and uncertainty makes those 

very conditions which as a society and as a Nation we need to be 

some of the most challenging to invest in from a venture-capital 

perspective. 

Mr. PITTS. Thank you. 

Dr. Gandy, in your testimony you note that the lack of therapeutics for chronic conditions such as Alzheimer’s places an enormous strain on our country’s finances and that without novel 

therapies, costs will only escalate. At this rate, will the next generation of Americans that develop Alzheimer’s be taking the same 

medications that were approved over a decade ago, and what would 

this mean to health system costs? 

Dr. GANDY. At this point, the medications that are used to treat 

Alzheimer’s disease are the same that were developed in the 1970s, 

so we have nothing new on the horizon. Those medications don’t 

change the progression of a disease. They relieve symptoms briefly. 

They always wear off. So we continue in the current cycle of having 

no way to slow the progression of the disease. 

Mr. PITTS. And Mr. Boutin, the California Public Employees Retirement System asserts in their testimony that the market exclusivity period of 5 years for brand drugs is ‘‘appropriate to properly 

incent innovation.’’ Can you comment on whether 5 years of exclusivity is appropriate to properly incent innovation for chronic diseases? 

Mr. BOUTIN. It is clear when you look at the number of conditions that lack treatments that it is not. It has worked in some 

cases but we now have approximately 7,500 conditions without 

treatments, and I hear Representative Waxman’s comment of ‘‘the 

science is not always there’’ but the incentives are clearly not there 

to drive the innovation we need for many of the conditions. We 

hear from NIH-funded researchers that they develop treatments or 

potential treatments that could come to market but lack patent 

protection and therefore they don’t. We hear repeatedly from our 

patient organizations and the organizations they work with on developing treatments that the timeline is taking too long to bring 

many of these products to market. We have a huge opportunity to 

incentivize them. 

Now, I think the question is, what is the right balance point of 

incentivizing them. I think we agree that the need is there, and I 

want to just take issue with the notion of unmet medical need. 

Unmet medical need is really important to people with chronic conditions. Alzheimer’s is clearly an unmet medical need but so is 

ALS, so are countless other conditions without effective treatments. 

Our challenge is to incentivize those highly innovative, highly valued products to address those needs. We can quibble over what 

that balance is but this Congress has an opportunity to do the hard 

work, figure that out and incentivize treatments for people who are 

dying now waiting for them. 

82 

Mr. PITTS. The chair thanks the gentleman. My time is expired. 

The chair recognizes the ranking member, Mr. Pallone, 5 minutes 

for questions. 

Mr. PALLONE. Thank you, Mr. Chairman. 

I wanted to ask some questions of Dr. Gandy and Dr. Miller. Let 

us start with Dr. Gandy. 

In reading your testimony, it is apparent that you share my concern about the seemingly ever increasing cost of drugs and its impact on both patients and on the health care system as a whole. 

You mentioned the Affordable Care Act and the biosimilars provision, which provided for 12 years of exclusivity for innovator biologics, and as you point out, biologics are extremely expensive, 22 

times the cost of ordinary drugs, so if a biologic at that price were 

to be discovered for Alzheimer’s, it would cost as much, if not more, 

than it currently costs to treat and care for patients with the disease. It would also not alter the unsustainable trajectory for Medicare as your testimony explains. 

You mention an Alzheimer’s Association report that concluded 

that if there were an effective Alzheimer’s treatment that could 

delay the onset for 5 years, American taxpayers would save $447 

billion in the year 2050 and the human suffering brought by Alzheimer’s of course heartbreaking and obviously the projections for 

how much of our health care system will be spending on the care 

of those with Alzheimer’s are dire. So it would be a tremendous 

public health advance if we could get this treatment and see that 

kind of savings, and I share your goal in trying to bring this treatment to market. Your recommendation to the committee is that we 

would consider extending the current 5-year term of exclusivity for 

drugs to treat Alzheimer’s but I seriously question whether a 

lengthy exclusivity will achieve the kind of savings we all hope to 

see or whether it would necessarily give patients access to treatments they can afford, and your testimony seems to assume that 

if we extend exclusivity for traditional or small-molecule Alzheimer’s drugs, the price of these drugs would be lower than we 

are seeing in the biosimilars area. I think we have seen recently 

that is not a safe assumption to make, and your testimony points 

out that ideally a novel Alzheimer’s treatment would start to be 

given to people in their 50s before they develop symptoms in order 

to slow the development of plaques. 

So Dr. Gandy, if we are talking about giving a drug that could 

actually prevent Alzheimer’s, how many people do you estimate 

would need to take it? Obviously the dosage might take different 

forms. If it is an oral solid, I would guess that it might need to be 

taken daily, maybe even more than once a day, and that potentially 

means taking a drug every day for decades. So I guess I wanted 

to ask, if we were talking about that kind of drug, how many people do you estimate would need to take it? I just have to ask a series of questions, if you could. 

Dr. GANDY. Sure. The number of people who would have to take 

the medication would be in the tens of millions. 

Mr. PALLONE. And what if the cost of this new Alzheimer’s treatment was $1,000 per pill, and if we extended the term of exclusivity for that treatment beyond the current 5 years to, say, 12 

years, as you suggest, or even 15 as some of my colleagues suggest, 

83 

what would that look like for an individual patient and what would 

it look like for the health care system overall? 

Dr. GANDY. I think the details of how to focus the exclusivity and 

target it narrowly are sort of a second-generation problem. I mean, 

I think we are really trying to find ways to deal with what we 

clearly observe as the retreat of the pharmaceutical industry from 

Alzheimer’s both at the venture level and at the large pharmaceutical level, and this is at least a way to begin to do that, but 

I share your concern about the expense, and it is difficult to know 

exactly which business model to use to get started. But think of the 

financial savings from the polio vaccine, think of having people who 

would be on iron lungs for their entire lives. There clearly needs 

to be some balance between the exclusivity and the cost savings. 

Mr. PALLONE. Well, let me ask Dr. Miller. Would you comment 

on it? Would you care to comment? 

Dr. MILLER. Yes. I am very familiar with Alzheimer’s. I am on 

the board of an Alzheimer’s cure at the University of California 

San Francisco and so have studied this quite a bit. It turns out 

these models of savings often are never seen in reality so it doesn’t 

matter if you are looking at drugs, devices, imaging or even robotic 

surgery, they often have these models when they try to get to the 

marketplace but their savings are rarely appreciated when they get 

to the market, therefore, the health crisis we have today. 

If you look at this drug, though, and you were to take your scenario, you just make it the price of a traditional oral solid branded 

product, you would quickly actually mitigate if not swamp any potential savings that are there, especially when you consider drug 

price inflation. That model that you are speaking to prices the new 

therapy at zero. It is free. And so the savings of a half trillion dollars or when the drug is free. If you have to truly treat the tens 

of millions that you are talking about, you would never have any 

savings. 

Mr. PALLONE. And the problem I have is if we grant exclusivity, 

we are essentially giving the pharmaceutical free rein to charge 

whatever it wants during that time period, and we are removing 

the effect of market competition forces, and I don’t think we have 

any guarantees that a company developing a new groundbreaking 

drug treatment would do the same thing and obviously that is my 

concern. 

Dr. MILLER. Well, it has been our experience that they don’t because they do have the ability to freely price in the United States, 

and if you are going to treat Alzheimer’s, there is a lot of reasons 

to treat Alzheimer’s. This is not about an economic argument. This 

is because it is the right thing to do for patients, but the likelihood 

of us seeing savings downstream are much less likely, especially if 

you extend exclusivity. 

Mr. PALLONE. Thank you very much. Thank you, Mr. Chairman. 

Mr. PITTS. The chair thanks the gentleman and now recognize 

the chairman of the full committee, Mr. Upton, 5 minutes for questions. 

Mr. UPTON. Well, again, we appreciate all your testimony this 

morning. 

Mr. Carusi, the fact that the number of venture capital firms investing in medical technology has dropped from 39 in 2007 to just 

84 

about 11 or 12 today is certainly concerning to a lot of folks. Who 

is going to provide the necessary startup capital for innovative new 

medical technology companies? How can we grow that number back 

to where it was before? 

Mr. CARUSI. Well, I think that is exactly the challenge right now. 

I think at its core, venture capitalists raise money from institutional investors, so we raise capital from universities, endowments, 

pension funds. As a part of that process, we also have a fiduciary 

duty to generate returns. That is the agreement that we are entering into. We can get that number back to 20, 25, 30, 35 if we can 

fix the math problem that we have, which is that it is very difficult 

right now to generate the kind of returns that our investors need 

to see when you look at the delays of FDA, you look at the delays 

of reimbursement. So I think this Congress and we as a device 

community, if we can find ways to get back to streamlining that 

innovation process, the math starts to work better and that starts 

to bring these investors back into the fold. Until then, we have 

been forced to go elsewhere, and as we like to say, we have been 

looking for a new set of best friends. That is in part why I am 

spending a lot of time my time overseas, and so we have seen other 

countries that are very interested in building their own life 

sciences ecosystem invest in venture capital funds directly in return for us locating our companies in those local geographies. So 

there are ways to access capital but it does come with strings and 

some of those strings are that we need to start to conduct business 

outside of the United States, and we are doing that right now to 

fill the gap. 

Mr. UPTON. So are those venture capital companies that are 

helping companies overseas, are they located overseas themselves 

or are they U.S. firms that are investing and then encouraging 

those companies to in fact develop those products overseas? 

