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[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]

  LOST OPPORTUNITIES FOR VETERANS: AN EXAMINATION OF VA'S TECHNOLOGY 
                            TRANSFER PROGRAM

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

                                 HEARING

                               BEFORE THE

                     COMMITTEE ON VETERANS' AFFAIRS
                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             SECOND SESSION

                               __________

                      WEDNESDAY, FEBRUARY 3, 2016

                               __________

                           Serial No. 114-52

                               __________

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                     COMMITTEE ON VETERANS' AFFAIRS

                     JEFF MILLER, Florida, Chairman

DOUG LAMBORN, Colorado               CORRINE BROWN, Florida, Ranking 
GUS M. BILIRAKIS, Florida, Vice-         Member
    Chairman                         MARK TAKANO, California
DAVID P. ROE, Tennessee              JULIA BROWNLEY, California
DAN BENISHEK, Michigan               DINA TITUS, Nevada
TIM HUELSKAMP, Kansas                RAUL RUIZ, California
MIKE COFFMAN, Colorado               ANN M. KUSTER, New Hampshire
BRAD R. WENSTRUP, Ohio               BETO O'ROURKE, Texas
JACKIE WALORSKI, Indiana             KATHLEEN RICE, New York
RALPH ABRAHAM, Louisiana             TIMOTHY J. WALZ, Minnesota
LEE ZELDIN, New York                 JERRY McNERNEY, California
RYAN COSTELLO, Pennsylvania
AMATA COLEMAN RADEWAGEN, American 
    Samoa
MIKE BOST, Illinois
                       Jon Towers, Staff Director
                Don Phillips, Democratic Staff Director

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public 
hearing records of the Committee on Veterans' Affairs are also 
published in electronic form. The printed hearing record remains the 
official version. Because electronic submissions are used to prepare 
both printed and electronic versions of the hearing record, the process 
of converting between various electronic formats may introduce 
unintentional errors or omissions. Such occurrences are inherent in the 
current publication process and should diminish as the process is 
further refined.
                            C O N T E N T S

                              ----------                              

                      Wednesday, February 3, 2016

                                                                   Page

Lost Opportunities For Veterans: An Examination of VA's 
  Technology Transfer Program....................................     1

                           OPENING STATEMENTS

Honorable Jeff Miller, Chairman..................................     1
    Prepared Statement...........................................    32
Honorable Corrine Brown, Ranking Member..........................     3
    Prepared Statement...........................................    33

                               WITNESSES

David Shulkin, M.D., Under Secretary for Health, Department of 
  Veterans Affairs...............................................     5
    Prepared Statement...........................................    34

        Accompanied by:

    Kyong-Mi Chang, M.D., Chief Research and Development Officer, 
        Veterans Health Administration

    Marisue Cody, Ph.D., Director of Operations, Office of 
        Research and Development

 
  LOST OPPORTUNITIES FOR VETERANS: AN EXAMINATION OF VA'S TECHNOLOGY 
                            TRANSFER PROGRAM

                              ----------                              

                      Wednesday, February 3, 2016

            Committee on Veterans' Affairs,
                    U. S. House of Representatives,
                                                   Washington, D.C.
    The Committee met, pursuant to notice, at 10:30 a.m., in 
Room 334, Cannon House Office Building, Hon. Jeff Miller 
[Chairman of the Committee] presiding.
    Present: Representatives Miller, Lamborn, Bilirakis, Roe, 
Benishek, Huelskamp, Coffman, Wenstrup, Abraham, Zeldin, 
Costello, Bost, Brown, Takano, Kuster, O'Rourke, and Walz.