Mr. CARUSI. So will speak for my own firm. Our new fund, 

Lightstone Ventures, it is a U.S.-based fund but we are—in fact, 

we just announced that we are opening an office in Dublin. We are 

moving one of our partners to Dublin, and a part of what we will 

do, not all, but a part of what we will do will be to look for innovative ideas and innovative technologies but to reside those companies overseas and to build those companies overseas. And so they 

are U.S. funds that are locating elsewhere. 

Mr. UPTON. Is any part of that equation that decision making 

part of the tax code consequences? I know we lost a company in my 

district to Ireland—Perrigo—in terms of their headquarters, in 

large part because of the tax rate of 35 versus 10 1⁄2. 

Mr. CARUSI. So that has certainly been in the press and certainly 

tax rates and lower tax rates and more attractive tax rates play a 

role but recognize the fact that our companies are very far from 

revenues and very far from profits and so the bigger driver for our 

companies is really around, A, the access to capital, and B, the regulatory environment in those markets, and it comes back to the 

fact that we can get a device product approved in Europe 3 to 4 

to 5 years ahead of what we can get that product approved in the 

United States. The fact that product is approved 3 to 4 to 5 years 

ahead of time then allows us to start to do the studies that the payers want to see to start to try to generate some of the cost data. 

85 

In the United States, we are behind in that cadence and so consequently given the fact that we are now running these trials in 

Europe and seeking European approval, we like to be close to our 

companies. We don’t just invest and so we are naturally moving 

overseas to be closer. 

Mr. UPTON. Mr. Borisy, you referenced the expected patent life 

and market exclusivity of a drug in development does impact the 

investment decisions, and you also indicated earlier that the size 

and cost of clinical trials is an impediment to investment and innovation. What are other thoughts that you might have in advancements and technology that can help make up the difference for 

those? 

Mr. BORISY. So for any drug that is being brought forward, as a 

society we are putting a level to say what is the information that 

we need to have that drug will be useful in the real world population and make a difference for patients and have the requisite 

safety information associated with it. We have in areas as has been 

discussed here in the committee in cancer and rare genetic diseases 

been willing to adopt the use of biomarkers, surrogate endpoints, 

and a recognition that the full understanding of the use of that 

drug will come post approval with experience in the real world. 

For some of these areas that are outside of cancer and rare genetic disease, there are likewise opportunities to take some of those 

modern approaches, and we can be doing that both pre approval as 

well as post approval. I think an important point to recognize is to 

the comment of we are in the 21st century now and not the 20th 

century with electronic medical records, with information technology, we are able to know an enormous amount about what is actually happening with a drug in the real world. So when we are 

dealing with the question of how do we develop drugs for some of 

these chronic diseases, some of these things affecting such large 

swaths of our population and we are dealing with the question of 

how do we make sure that innovation invests in those areas. We 

should ask, can we use some of these modern technologies to make 

that process more doable, more stable, more predictable. 

Mr. PITTS. The chair thanks the gentleman and now recognize 

the ranking member of the full committee, Mr. Waxman, 5 minutes 

for questions. 

Mr. WAXMAN. Thank you very much, Mr. Chairman. I appreciate 

all the testimony. I am sorry, I had to go to another subcommittee 

and didn’t hear all of your oral presentations. The chairman has 

often said to me, I ought to clone myself, but we don’t know how 

to do that, and it probably wouldn’t be allowed anyway, and nobody 

would want it. 

Mr. Hemphill, I want to ask you some questions about this 

MODDERN Cures Act, because that is a legislative proposal that 

has been put forward. In your testimony, you said it is likely that 

some drugs are not developed because the exclusivity rewards are 

not large enough, but it is unclear how large a problem this is, and 

I would like to explore that with you. Certainly we ought to be willing to use patent term extensions and exclusivities as an incentive 

to spur the research and development of new drugs. That was the 

basis of some of the laws that we are all praising like the Orphan 

Drug Act. In that law, we gave 7 years of market exclusivity for 

86 

drugs to treat rare disease. That meant that these were rare and 

didn’t offer a huge profit potential because they weren’t a lot of 

people that were likely to buy the drug but this MODDERN Cures 

Act gives not 7 but 15 years of exclusivity and post-approval patent 

protection to so-called dormant therapies. Do you see a reason why 

we would need an even longer period for these drugs than we gave 

for orphan drugs? The Orphan Drug Act has been very successful. 

We have a lot of new drugs for people with these rare diseases. 

Mr. HEMPHILL. So I would say no, not necessary under the 

MODDERN Cures Act as it is currently conceived, given the 

breadth of applications of unmet medical need and its applicability 

to essentially any new drug. I leave open the possibility that in 

principle, there could be therapies for which the lead time is so 

long that some kind of targeted additional protection would be 

worthwhile. I just think the MODDERN Cures Act goes way beyond that in its current breadth of application as well as its duration. 

Mr. WAXMAN. In a biosimilars provision in the Affordable Care 

Act, we gave 12 years of exclusivity to biologics. That is 7 years 

longer than we gave in Hatch-Waxman for small-molecule drugs. I 

have always believed that the 7 years was too long. However, the 

argument was made that a lengthier time was needed because biologics were harder to develop and their patents were weaker. Do 

you see any reason why dormant therapies would need 3 years 

longer exclusivity than biologics? 

Mr. HEMPHILL. Well, I think in principle, it is always possible 

that longer protection would elicit additional innovation, and then 

the question is, at what cost to the therapies that we would get either way, which is why I think it is so important for us to do careful study to figure out where those gaps are, if anywhere. 

Mr. WAXMAN. Well, you mentioned the evergreening provision in 

your testimony. Now, that is not just a one-time event, that could 

go on forever wherever a small change can produce another 15 

years of exclusivity. There was an interesting statement. Mr. 

Boutin in his testimony claims that MODDERN Cures has the 

strongest anti-evergreening language ever included in legislation. 

Do you agree with that? Do you think that that law prevents 

evergreening or could companies get multiple 15 years exclusivity? 

Mr. HEMPHILL. I don’t agree. I am very concerned about 

evergreening in this bill. There may be a difference in what we 

mean by ‘‘evergreening. ’’ One particular issue that I am very concerned about is product hopping where you get close to the end of 

the exclusivity and then the drug maker switches the patients over 

to a new version of the same drug. We have been talking about 

Alzheimer’s, and Namenda is a nice example. The existing 

Namenda treatment is going away this summer and all the customers are being—all the patients are being shifted to a once-a-day 

version, and this extends the exclusivity, and I don’t see how the 

MODDERN Cures Act is going to get around that. 

Mr. WAXMAN. This MODDERN Cures proposal, the sponsors 

point out it is only for therapies that address an unmet medical 

need for serious or life-threatening diseases. On the surface, that 

sounds reasonable. Do you think it is appropriately targeted to only 

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priately stimulated by such extraordinarily long periods of exclusivity and patent protection? 

Mr. HEMPHILL. It looks like it would apply to roughly any drug 

that currently gets new chemical entity protection. Maybe there are 

small exceptions to that but I think it extends quite a bit further 

than what would you normally think of by unmet medical needs. 

Mr. WAXMAN. And that could be a huge windfall? 

Mr. HEMPHILL. Correct. 

Mr. WAXMAN. Mr. Boutin, I know you met with our staff on several occasions, and I understand you are trying to get them data 

and information to show whether there are significant numbers of 

dormant therapies out there waiting to be developed. Have you had 

any success in collecting this data? And I would also appreciate 

data justifying why 15 years of exclusivity and patent protection 

are necessary for these therapies. 

Mr. BOUTIN. So with respect to the data question, there is data 

that is available but it is very limited. It is very challenging to collect that information because the incentives are not there to exist, 

and when we speak with companies, they routinely tell us that 

when they had a good product that they shelve because it has gone 

dormant because there is not enough time to develop it, they routinely shred the data. What we have seen with the filing of 

MODDERN Cures is, companies now are starting to keep that data 

in-house. So they are starting to look at how they might potentially 

recapture these lost opportunities. 

Mr. WAXMAN. Well, it is important that we insist on receiving 

more information as we look at this law because this is a huge 

windfall in some cases, and we want to know if it is necessary. If 

it is necessary, we certainly want to do what will help spur innovation. 

Mr. BOUTIN. Well, in—— 

Mr. WAXMAN. But we know, Mr. Chairman, in conclusion, that 

there have been many laws where we have just overpaid. We have 

overpaid the drug companies to do research on dosages for kids and 

we look at how much money that costs them to do it and that exclusivity was so much more valuable. We have overpaid for even 

some of the orphan drug laws, and we are overpaying at the expense of patients going without drugs or the payers for drugs not 

being able to afford it or the Medicare system and the Affordable 

Care Act not being able to sustain these kinds of costs. So we have 

got to get the balance right and we need the data to make sure 

that we are doing that. Thank you. 

Mr. PITTS. The gentleman’s time is expired. The chair now recognizes the vice chair of the committee, Ms. Blackburn, 5 minutes for 

questions. 

Mrs. BLACKBURN. Thank you, Mr. Chairman, and I want to 

thank everybody for being here and we have a hearing downstairs 

as well as here so we are kind of back and forth. 

Mr. Carusi, I want to come to you. I would like to talk with you 

a little bit about your due diligence process as you look at funding 

a startup with a concept, and being from the Nashville area where 

a lot of health IT is taking place and Health Box is active there, 

the Entrepreneur Center, when I go over there and I talk to some 

of these innovators and you look at what is taking place from conVerDate Nov 24 2008 13:06 Dec 02, 2014 Jkt 037690 PO 00000 Frm 00093 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-151 CHRIS
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cept to commercialization to distribution, it is a pretty long 

timeline. In preparing for the hearing and reading through your 

testimony, I want you to just talk to me about that due diligence 

process, what you are looking at, how the FDA approval process affects that, how that window has changed in the past 10 to 15 years. 