           OPENING STATEMENT OF JEFF MILLER, CHAIRMAN

    The Chairman. I would like to welcome everyone to today's 
hearing and we have entitled it Lost Opportunities for 
Veterans: An Examination of VA's Technology Transfer Program.
    Let me begin today's hearing by stating that the issues 
that we are going to address show how that despite VA's 
objections, it is really critically important for this 
Committee to look at both the past and current failures that 
exist within the department in order to improve the future of 
veterans' care.
    Without our investigative effort and our notice to conduct 
this hearing, VA would not have reviewed what we are going to 
talk about this morning. Moreover, VA would not be aware of the 
apparent exploitation of its Technology Transfer Program from 
those that are inside the Department of Veterans Affairs.
    My concern is that the issue we will discuss today may not 
be limited to one single researcher. For those who are unaware, 
Federal agencies are, in fact, authorized to assert ownership 
in inventions made by Federal employees using Federal 
resources.
    VA's Technology Transfer Program was developed as the 
mechanism to determine ownership and then to transfer the 
benefits of VA-owned technology to veterans and the public 
through patenting and licensing. Unfortunately, this program 
appears to be habitually underused resulting in tremendous 
losses to veterans and American taxpayers.
    A glaring example of where the Technology Transfer Program 
perhaps should have been used is in connection with the 
hepatitis C drug Sofosbuvir which is claimed to cure up to 99 
percent of those infected with this ultimately fatal disease. 
This drug reportedly developed by a VA employee resulted in an 
$11 billion sale and a $444 million personal profit to that VA 
employee.
    However, VA appears to have nothing to show for it except a 
bill from the drug's current owner for VA's use to treat 
veterans. More than 200,000 veterans have been diagnosed with 
hepatitis C and VA pays upward to $40,000 for treatment for 
each veteran that is infected with this disease. That is about 
$8 billion to treat veterans with a drug reportedly developed 
using VA resources.
    During last summer's financial crisis, VA had to ask 
Congress for additional funds to pay for the treatment. So the 
question is, why is VA paying so much? What we know is the 
drug's reported creator, Dr. Raymond Schinazi, was a 7th VA 
employee when the hepatitis C drug was developed. He worked for 
VA for more than 25 years and retired shortly after we asked 
him to testify at this hearing.
    In fact, we sent an email over to VA on January 20th 
informing them that we would be asking him to participate and 
testify along with Dr. Shulkin. We sent a hard copy to Dr. 
Shulkin on the 21st. Dr. Schinazi put in his papers to retire 
from the department on January the 21st. He retired two days 
ago.
    He's listed as a senior career researcher and has received 
hundreds of thousands of dollars in VA research funding. Yet in 
a letter to me dated the 1st of February, the day of his 
retirement, VA asserts that no money was given to Dr. Schinazi 
for his research on the drug.
    But questions remain whether earlier research on a 
different drug was used in the development of the hepatitis C 
treatment. Additionally, Dr. Schinazi filed patents while he 
was a VA employee, but he never disclosed those inventions and 
patents to the VA.
    So how is it that none of his claimed life-saving 
inventions belonged to VA or our veterans? Interestingly, as I 
mentioned earlier, I asked Dr. Schinazi to appear at this 
hearing, but after being requested to testify, he did retire 
from VA effective two days ago.
    Secretary McDonald rightly promotes VA as having invented 
many cutting-edge technologies like the Nicotine Patch, the 
cardiac stent, and the CT scan. And although these inventions 
were developed prior to the inception of VA's Technology 
Transfer Program, I think these lost opportunities should serve 
as a lesson to be learned by everyone that VA should be 
supporting and developing the program so that no other 
potential opportunities are lost. Our veterans and taxpayers 
should be benefitting from these inventions. It is as simple as 
that.
    VA oversees $1.8 billion in research every year. Yet in 
2014, it only received 304 invention disclosures, filed only 25 
patents, issued only 15 license agreements, and earned only 
$375,674 in royalties.
    To put that into perspective, the National Institutes of 
Health has a $3 billion intramural research budget and in 2014, 
they received 370 invention disclosures, filed 153 patents, 
issued 222 license agreements, and earned $137 million in 
royalty income or about 360 times more than VA's reported 
royalties.
    Similarly at the USDA, they have got a billion dollar 
research program. In 2014, they received 117 invention 
disclosures, filed 119 patents, signed 412 license agreements, 
and received $3.6 million in royalty income or about nine times 
more than VA.
    So it begs the question why has VA not seemed to capitalize 
on the many research successes that it claims? We have already 
seen the results of one potential lost opportunity regarding 
the new hepatitis C drug. How many more are there out there, 
and how many more will there be? If VA wants to take credit for 
the tremendous medical accomplishments, it should have 
something to show for it, certainly more than just talking 
about it.
    Veterans deserve the right to reap the benefits of those 
inventions given the fact that they were created by employees 
and with taxpayer resources specifically designed for their 
use.
    With that, I now yield to the Ranking Member, Ms. Brown, 
for any opening statement she may have.