Mr. CARUSI. I would be happy to. I think it is important to note 

that at my firm, so at Lightstone, we are involved from the very 

early stages. In fact, about a third of our companies have been created either in-house or in coordination with incubators that we 

work with. So this means that we are literally sitting down with 

an entrepreneur, a physician, an inventor looking at a market and 

inventing. So we are involved at that early stage. We then have to 

take a look at that starting process. We have to look at the technical risks, the development risks, the risks in the clinical trials, 

what kind of a study can we run. If we run that study, will we get 

FDA approval. How long will that take. We then have to make a 

determination as to whether or not we will have created enough 

value that we can then find another player, be it at the public market or one of the major players take on that project or if we have 

to keep going. If we have to keep going, then we have to look at 

the whole reimbursement process, what is involved in getting coding, coverage, payment. At the end of the day, we have to get the 

product from the ideation phase all the way through to the point 

where we are generating revenues and we are generating profits. 

That is what we do. If you look at that timeline, and Mr. Borisy 

has already mentioned this, that timeline is now pushing anywhere 

in devices up to 8 to 10 to 12 years with a great deal of uncertainty 

along the way, and one of the things that we as venture investors 

hate the absolute most is seeing our companies fail late. We would 

rather introduce experiments where we can have these companies 

fail early and move on. But what is happening is, these companies 

are either failing at the point where they get in front of panel for 

FDA approval, even if we have met the appropriate endpoint, or 

they are failing when they get into the morass of reimbursement, 

and then they become restarts. Nobody wants to fund a restart. It 

is easier to give birth than resurrect, and the reality is, if these 

companies then die and we have to move on and it is dragging won 

the returns of our industry and it is dragging down innovation, and 

that is the process that we are facing right now. 

Mrs. BLACKBURN. You mentioned the challenges with the IDE 

process. Do you want to add anything more to that? 

Mr. CARUSI. Yes. So I mean, again, on the IDE process, that is 

the process to actually initiate our clinical studies to then demonstrate the safety and the efficacy of the device. What happened 

over the years is the data requirements to start those studies, it 

was as if we were actually going for approval. We are not going for 

approval; we are going for the approval to start the trial. And 

again, some of these are going to fail. They are not going to work. 

If you start to layer on additional preclinical requirements, additional bench requirements that aren’t necessarily adding to the 

safety of these products, then again you are adding to the cost of 

time before we actually get to the experiment where we can run 

the clinical trial and see if the product is safe, more effective and 

89 

good for patients, and if it costs too much, capital is fungible. We 

will go somewhere else. 

There was just a discussion around Alzheimer’s. We are not 

funding Alzheimer’s drugs. We can’t. We can’t bring them to market. And so the math won’t work, and so it is simply a matter of 

making sure that the right incentives are in place so that we don’t 

kill innovation. At the same time, we are in the game of disrupting 

things. That is what we do for a living. So we don’t want to see 

incumbents sitting on drugs and new devices down the road but we 

need enough incentive to make sure that the math works so that 

we can fund them to begin with, and right now in a lot of spaces, 

we are not able to do that. 

Mrs. BLACKBURN. Thank you, and I will yield back my time, Mr. 

Chairman. 

Mr. PITTS. The chair thanks the gentlelady and now recognizes 

the gentleman, Mr. Matheson, 5 minutes for questions. 

Mr. MATHESON. Thank you, Mr. Chairman. 

I want to talk a little bit about the issue with medical devices, 

small manufacturers in particular. They are the ones in the marketplace who are really creating some of the groundbreaking technologies. They rely heavily on venture capital, as we just heard in 

the last answer. And I think that as should be expected, venture 

capitalists are going to only take on a certain amount of risk both 

in terms of product performance and uncertainty and regulatory 

uncertainty as well because uncertainty in business is a cost. I 

think that sounds pretty basic but I think that is something Members of Congress need to be reminded of. 

One area in which I believe venture capital firms consider when 

deciding whether to make an investment in medical device is the 

likelihood of adequate and predictable reimbursement from Medicare because once you get FDA approval, that doesn’t mean Medicare is going to give you reimbursement. 

Over the past several years, I have heard from device manufacturers and venture capital firms that Medicare is requiring more 

data to obtain appropriate coverage of payment, and I appreciate 

that CMS wants to put forth an effort to spend taxpayers’ dollars 

in an efficient and responsible manner, but this change in standards, if you will, and the lack of clarity surrounding what the 

standards are from what I understand has made it increasingly difficult for VC firms to make an educated and informed decision 

about the viability of a device once it gets through the FDA approval process. So if an FDA-approved device is not approved by 

Medicare, its viability in the marketplace and the ability for patients to access the technology obviously is greatly reduced. 

In order to help alleviate some of this uncertainty, I have cosponsored legislation authored by my friend and colleague, Congressman Paulson, the Accelerating Innovation in Medicine, or AIM Act, 

which would give device manufacturers the opportunity to make an 

FDA-approved product available on a self-pay basis for an initial 

3-year period before approaching CMS about Medicare coverage on 

reimbursement. This program would be entirely voluntary. It 

would allow manufacturers the time to collect needed data to justify reasonable and adequate coverage and payment for Medicare 

down the road, reducing some of the uncertainty associated with 

90 

the Medicare coverage process and hopefully providing the venture 

capital community with a measure of certainty in the device and 

more broadly in the market in general. 

So Mr. Carusi, I wanted to ask you if you had heard of this or 

were aware of this proposal and do you feel it would assist both 

the venture capital community and the small device manufacturers 

in reducing some of the uncertainty in the process and bringing 

products to the market on a more expedited basis? 

Mr. CARUSI. Yes, I am familiar with the AIM Act, and I think 

it very much goes to the heart of one of the challenges that we are 

facing, which is to your point. We now have FDA approval but we 

are now in a process where we have to generate more data. As we 

are generating that data, we are not profitable entities. We are 

burning $500,000 to $2 million a month, and in fact, that number 

tends to go up because we now have to start marketing these products. So the question comes down to, we can’t as small companies 

continue to fund these products through that next phase of development. So I think what the AIM Act does or could potentially do 

is help to provide a source of funding during this period of time so 

that we can continue to generate the data that payers, that Medicare would want to see. 

Look, the world has changed. We recognize that data is everything. Clinical data is our sole focus, so generating that data is necessary, it is important, but if we are going to have to add more 

years, more uncertainty and more disruption, then we need policies 

like the AIM Act, and I would say that is one of several potential 

approaches. That is not going to do it. We need more things and 

more creative ways to try and think about how we can as an ecosystem help the ecosystem generate this data. It is not simply 

about device companies or biotech companies. It benefits hospitals, 

payers, patients. So what is the right mechanism to fund this additional data-gathering exercise? 

And then the other thing I would add is, and then what is the 

data that is required. Don’t move the bar. Tell us—and we have 

had this conversation with FDA. If it is X, we hit X, then you are 

going to get paid, and right now that bar is constantly moving so 

we don’t even know if we generate that data if we are going to get 

payment and coverage. 

Mr. MATHESON. I appreciate that. 

Mr. Chairman, I will yield back. 

Mr. PITTS. The chair thanks the gentleman and now recognizes 

the vice chair of the subcommittee, Dr. Burgess, 5 minutes for 

questions. 

Mr. BURGESS. Thank you, Mr. Chairman, and Mr. Carusi, just 

briefly before we leave that point, it was the intention or the desire 

of this committee 2 years ago when the reauthorization of the Food 

and Drug Administration came to our committee that many of 

these problems would be, if not solved, at least managed or mitigated, and that has not been the case? 

Mr. CARUSI. No. On FDA, that is having an impact, and so I 

think we are starting to see benefits from FDASIA, and certainly 

with FDA and improved dialog with Commissioner Shuren and his 

leadership, we are seeing improvements. So that is why in my testimony I moved from FDA, we still want to continue to improve it, 

91 

but to the reimbursement side of the equation because parallel to 

the discussions we had several years ago around FDA and a lack 

of transparency and predictability and consistency, that is what we 

are now facing in reimbursement. 

Mr. BURGESS. Let me ask you a question because it came up yesterday in a Rules Committee hearing over the appropriation for the 

United States Department of Agriculture, which for reasons that 

escape most of us includes the FDA. But the whole issue of special 

protocol assessments came up and the fact that the rules might be 

changed late in the game in that environment. Can you speak to 

that just briefly? 

Mr. CARUSI. Yes, I can. Again, I think that has been utilized 

more on the drug side, which is frankly less where I play. It is 

probably more where you play. Again, I think the intention of SPAs 

is terrific. I think the intention is to provide again a bar where if 

you hit a certain data requirement, you have certainty that you 

will get approval. That is the right intent. Where it runs into problems if that doesn’t prove to be the case. So in other words, if you 

are now three-fourths down the process, you are in the middle of 

your clinical trial and the bar has changed, the bar has moved, you 

have to start that clinical trial all over. You have just taken a step 

of 3 to 4 years back. In many ways you may have flushed $50 to 

$100 million down the drain. So I think the intent is right but we 

can’t monkey with the SPA, unless there is some meaningful new 

clinical piece of data that has emerged one that has been established. 

Mr. BURGESS. I thought it was telling, your comment, fail early, 

avoid the rush, you certainly get why that concept is there. 

Dr. Gandy, I really appreciate you being here and appreciate the 

work you are doing in Alzheimer’s. It must have been as startling 

for you to hear as it was for me that Mr. Carusi is no longer funding Alzheimer’s research. But let us talk about that for a minute 

because one of the first things after I was elected to Congress in 

2003, I asked for a meeting with Dr. Zarounian out at the NIH and 

we talked about things on the horizon, things in the future, and he 

related that statistic that you gave us, that 5 years delay in the 

onset of symptoms, big savings on the other side. So if I have done 

the math calculation correctly where I am now into my third of 

those 5-year intervals but as you relate, it hasn’t really happened, 

has it? 

Dr. GANDY. No, that is right. We currently don’t have anything 

on the horizon that will make an impact on the course of Alzheimer’s, on the progress of Alzheimer’s disease. 

Mr. BURGESS. Well, what about actions like establishing clinical 

trial networks in the study of Alzheimer’s? 

Dr. GANDY. The NIA has established a nationwide network of 

Alzheimer’s centers, and that is the mechanism by which it uses 

to recruit and test new drugs—recruit patients and test new drugs, 

and that system, that network often partners with industry to test 

new industry drugs as well. 

Mr. BURGESS. And that in turn then spur new investment, perhaps get Mr. Carusi again involved and invested in our research? 

Dr. GANDY. I think what we need is a success, and I think that 

would attract more investors. I mean, we have relationships and 

92 

actually a number of public-private fora for discussion but I think 

the thing that would really build the enthusiasm is some success. 

Mr. BURGESS. And would things like standardizing biomarkers, 

would that help? 

Dr. GANDY. That certainly is the—the NIH has established what 

is called the Alzheimer’s disease Neuroimaging Initiative, which 

has been really a landmark study, ongoing study, in defining a 

number of biomarkers of the natural aging process, of the conversion from aging to mild cognitive impairment and then conversion 

from mild cognitive impairment to Alzheimer’s disease. 

Mr. BURGESS. Thank you. 

Dr. Ledley, you brought up a gene therapy, and I can remember 

reading in the newspapers in the mid-1990s, late 1990s about some 

promising gene therapies and then unfortunately there were a series of unsuccessful problems, and then it kind of went away. Can 

you kind of give us an idea of what is on the horizon with gene 

therapies? 

Dr. LEDLEY. So the short answer, gene therapy works. The last 

couple of years have been incredibly exciting. It has seen some very 

high-profile IPOs in the past couple years. So people are happy 

about it again. I think it is a classic story where a lot of—there is 

a real disconnect between the good support for therapy for NIH, 

venture capitalists who made a lot of profit early in the field and 

found a lack of sustained support for the innovations required to 

take immature technologies and make them mature, and we believe the field has slowed by that. It was a difficult process. There 

are very important pricing issues for that field to work out in the 

next couple of years but it is a great example of where the basic 

science is now ready for investments that can take advantage of 

discovery and the type of review process which is put in place at 

the FDA. 

Mr. BURGESS. All right. I have more questions, Mr. Chairman, if 

we have time for a second round, but I will yield back. 

Mr. PITTS. The chair thanks the gentleman and now recognizes 

the gentleman from Texas, Mr. Green, 5 minutes for questions. 

Mr. GREEN. Thank you, Chairman, and both you and the ranking 

member for asking our witnesses to testify. 

First of all, it is frustrating what my mother-in-law went through 

with Alzheimer’s in the 1990s. There is no drug today different 

from that than Aricept. It wasn’t really useful then, slow delay of 

the illness but we are just not there. And Dr. Gandy, I appreciate 

all your efforts, and I even appreciate your purple tie, Mr. Carusi, 

from working with our local Alzheimer’s group in Houston. 

But let me get to my other issue. The need for greater antibiotic 

drug development is something I, along with Congressmen 

Gingrey, Shimkus, DeGette and others, have long championed. We 

have successfully started getting the ball rolling with GAIN Act 

last Congress and we are already seeing positive signs. However, 

as much as it pains me to say, it has not done enough to fully set 

our country back on a path of investment and development in new 

antibiotics. We need to combat ever-emerging and deadly diseases. 

The health of our soldiers and veterans is particularly at risk. An 

article that ran in The Hill yesterday titled Fighting Superbugs by 

Developing Targeted Weapons in which the author was Rear AdmiVerDate Nov 24 2008 13:06 Dec 02, 2014 Jkt 037690 PO 00000 Frm 00098 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-151 CHRIS
93 

ral James Kerry stating that many soldiers and civilians have lost 

their lives because we do not have the drugs we need. It is time 

to mount an urgent defense against superbugs and use all the tools 

at our disposal to put new weapons on the field. 

Mr. Borisy, I know that knowing that you know about the antibiotic space today, the risk-reward profile, would you advise your 

clients or colleagues to invest in antibiotic development today, and 

why or why not? 

Mr. BORISY. Investment from a venture perspective in new antibiotic development is very challenging. As an optimist from the 

science and the medicine perspective, I actually believe we have 

the tools and the technologies today that if we applied it and focused the capital around it, we could come up with the tremendous 

innovations that we need against some of these superbugs and 

areas of very important need to our society in infectious disease. 

Mr. GREEN. OK. I only have 5 minutes. But if Congress were to 

create additional incentives on antibiotic development, do you believe that it might help move the needle with investors such as 

yourself? 

Mr. BORISY. Yes. 

Mr. GREEN. If so, what types of reforms or incentives would be 

needed to improve your outlook on investment in this area? 

Mr. BORISY. So one of the most important would be again drawing the analogy from cancer and from rare genetic diseases, which 

is if we accept it for these antibiotic infections, allowing to develop 

for those specific populations to show that if we could show that 

a drug works in those specific populations, that would have a tremendous impact. 

Mr. GREEN. I, along with my colleague, Congressman Gingrey, 

have introduced the ADAPT Act, which is a follow-up on the GAIN 

law from last Congress. It would create a special designation for 

critically important antibiotics with a goal of improving FDA process around them. If we could demonstrate to industry leaders such 

a process would shorten approval times for safe and effective products, would that help increase the worth of antibiotic products on 

the market? 

Mr. BORISY. Yes, it would. It would have a direct impact. 

Mr. GREEN. Thank you. Without new antibiotics, medical advances and new cures to treat other diseases will largely be moot 

since treatments like chemotherapy, even a miracle future therapy 

could be too dangerous to patients because of the risk of infection 

and no antibiotics to protect them, and I urge my colleagues to take 

swift action and aggressive action because we do not have a moment to waste, and again, hopefully our subcommittee will look at 

the ADAPT Act as a follow-up to the success we are seeing with 

GAIN. I know just recently there was one of the pharmaceuticals 

approved. 

Mr. Chairman, I will yield back my time. 

Mr. PITTS. The chair thanks the gentleman and now recognizes 

the gentleman from Illinois, Mr. Shimkus, 5 minutes for questions. 

Mr. SHIMKUS. Thank you, Mr. Chairman. It is great to be here. 

I am way down on this side. And it is great—I too am in the other 

subcommittee so I am bouncing back and forth, but it is really important to hear the plethora of the panel because it really just gets 

94 

your mind going. It drives staff crazy because they want us to direct our questions, but you start thinking. So I am going off script 

for a second. 

Mr. Hemphill, Alzheimer’s, everyone has been touched by it. So 

you hear the testimony. Obviously the capital community is not 

here. There is no return on investment, can’t make the case. It is 

an epidemic. It is going to—so this whole brand exclusivity stuff, 

I mean, doesn’t that not make a case for creating a market condition where capital will flow so they can get a return so we can 

solve this disease?; 

Mr. HEMPHILL. So—— 

Mr. SHIMKUS. I have got to be quick so—— 

Mr. HEMPHILL. I am off script. 

Mr. SHIMKUS. I am off script too. That is right. 

Mr. HEMPHILL. I completely agree that in principle if you have 

a situation where you otherwise would not have a drug—— 

Mr. SHIMKUS. Like this, I mean right now, we got it. 

Mr. HEMPHILL. Well, I am not sure the case is proved from the 

fact of long development. 

Mr. SHIMKUS. But I will just say, there is no money going right 

now so the market is making the case now. 

Mr. HEMPHILL. The absence of investment doesn’t necessarily tell 

us that a different legal regime would yield a different result. 

Mr. SHIMKUS. OK. Let me move forward. That is part of the challenge, this debate that we have to get to. 

I also want to just highlight—Mr. Matheson did a great job. I am 

a cosponsor of the AIM Act for all the reasons that—I am not going 

to go into it in detail, but I would encourage my colleagues to look 

at that and get on it. 

Mr. Chairman, I would encourage you to—I don’t know if we 

want to wait on this 21st century cures thing or you may want to 

consider trying to at least get it through the process so we can see 

where we are because I don’t see a downside to it. I just don’t. It 

helps bring capital in the early formation. It is outside the Medicare morass, coding issue. It brings more certainty than less at a 

time when you are looking for capital flow. 

So now I will get on script, Chris. But we are trying to focus in— 

and a lot of this debate has been on obviously the lifesaving drug 

that will emerge and the cost, but I think as important in this debate is the diagnostic portion because the way the world is changing and the science behind this, you can target specific drugs to 

specific conditions based upon markers and the like. 

So Mr. Borisy, starting with the premarket approval process, 

what types of incentives do you believe might spur development in 

this space? Were you thinking it might be constructed similar to 

a drug-like postmarket incentive structure or something different? 

Mr. BORISY. So for diagnostics, a clear and predictable understanding of reimbursement, which does not exist today, would have 

a direct connection to capital formation for innovative new 

diagnostics that we mean and that clear and predictable reimbursement in diagnostics, whether that was in some form of 

postmarket exclusivity, whether that was just in clear Medicare 

rules and understanding that clarity and transparency would make 

a tremendous difference. 

95 

Mr. SHIMKUS. In your testimony, you recommend the committee 

consider a process whereby CMS create a program for diseases important for public health with high unmet diagnostic needs. Can 

you tell us more about how such a program might work and for instance, could it help cut down the time between FDA approval and 

the CMS coverage? 