    [The prepared statement of Jeff Miller appears in the 
Appendix]

       OPENING STATEMENT OF CORRINE BROWN, RANKING MEMBER

    Ms. Brown. Thank you, Mr. Chairman.
    Since 1980, the Federal Government has worked to make 
taxpayer-funded research more available to the private sector 
while making sure that taxpayers also gain from these research 
investments.
    This allows all of us to share in the important research 
breakthroughs.
    University of Florida developed Gatorade and got a patent 
for it, so anybody who used it had to pay University of Florida 
royalties for its use. This concept of VA keeping its 
intellectual property rights for its employee's invention can't 
be hard.
    But we need to strike the right balance here so academic 
institutions want to partner with VA to conduct research and 
get funding for research from royalties from inventions, and so 
research is available for businesses to develop products that 
help veterans and the public.
    This important program that should be overseeing, this 
balance may not have received the leadership focus that it 
needs and employee turnover has been high.
    There are questions as to whether the process in place is 
sufficient to strike that balance from the Veterans Health 
Administration to the Office of General Counsel.
    For this reason, I believe we should have an outside 
organization look into this program. I believe we should 
request that the GAO to look into this program and provide us 
with the facts so that we can make sure the program strikes the 
proper balance.
    Finally, I believe that if this program is not working as 
it should, VA, the taxpayers, may end up holding the bag.
    Just last week, the Chairman raised questions and concerns 
over the price paid by the VA for hepatitis C drugs. He also 
pointed out that the drug was invented by a team led by a VA 
doctor.
    This doctor subsequently sold the company that developed 
the drug to Gilead Sciences.
    According to the Chairman, Gilead is charging the VA 
''upward $40,000'' while Egypt, the same drug costs $900.00.
    Voice. Nine hundred dollars.
    Ms. Brown. Oh, I am sorry, that is a big difference. Let me 
go back and make a correction on that. We charged 40,000.
    Voice. Forty thousand.
    Ms. Brown. I am sorry. Forty-thousand. That is a lot of 
money.
    Voice. Egypt pays $900.
    Ms. Brown. And Egypt pays $900. Let me try that again. We 
pay $40,000 per individual and Egypt pays $900 per individual. 
And this is for the same drug? Uh-huh. The milk isn't clean in 
that one.
    Without the VA, this drug would not exist.
    In this case, we do not know if the process worked and 
whether the VA properly asserted its rights in this matter.
    I believe that we should have a hearing on drug pricing and 
how, moving forward, we can make sure that veterans are getting 
the drugs that they need and the VA is paying a fair price.
    In addition, according to the recent New York Times 
article, drug manufacturing issues have caused shortages and 
rationing. We need to make sure that we get to the bottom of 
this to make sure that veterans are not unduly affected. Let me 
repeat myself. We need to get to the bottom of this and make 
sure veterans are not unduly affected.
    Making sure that taxpayers are not ripped off, and that the 
veterans get the medicine that they need is vital.
    I look forward to working together to explore these issues 
in the weeks to come. Thank you, Mr. Chairman, and I yield back 
the balance of my time. One team, one fight.