Mr. BORISY. So if we take an example that we have been talking 

about at the hearing today such as Alzheimer’s and if we said from 

the work that Dr. Gandy and others are doing that we had a diagnostic imaging biomarker that we felt was meaningful and predictive, understanding how that would be paid for, just simply having that clarity and stability would allow then the development and 

proof of that diagnostic. That diagnostic would then enable the development of therapeutics to Alzheimer’s that we have been bemoaning here today as lacking. 

Mr. SHIMKUS. Yes, and I just want to throw—Mr. Miller is here 

and in part of his testimony he said on Alzheimer’s, it is just the 

right thing to do. So we have got to change our programs and processes to address this, and hopefully we can get there working together. This is a very exciting time but there are unmet needs that 

we should be about meeting, and with that, Mr. Chairman, thank 

you and I yield back my time. 

Mr. PITTS. The chair thanks the gentleman and now recognizes 

the gentlelady from Florida, Ms. Castor, 5 minutes for questions. 

Ms. CASTOR. Thank you, Mr. Chairman. I want to thank the 

panel for your expert advice today and also commend my colleagues 

for focusing on this important issue for American families. 

We have today about the MODDERN Cures Act, which would extend the period of exclusivity for essentially any new drug to 15 

years. That is 3 years longer than any other term of exclusivity 

currently in the law, and the intent of the bill is very good, but I 

have been listening closely and I haven’t heard today that a case 

has been made for why there would be a need to extend exclusivity 

for such a lengthy term, and a number of you have testified to that 

today and to some of the negative effects of lengthy periods of exclusivity. 

Dr. Ledley, could you explain in greater detail how in your view 

greater exclusivities would discourage uptake by hands of smaller 

biotech companies? 

Dr. LEDLEY. Sure. Fifteen years is a very long time in the 

progress of science. We don’t use 15-year-old computers anymore, 

and by the time a drug has been on the market for a certain length 

of time, science is able to come up with something better and 

should, and the public needs it. So there needs to be a return on 

the investment in the original drug and there needs to be an immediate turnaround to invest in the next drug that is that much better, and 15 years is just out of proportion to the space of scientific 

progress. 

Ms. CASTOR. And I am also extremely concerned about the price 

tag for providing extended exclusivities. Dr. Miller, your testimony 

mentions the Solvadi situation, the hepatitis C drug that is now 

about $1,000 per pill. It is an extraordinary price but coupled with 

the fact that we have over 3 million Americans that could have 

their hepatitis C cured, they would benefit greatly. So that has 

96 

raised these difficult questions for public and private payers especially. Could you describe for us the tradeoffs and compromises 

that payers are having to make as a result, and could you tell us 

why Solvadi is unique or could it be part of a trend or are there 

other similarly priced drugs on the market? 

Dr. LEDLEY. That is a great point. So what you see is that for 

manufacturers, they don’t have just exclusivity as a lever to pull, 

they have pricing. So in this country we allow them to freely price, 

and that is what has happened with Solvadi. If you treat all 3 million patients in the United States, you will spend over $300 billion, 

which is equal to the entire drug spend for the United States, and 

when you look at the pipeline, of that 5,400 drugs that are in 

human testing, there are many that are going to be breakthrough 

products that also will be at prices that we can’t afford. And so it 

is no good having drugs that people can’t afford and so access has 

to be considered in your policies when you consider extending exclusivity because you are guaranteeing higher prices for longer periods of time. 

Ms. CASTOR. And one of the issues that confronts us as the population ages and the call on Medicare will be greater is the fact that 

we don’t allow negotiation of drug prices in America. It is kind of 

un-American that we don’t negotiate by law. This means that drug 

companies can charge almost any price that they would like, particularly for lifesaving drugs that are the only treatments or cures 

for a particular disease. In such cases, it is hard to imagine the 

need for extending the length of time for which they are shielded 

from price competition by generics. 

Professor Hemphill, is America, in having that policy against negotiating drug prices, do we subsidize drug use in other countries? 

Ms. CASTOR. Well, certainly, U.S. payers and patients pay a disproportionate part of the research and development that ultimately 

has a global benefit. 

Ms. CASTOR. Well, I thank you for your testimony, and I want 

to end on the note of even though we might have differences of 

opinion on the panel on the Cures Act, I think everyone that I 

heard today was united in the fact that we need to make sure we 

are committed to basic research, and the fact that the budget battles, sequester, government shutdowns of the past few years has 

taken a bite out of NIH and sent scientists possibly looking at careers in other countries, is really something that this committee 

has got to focus on. Dr. Collins said NIH has lost 25 percent of its 

purchasing power. We are throwing away half of the innovated, talented research proposals. This really should be the committee’s primary point, and maybe moving medical research from a discretionary category to something we have a long, sustained commitment. 

Thank you, and I will yield back. 

Mr. PITTS. The gentlelady’s time is expired. The chair recognizes 

the gentleman from Georgia, Dr. Gingrey, 5 minutes for questions. 

Mr. GINGREY. Thank you, Mr. Chairman, Ranking Member 

Pallone, and to the witnesses for testifying today. 

You know, the GAIN Act of course was an important first step 

in addressing a lack of new antibiotic drug development and we 

have already seen the first successes of the GAIN Act. I am real 

97 

happy to have worked with Mr. Green, Ms. DeGette, MR. Shimkus 

and others on the committee in a bipartisan way to develop the 

GAIN Act. Obviously—and Mr. Green talked about this a little bit 

earlier about the ADAPT Act, which of course is follow-on to GAIN 

and the work that we need to do in regard to that. 

I wanted to direct my questions mainly to Mr. Borisy. When 

making investment recommendations, Mr. Borisy, can you explain 

how not just potential economic returns but clinical trials and the 

approval process impact the likelihood that you would recommend 

to your team investing in a particular drug? 

Mr. BORISY. So me and my partners at Third Rock focus fundamentally on early-stage investments in areas of science and medicine where we can make a breakthrough, make a big difference for 

patients. So if we talk about infectious diseases as an example, 

coming up with therapies that would work for something where, 

you know, it is a superbug and nothing works and it is a critical 

need, that is the type of thing that we would like to do. 

When we are considering an area to invest, when we are in the 

process of translating those out of the basic research that has been 

done, a lot of work, multiple years before it can even get to the clinic to refine it into being a drug has to be done. This takes tens of 

millions of dollars. Then we go into the clinical development period 

of time, and the questions focusing us are two, which is how much 

money and how long is it going to take until we can get that proof 

of concept that we have created something that really makes a difference for patients, not the final bar of approval perhaps but that 

smart people looking at it say that is important, and the second is, 

does other parts of the ecosystem that we have talked about recognize that as important. That could be public investors so we could 

take the company as an IPO. It could be a larger pharmaceutical 

company that is going to take it across the finish line. Things such 

as ADAPT where we know that the clinical study can be faster, 

quicker in a specific targeted population that we can really show 

it works and makes a difference, if that is more doable, then that 

is what enables our capital formation to invest in that. 

Mr. GINGREY. Well, cutting right to the chase, let me ask you 

this follow-on. And I think Mr. Green asked you this question but 

maybe I would like for you to elaborate a little bit more. 

Knowing what you know about the antibiotic space today, the 

risk-reward profile, would you advise your clients or colleagues to 

invest in antibiotic development today, and why or why not? 

Mr. BORISY. And this is not an academic question to us. Actually 

yesterday morning before flying down here to Washington, D.C., I 

was looking at an innovative technology in infectious diseases that 

could do exactly what we all here talking about want it to do, and 

it is a very difficult question for us right now because it is that 

question of regulatory uncertainty in the area, and so it is something that we want to be able to do but as we have talked about, 

the question of if we can do what we have done in areas of cancer 

and rare genetic diseases with breakthrough therapies, accelerated 

approvals, it could make it very doable. 

Mr. GINGREY. And the last question in my remaining minute, 

again, Mr. Borisy, my colleague Gene Green and I introduced, as 

you know, the ADAPT Act, which 23 other members of this comVerDate Nov 24 2008 13:06 Dec 02, 2014 Jkt 037690 PO 00000 Frm 00103 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-151 CHRIS
98 

mittee have cosponsored. The legislation allows the FDA to approve 

antibiotics that treat serious and life-threatening infections for specific patients based on smaller and then more rapid clinical trials. 

Do you believe if Congress could streamline the approval process 

for such products without lowering the FDA’s safety and effectiveness standards the climate for investing in new antibiotics wou8ld 

improve? 

Mr. BORISY. Yes, it would. 

Mr. GINGREY. Well, I thank you very much, and I don’t have time 

to address the other members of the panel—it is a large panel— 

but again, I am grateful that you all are here. 

Without new antibiotics, advancements in new cures to treat 

other diseases would largely be moot since treatments like chemotherapy, even a miracle future treatment, would be too dangerous 

to patients if you didn’t have these antibiotics because you wipe out 

the bone marrow, you lower their resistance to infection, and as 

you well know, in many cases the patient doesn’t get the cure because they get wiped out and get overwhelmed with an infection 

and die before the bone marrow has a chance to recover. So all of 

this is interrelated very closely. 

Thank you very much, Mr. Chairman. I yield back. 

Mr. PITTS. The chair thanks the gentleman and now recognizes 

the gentlelady from Virgin Islands, Dr. Christensen, 5 minutes for 

questions. 

Mrs. CHRISTENSEN. Thank you, Mr. Chairman, and I thank the 

panelists for being here this morning. 

I am going to direct my questions to Mr. Hemphill. Your testimony describes various types of market protections that are granted to brand drugs in current law and you assert that those protections are, for the most part, functioning quite well. So I am correct 

in interpreting that in your testimony, that they are functioning 

quite well? 

Mr. HEMPHILL. So my testimony is that they have been effective 

in providing strong incentive for drug makers to innovate. 

Mrs. CHRISTENSEN. OK. Obviously there are many diseases for 

which no effective treatments exist. You mentioned the possibility 

that some drugs are not developed because pharmaceutical companies do not view current protections are providing an adequate reward but you state that the scope of the problem is unclear, and 

I would assume it is also unclear whether weak market protections, 

if they exist, are actually the cause of failures by companies to develop new treatments. Can you say more about the impact of socalled weak market protections? 

Mr. HEMPHILL. Sure. So two brief points on this. One, I think we 

just don’t know a lot about the innovation that doesn’t happen. We 

have anecdotes but we don’t have hard data so the data collection 

effort that was mentioned earlier seems really important. 

Second, even though limited protection, the limited non-patent 

protection that is provided, for example, by the Hatch-Waxman Act, 

has a big effect. We have therapies on the market that have no patent protection. An Alzheimer’s drug, if it a great Alzheimer’s drug, 

suppose they only get 5 years of new chemical entity protection but 

20 million people are taking it, and each are a $1,000-a-year business for the brand, not an unreasonable amount judged from what 

99 

other chronic diseases have as a pay. A thousand times 20 million 

people, 10 million people times 5 years, and that is a $50 billion 

business which I think would focus the mind if you have the kind 

of excellent drug that we are talking about. Now, that is not going 

to answer every question but I think for some drugs, a lot of times 

the existing protections are going to be adequate. 

Mrs. CHRISTENSEN. Are there other factors that might be causing 

delays in the emergence of new lifesaving treatments that we 

haven’t discussed? 

Mr. HEMPHILL. Well, sure. I mean, we have talked a bit about 

just the nature of scientific inquiry and the uncertainties in solving 

really tough problems like Alzheimer’s and cancer. 

Mrs. CHRISTENSEN. It is clear we have a lot to learn about how 

much a problem this even is but we are hearing a lot of conclusions 

from some of our witnesses today about insufficient patent protections being the cause of pharmaceutical development failures. Mr. 

Hemphill, have you heard anything in the other testimony today 

that convinces you that others on this panel have new facts and 

new data to substantiate this problem? 

Mr. HEMPHILL. So I think we certainly have new anecdotes, and 

it is quite possible that in principle that as we get better at science, 

the remaining problems are harder and therefore require new solutions. I think the question is nailing down what that other world 

would look like were we to engage in the kind of changes that are 

being proposed. 

Mrs. CHRISTENSEN. And finally, we have heard a lot today about 

the need for new incentives. A major focus has been on marketing 

protections like exclusivity and patent extensions. Mr. Hemphill, 

your testimony briefly described some other incentives that you indicate could be affected such as providing government funding for 

certain research and development itself. Can you maybe give us 

some more ideas about what other incentives are out there and 

whether you think they hold potential to spur innovation? 

Mr. HEMPHILL. Sure. Just briefly, we hear about extremely 

lengthy trials sometimes being a problem vis-a-vis patent protection because if the patent runs out before you can get your drug 

to market because of the long trial, the Hatch-Waxman renewal or 

extension of patents might not be enough. But in those situations 

where we feel some confidence that this is a worthwhile project to 

pursue, you could readily imagine, it is a subsidy, it is a government outlay to support those trials. We see this sometimes in cancer, and I think that has been effective, and that is the kind of targeted solution that I think we should really be paying a lot of attention to. 

Mrs. CHRISTENSEN. Thank you. Thank you, Mr. Chairman. I 

yield back. 

Mr. PITTS. The chair thanks the gentlelady and now recognizes 

the gentleman from New Jersey, Mr. Lance, 5 minutes for questions. 

Mr. LANCE. Thank you very much, Mr. Chairman. 

I am the Republican chair of the Rare Disease Caucus, and in 

that capacity, I frequently meet with patients and families where 

there are no medicines, and I am the sponsor of MODDERN Cures. 

MODDERN Cures is completely bipartisan in its sponsorship, and 

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I want to thank all of my colleagues who have become cosponsors 

including, for example, Mrs. Eshoo, Mr. Butterfield, Mr. Tonko, distinguished members of this committee on the Democratic side, as 

well as Republican cosponsors I see, Mrs. Ellmers and Mr. Bilirakis 

right in front of me. 

Mr. Boutin, can you give your perspective on the incentives in 

the Orphan Drug Act, which is an improvement in orphan-drug 

therapies from the original Hatch-Waxman Act, a monumental 

piece of legislation, whether regarding the Orphan Drug Act and 

whether you think it is sufficient to incentive rare-disease research 

or should we be doing more? 

Mr. BOUTIN. Thank you for the opportunity. 

Mr. LANCE. Certainly. 

Mr. BOUTIN. Orphan Drug Act is a monumental piece of legislation. I think everybody in the room recognizes that. But at the 

same time, we have approximately 8,000 rare diseases. 

Mr. LANCE. Yes. 

Mr. BOUTIN. We have 500 treatments. 

Mr. LANCE. Yes. 

Mr. BOUTIN. Clearly, we need to do more. 

Mr. LANCE. Yes. And regarding Alzheimer’s and the moving 

questioning of my colleague, Congressman Green, would it be fair 

and is this the consensus of the panel that we need to do a much 

better job regarding Alzheimer’s and somehow have to reach a solution to bring that to a better situation for the hundreds of thousands, indeed millions of patients who will suffer from Alzheimer’s? 

Is that the consensus of the panel? 

Mr. BOUTIN. Without question. 

Mr. LANCE. Is there anyone who dissents from that? Thank you. 

Professor Hemphill, in responding to Congressman Shimkus’s 

questioning, I believe you said—and I am paraphrasing and I certainly want to give you the opportunity to respond fully—I believe 

you said that the absence of new drug therapy doesn’t necessarily 

mean that we need a new legal regime. Is that what you said? And 

I certainly want to give you every opportunity to express your 

point. 

Mr. HEMPHILL. Yes. 

Mr. LANCE. You did say that? 

Mr. HEMPHILL. Yes. Do you want me to explain? 

Mr. LANCE. Of course. 

Mr. HEMPHILL. So the idea here is simply that we don’t know 

simply by the fact of increased legal protection that we will thereby 

have new cures. 

Mr. LANCE. Yes, I am an attorney, and we do not know. It seems 

to me we need some progress in these terrible rare diseases and 

not so rare diseases like Alzheimer’s, and of course, we cannot be 

conclusive that a new legal regime would bring that about. Is it 

possible that modification of the current legal regime would bring 

that about? 

Mr. HEMPHILL. As I said, in principle, it is possible. What is 

tricky here is that we know a lot about the costs from length and 

exclusivity vis-a-vis drugs that are going to be elicited either way 

and we know almost nothing about the theoretical improvement 

that we would get from a longer period of—— 

101 

Mr. LANCE. That is why we need a healthy discussion to reach 

a balance. 

Mr. HEMPHILL. Agreed about a balance. 

Mr. LANCE. And at the moment, there is the balance in HatchWaxman and then there is the balance in the Orphan Drug Act 

and we are trying to move forward in rare diseases, I, as the Republican chair of the Rare Disease Caucus. We need a healthy balance, and that is what this committee in particular is trying to 

strike, and I would encourage all on the panel to determine what 

that healthy balance should be, and Mr. Boutin, you believe we 

need to update or at least modify orphan drugs regarding rare diseases? 

Mr. BOUTIN. Without question, we need to update the balance, 

strike it better, and two quick points. The anti-evergreening issue 

that was raised applies to every medication—— 

Mr. LANCE. That is precisely accurate. 

Mr. BOUTIN [continuing]. Not what would be on MODDERN 

Cures. The issue around costing currently applies to every medication, not what would come out of MODDERN, just to be very clear. 

Mr. LANCE. Thank you. 

And finally, Professor Hemphill, I don’t think we have ever met 

before. You are welcome to come into my office at any time to discuss my legislation, MODDERN Cures. I understand you teach in 

Upper Manhattan and live in Manhattan, and I assure you, the 

Lincoln Tunnel, the Holland Tunnel and even the George Washington Bridge are all open, and I welcome healthy discussion on my 

completely bipartisan legislation, MODDERN Cures Act. 

Thank you, Mr. Chairman. 

Mr. PITTS. The chair thanks the gentleman and now recognizes 

the gentleman from New York, Mr. Engel, 5 minutes for questions. 

Mr. ENGEL. Well, thank you very much, Mr. Chairman. I live on 

the other side of the George Washington Bridge, the side that people couldn’t get to when it was blocked, so I want to thank all of 

you for your testimony and especially give a call out to the New 

Yorkers, Dr. Gandy and Mr. Hemphill. Always good to see New 

Yorkers down here in Washington. 

The 21st Century Cures Initiative creates an important bipartisan opportunity for us to consider creative new approaches to 

incentivize getting new treatments into the hands of patients as 

quickly and safely as possible. I am the coauthor of the Paul 

Wellstone Muscular Dystrophy Community Assistance Research 

and Education Amendments of 2008 and 2013 along with my colleague on this committee, Dr. Burgess. I have seen how new research models have produced great advances in our understanding 

of the various forms of muscular dystrophies. So I raise this now 

because I think we can use the Wellstone Muscular Dystrophy Research Centers’ model to incentivize other forms of research. Much 

like the National Pediatric Research Network, the Wellstone Centers use a network approach that is designed to ensure that research is not conducted in silos, and I believe this network approach fosters collaboration and allows government funding to be 

supplemented by nonprofits and patient advocacy dollars and by 

private biotech and pharmaceutical funding. 

102 

Let me ask you, Dr. Gandy, given your experience with Alzheimer’s research at Mount Sinai, could you comment on how a 

network approach to research can serve as a force multiplier to 

incentivize treatments and cures for patients? 

Dr. GANDY. I think the network approach is essential. For one 

thing, the network standardizes the approach to medication, the 

approach to diagnosis across all centers, and by disbursing the person power across the country enables the rapid recruitment of new 

subjects for trials. I think in terms of operations, there is really no 

other way to do it. 

Mr. ENGEL. Are there any other models of public-private partnerships that you think would be constructive to consider in addition 

to the Wellstone Center approach? 

Dr. GANDY. No, I think that is a reasonable place to start. 

Mr. ENGEL. OK. Thank you. 

I would also like to ask about the development of treatment and 

cures for patients with rare diseases. Within our rare-disease research communities, more and more personalized approaches to 

therapeutic development are becoming possible but these lifesaving 

personalized drug therapies have small consumer markets and are 

among the most expensive therapeutics ever created. So let me ask 

Mr. Borisy and Dr. Miller, could you comment on how we can continue to attract biotech and pharmaceutical industry partners into 

this space and how we can support industries’ work with payer 

groups to ensure access once therapies are approved? 

Mr. BORISY. So on the investing in new potential companies that 

are focused on rare genetic disease, if we believe the science and 

medicine is there to really make a tremendous different for the 

lives of those patients, my partners and I are one by one working 

through those opportunities and forming multiple companies to do 

exactly that. Part of that is based on the understanding as we have 

talked about here today on the path through regulatory approval. 

A second part is understanding the reimbursement as being there, 

and when we are talking about diseases that might have a couple 

thousand patients, a couple hundred, or some that are even as few 

as 100 patients that are involved, that necessarily means a high 

price associated with those, and we know those are challenging 

issues. There are potential therapies that could make a huge difference for patients. If we have stable reimbursement, even at 

those high prices, then innovation in those rare diseases will continue. 

Mr. ENGEL. Thank you. 

Dr. Miller? 

Dr. MILLER. Yes. What has been proven that makes a difference 

for these diseases is, one, NIH funding, so having basic science to 

support it. So even when we look at Alzheimer’s, it is rarely about 

the basic science that is going to drive the industry development. 

Second, it is actually the FDA. You have heard from everyone, it’s 

regulatory and reimbursement certainty. That is actually their bigger risk than looking for added incentives, and so if you are really 

going to concentrate on the things that help everything from antibiotics to Alzheimer’s to rare diseases, it is really about regulatory 

and reimbursement certainly. 

Mr. ENGEL. Thank you. I see my time is up. 

103 

I was wondering if I could just ask one more. Many of you have 

mentioned that funding basic science through funding the NIH is 

critical to the goal of creating incentives for innovation, and I certainly agree. 

So let me ask Dr. Miller and Dr. Ledley, if either of you could 

tell us more about how basic science gets translated into cures that 

can then be capitalized upon by drug makers and what effect have 

recent cuts to NIH’s budget had on this process? 

Dr. MILLER. So I started as an NIH investigator. My wife is the 

Chairman of Medicine at Washington University. The NIH budget 

cuts have been devastating to basic science research at universities. The great thing about the NIH is they allow the investigators to actually spin these products off and work with the venture 

capitalists to start new companies. When you stop that process, 

when you choke off at NIH the basic science level, the rest of the 

process doesn’t work and so it is crucial that we restore and even 

improve funding for basic science. 

Dr. LEDLEY. I think we have heard big numbers about how many 

rare diseases and how many unmet needs there are, and there are 

enormous numbers. I think it is useful to look at the number of 

grants the NIH puts out every year relative to that number and 

ask how many investigators do we think should be taking independent new initiatives for these diseases, each one of which harbors the potential for the new cure that can then be developed. 

Mr. ENGEL. Thank you, Mr. Chairman. 

Mr. PITTS. The chair thanks the gentleman and now recognizes 

the gentleman from Louisiana, Dr. Cassidy, 5 minutes. 

Mr. CASSIDY. Thank you, Mr. Chair. I really enjoy the panel. 

Now, Mr. Hemphill, I have to say when I read your testimony, 

your spoken testimony had something different. I say this not to 

challenge, merely to understand. You said listen, you don’t think 

extending exclusivity is necessarily important but when you spoke 

you said except maybe as Dr. Gandy suggested. Now, clearly you 

left a door open there. Do you see that there is circumstances in 

which this extension of patent protection exclusivity for something 

particularly like I think you used the example of an oral therapy 

for neuromuscular disease or neurologic disease would indeed be 

helpful? 

Mr. HEMPHILL. So I certainly didn’t intend any inconsistency between my written testimony and my oral. I feel strongly that if we 

have clear evidence that a targeted increase in exclusivity would 

work, we should take that really seriously. 

Mr. CASSIDY. Now, hang on, and again, this is a great conversation, so I am not saying this to challenge but there is a certain existentialism about this, right? 

Mr. HEMPHILL. Right. 

Mr. CASSIDY. Now, we cannot know the future, and so we are always going to have the anxiety that oh, my gosh, I made the wrong 

decision. 

Mr. HEMPHILL. Right. 

Mr. CASSIDY. I do that whenever I buy a stock. So that said, we 

know Gandy. He is an incredible investigator, which by the way, 

the NIH 20 years ago was advised to redirect their funding to 

things which have more importance to modern disease. They have 

104 

not done it in 20 years. So as we speak of the NIH, let us note that 

the IOM has suggested that they redirect funding and they have 

not done so, and in a period of constrained resources, we have to 

call upon them perhaps to be a little bit more directing towards 

your diseases. 

Now, that said, I go back to my point. Is there a kind of situation 

in which indeed these sorts of incentives would be important? 

Mr. HEMPHILL. Yes. Certainly that is possible, and I also don’t 

mean to suggest that certainty has to be our standard. As you say, 

we are investing, we are gambling, but we are gambling with the 

public’s money to the extent that—— 

Mr. CASSIDY. I agree. 

Mr. HEMPHILL [continuing]. Existing drugs get this extension, 

which is why I say narrowing our view not to every single drug and 

probably not every single—— 

Mr. CASSIDY. So let me challenge you. Are you ready, man? 

Mr. HEMPHILL. Yes. 

Mr. CASSIDY. You are a bright guy. Figure out that metric and 

give it to Lance. That would have an incredibly important—because 

I look at Alzheimer’s, and there is few models I think outside of 

Down’s kids of where you know they are going to develop disease. 

Now, as the son of a man who died of Alzheimer’s, this is so incredibly important. If you could figure out that metric talking to 

Gandy across town, that would be fantastic for our country. So I 

say that just to kind of put the plug in. 

Mr. HEMPHILL. I appreciate that. 

Mr. CASSIDY. Yes, thanks. 

Dr. Miller, good to see you, man. Listen, I have some problems 

with your California study. I am a hepatologist. And so if you look 

at the intention to treat, I do think they underestimate the impact 

of Solvadi upon outcomes. Every time I still see patients mentally 

ill and such who are not candidates for interferon, wouldn’t be included in a clinical trial so the 47 percent cure rate that that paper 

posits, it doesn’t happen among my patients with addiction disorders or mental illness. That said, I am struck that you suggest 

that we need to have a mechanism by which we would limit what 

a company could charge but you don’t mention that mechanism. 

And I say that because your company is incredibly disruptive. I 

mean, you all are good. So you think about how markets work. Do 

you have a suggestion how the Federal Government could limit 

what companies charge without squelching the innovative drive 

that has given us a drug which is truly a breakthrough drug? 

Dr. MILLER. If you interpret what I said as the government 

should be price-setting, the answer is absolutely not. We do not believe the government—— 

Mr. CASSIDY. And you didn’t say that but I didn’t know where 

you would go with it. 

Dr. MILLER. No, we actually believe it is a free market solution 

that has to be required, and so we look at it the exact opposite. We 

think that they have taken advantage of it, which is just a warning 

to you all that when you talk about extending the period of exclusivity, remember that that is not the only lever that these people 

have. They have pricing as a lever and they clearly have exercised 

it, and Solvadi is a great example of it, but we believe that the 

105 

pushback to Solvadi has to come from the marketplace, not from 

the government. 

Mr. CASSIDY. So if we are talking about patent protection, it 

seems like there is limited levers to push back form the marketplace. Is that a fair statement? 

Dr. MILLER. So you know—— 

Mr. CASSIDY. And again, we are kind of guessing what their true 

cost is to develop a drug, which is an incredible drug. 

Dr. MILLER. So we actually know in this particular case their 

true cost of developing it because they didn’t develop it, they 

bought it for $11 billion and they will make that back in the first 

year alone. The trouble is, is that you also need the pharmaceutical 

manufacturers to act responsibly in their pricing, but even in that 

absence, there is going to be competitors to the marketplace and 

they will have to pay a consequence if the competitors can create 

a product that is equally good because, as you said, we will shift 

our market share to someone that is willing to give us a better 

price. 

Mr. CASSIDY. Well, I am out of time. I really enjoyed the written 

testimony and I wish I had more time to ask questions, and thank 

you each for your good work. I mean, I thank you each for your 

good work. Thank you. 

Mr. PITTS. The chair thanks the gentleman and now recognizes 

the gentlelady from North Carolina, Ms. Ellmers, 5 minutes for 

questions. 

Mrs. ELLMERS. Thank you, Mr. Chairman, and thank you to our 

panel for being here today. 

You know, the 21st Century Cures is certainly something that I 

have considerable passion for, and I think it is certainly the right 

approach for us to take in government when unfortunately, many 

times we are always reactive rather than proactive. 

My first question is for Mr. Borisy. We have all discussed the 

challenges of costly cures to come up with for diseases. Again, Alzheimer’s is a devastating disease. Certainly I know many of us 

have been touched by this personally. My mother died of Alzheimer’s, and we all want a cure, and I hear this from my constituents all the time, ‘‘I don’t understand, you spend so much money 

in Washington on so many different things, why can’t you come up 

with a cure for Alzheimer’s, why can’t you come up with a cure for 

diabetes.’’ We know how much this affects the American people. 

I think I have a better understanding from listening to the testimony that you are all giving today, that the cost and the benefit 

are not necessarily adding up, and that forces some of the innovations, research, and the development outside of our own country. 

What can we do here in Washington, right now, as part of this 21st 

Century Cure, what changes in policy can we make and what specifically—I know a lot of it is the length of time—it is the FDA. If 

you had one thing that you could say would change this dramatically, what would it be? 

Mr. BORISY. So we want to bring these innovations to patients, 

as you just very eloquently said. Of course, the science and the 

medicine, the basic science and medicine has to be there, but with 

it there, what we can do is if we can apply the tools that we have 

learned from accelerated approval, from breakthrough therapies 

106 

with FDA to say as a society that we want to apply those for these 

chronic diseases like diabetes, like Alzheimer’s, that simple act 

alone will change the consideration of the game. It doesn’t guarantee we will successfully create—— 

Mrs. ELLMERS. Right. No guarantees. That is never—— 

Mr. BORISY. But it totally would change the game that if there 

are ideas and sparks out there, it makes it something that is 

investable in to go take that risk. 

Mrs. ELLMERS. So again, it is getting back to uncertainty that is 

out there and the unfortunately—we are talking about dollars. I 

mean, we are talking about investment. We are talking about folks 

putting their hard-earned money behind these initiatives, and 

there has to be a payoff, and you know, sometimes that is hard for 

us because again, we are passionate about the issues and it is a 

very emotional and personal issue. 

Mr. Carusi, one of the things—again, it gets back to the availability to be developing drugs. I have a business company in my 

district, Entera Health, which is a medical foods company. Basically, this is one of the innovations that we are seeing moving forward. For patients, medical foods, and helping patients who are 

taking many of these medications for HIV, Parkinson’s, Alzheimer’s, rheumatoid arthritis, irritable bowel syndrome, and helping the patient to respond better to drugs. How can we help this 

process when we are talking about reimbursement? How can we do 

a better job to make sure that there again we are making this advancement? What changes at the FDA level would you say would 

streamline this process for something that is on the edge as we are 

talking about medical foods? 

Mr. CARUSI. Yes. Medical foods is not an area where I have been 

heavily focused or invested, but again, I think the theme that you 

have heard is one of consistency, transparency and predictability, 

and when you start to have, as you defined it, devices, drugs, 

therapeutics that are on the fringe, the pathways start to become 

less defined, less certain, and so as a result, any of these approaches, we need to know with clarity starting with FDA what the 

path is and then with reimbursement if these were indeed reimbursed products what that looks like, what the bar is and will they 

be reimbursed. Alternatively, some of these may be self-pay opportunities and that has its own set of discussions. But all of these 

testimonies and all these discussions, it comes back to transparency, certainty, and predictability. 

Mrs. ELLMERS. Thank you. I have just one quick question. Does 

CMS now have the authority to create codes? Because I know this 

is a conversation we have had in the past where we have reached 

that level and then we have to unfortunately see another level realized. Do they have that authority right now? 

Mr. CARUSI. To create codes? 

Mrs. ELLMERS. To create codes. 

Mr. CARUSI. My understanding is—around medical foods specifically or more—— 

Mrs. ELLMERS. Well, not necessarily around medical foods. 

Mr. CARUSI. My understanding is yes, but again, this is starting 

to get to the—there are others that are more knowledgeable in that 

area than me. 

107 

Ms. ELLMERS. Thank you, Mr. Carusi, and I have overstepped 

my time, so thank you, Mr. Chairman. 

Mr. PITTS. The chair thanks the gentlelady and now recognizes 

the gentleman from Florida, Mr. Bilirakis, 5 minutes for questions. 

Mr. BILIRAKIS. Dr. Gandy and Mr. Borisy and also Mr. Carusi, 

let us talk about increasing incentives. I know that it was mentioned earlier. We want companies to continue to invest in new and 

innovative treatments, but it seems to me there are so many diseases that currently go without treatment options. In your testimony, you all touched on extending exclusivity and patent life. Can 

you elaborate on how market exclusivity, data exclusivity and patent life play a part in driving innovation for treating neurological 

diseases such as Alzheimer’s or perhaps Parkinson’s, and how if we 

do nothing this could hurt the development of new innovative 

therapies? Why don’t we start with Dr. Gandy? 

Dr. GANDY. I would say in my experience over the past 30 years, 

I have watched the pharma and VC investment in Alzheimer’s research dwindle and the single reason that is most frequently cited 

is the regulatory path, the challenge for getting approval and then 

having sufficient patent life left to recoup any of the investment. 

Alzheimer’s disease moves very slowly. The clinical trials require 

hundreds of patients. They take years to complete, and it is a monumental task, and we don’t have yet any templates. We are trying 

to do something in biology we have never done before. 

Mr. BILIRAKIS. Thank you. Mr. Borisy, please. 

Mr. BORISY. Two weeks or so ago, I was talking with a senior 

pharmaceutical executive who is running a program in Alzheimer’s, 

literally spending billions of dollars over many years. If we are to 

try to create and invest in a company that is going to pursue Alzheimer’s therapeutics, given that type of scale of time and money 

that is required, we need to have confidence that if we get to some 

early stage of proof of concept in the clinic that a future partner, 

be that a pharmaceutical company or be that public market investors, will believe or be willing to take on the risk from there, we 

need to be able to hand the ball off to the next stage in the ecosystem for it to have been a viable place to put our money in the 

beginning. If for the next step in the ecosystem they literally are 

spending billions of dollars and an indefinite period of time, then 

they will say you have created that innovation but there is no protection left for that product and therefore even if we show that 

proof of concept, they will say but that has no value to us. That 

is a fundamental impediment to us investing in companies in the 

area. 

Mr. BILIRAKIS. Thank you. Mr. Carusi, please. 

Mr. CARUSI. Yes, I think it comes back to time, and so I want 

to give an example. In my portfolio of companies, we have a company GI Dynamics, and GI Dynamics is developing a device-based 

approach to treat type 2 diabetes and obesity, two of the biggest 

chronic-disease issues we have in this country. We first started 

that company in 2004. It is now 2014. We are still in the midst of 

running our clinical trial for FDA approval and we are starting to 

commercialize the product outside of the United States. If you had 

asked me today, oK, you know, 10 years back, would you invest in 

this company knowing you weren’t going to have approval until 

108 

2015, 2016, I wouldn’t have made the investment despite the fact 

that what they are doing is tremendously valuable. So it comes 

back to the incentives and whether or not if it is going to take this 

much time and this much money that again we can make a reasonable return on that investment, and to me, it is a math problem 

and that is what this comes down to, and I do think there are certain areas, and I think they are in the chronic-disease field, where 

there are big studies a lot of times huge potential but we are going 

to need help, and I think that is what we are asking for. 

Mr. BILIRAKIS. Very good. Thank you. 

Can anybody on the panel give me a rundown on Parkinson’s disease, if there are any promising therapies, breakthroughs, maybe 

delaying the onset of Parkinson’s disease? Is there anybody on the 

panel that would like to discuss that? 

Dr. GANDY. The Parkinson’s disease field is now following in the 

template of the Alzheimer’s field in terms of generating these networks that are nationwide looking for biomarkers. I think that they 

have the advantage of having a little more in terms of impact using 

transmitter replacement and manipulation than has happened with 

Alzheimer’s, so there are some new medications there targeting 

some new receptors for symptomatic relief, but they haven’t yet 

changed the progression of the disease, and that is really what the 

key is, to slow the progression. 

Mr. BILIRAKIS. Anyone else? 

Dr. LEDLEY. A lot of good work on gene therapy. This came up 

earlier, but this is one that is a challenging target but clearly a feasible and difficult one, but a lot of good work. Some of the companies that have raised money lately are doing it aimed at Parkinson’s. 

Mr. BILIRAKIS. Very good. Thank you. 

Thank you, Mr. Chairman. I appreciate it. I yield back. 

Mr. PITTS. The chair thanks the gentleman. I hate to cut this off, 

but this has been the best interaction we have had with members 

and witnesses, and frankly, this has been one of the most informative, helpful, exciting hearings that we have had. So I want to 

thank each of the witnesses for your testimony. We have a UC request? 

Mr. PALLONE. Thank you, Mr. Chairman. 

Let me echo what you said about the hearing and the value of 

it. I totally agree. 

I just would ask unanimous consent to enter into the record the 

statement of Ann Boynton, Deputy Executive Officer for the California Public Employees Retirement System. 

[The information appears at the conclusion of the hearing.] 

Mr. PITTS. Without objection, so ordered. 

There will be follow-up questions. We have members at other 

hearings on the floor. Dr. Burgess is having to manage time on the 

floor. We have follow-up questions. We will submit those to you in 

writing. We ask that you please respond promptly. I remind members that they should submit their questions by the close of business on Wednesday, June 25th. 

Again, thank you so much, a very good hearing. Without objection, the subcommittee is adjourned. 

[Whereupon, at 12:38 p.m., the subcommittee was adjourned.] 

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[Material submitted for inclusion in the record follows:] 

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