    [The prepared statement of Corrine Brown appears in the 
Appendix]

    The Chairman. Thank you, Ms. Brown.
    Members, I would ask that you waive your opening statements 
as is customary in this Committee.
    And I would like to welcome Dr. Shulkin to the table as the 
only witness testifying today. Of course, he is the Under 
Secretary for Health of the Department of Veterans Affairs. He 
is accompanied by Dr. Kyong-Mi Chang, Chief Research and 
Development Officer for VHA, and Doctor, is it Marisue, Marisue 
Cody, Director of Operations for the Office of Research and 
Development.
    And as I have already told you originally, we had requested 
that Dr. Schinazi who retired on Monday and another physician, 
the Deputy Under Secretary for Health and Policy Services, to 
attend. Dr. Agarwal is out of the office and won't be available 
for a couple weeks. I understand the reasons for that. And, of 
course, we have already talked about Dr. Schinazi retiring two 
days ago.
    I have made numerous requests, and I think Dr. Shulkin is 
aware of that, for answers to several questions that were sent 
to VA starting back in December of last year, but after those 
attempts by the Committee staff to get VA to provide this 
information, you only provided some of the requested 
information as of Monday.
    So I would ask, if you would, to stand, so I can swear you 
in, and if I could have the two folks that are joining as well 
stand, so I can swear you in as well. If you would raise your 
right hand.
    [Witnesses sworn.]
    The Chairman. Thank you very much. You may be seated.
    Dr. Shulkin, your complete written statement will be 
entered into the record. You are recognized for five minutes.

                STATEMENT OF DAVID SHULKIN, M.D.

    Dr. Shulkin. Thank you.
    Good morning, Chairman Miller, Ranking Member Brown, and 
Members of the Committee. Thank you for the opportunity to 
discuss the Technology Transfer Program at the Department of 
Veterans Affairs.
    The Chairman has already introduced my two colleagues to my 
right and my left.
    VA's Transfer Technology Program is housed within the 
Office of Research and Development through which VA conducts a 
robust research program whose fundamental mission is to advance 
the health care of veterans.
    VA research supports over 2,000 research projects at over 
100 VA medical centers throughout the country with a fiscal 
year 2016 direct appropriation of $620 million. The VA research 
program is further enhanced by private and Federal funds 
awarded to VA researchers, meaning total resources available to 
VA researchers will exceed $1.8 billion this year.
    VA research projects focus on VA relevant biomedical 
laboratory, clinical rehabilitation, health services research 
through four research services, a cooperative studies program 
for large clinical trials, and a quality improvement program 
that uses research evidence to improve clinical care.
    For over 90 years, VA research has worked to improve the 
lives of veterans, performing the first successful liver 
transplant, developing high-performance prosthetic devices, 
establishing the value of aspirin therapy in improving heart 
health, and showing the effectiveness of the shingles vaccine, 
as well as developing the Nicotine Patch.
    Established in 2000, VA's Technology Transfer Program 
reflects our research focus on the veteran, ensuring that 
products and innovations created by VA researchers are 
accessible to all veterans.
    Prior to the establishment of this Technology Transfer 
Program, VA had no policy on intellectual property rights and 
generally waived ownership rights to inventions tasking the 
inventor and usually the academic partner with patenting, 
marketing, licensing responsibilities.
    My written testimony includes the specific details of the 
Technology Transfer Program. The primary goal of the program is 
to ensure veterans have access to cutting-edge technologies and 
to enable VA to effectively partner with academic and private 
organizations.
    To support this, the program manages over 1,500 cooperative 
research and development agreements per year, most for clinical 
trials that grant veterans access to new and potentially 
beneficial medications.
    Often as opposed to patenting inventions and delaying their 
availability in the public domain, the Technology Transfer 
Program works to ensure veterans have immediate access to these 
technologies by releasing them publicly.
    The program is crucial to the dissemination of products 
that are of limited commercial value to private institutions, 
but can greatly improve veterans' quality of life. This has 
included the development of several kinds of prosthetic feet 
such as a foot that allows veterans with lower leg amputations 
to easily change shoes without experiencing balance issues. 
This allows for easier wear of high heels or cowboy boots.
    This is an important quality of life issue for veterans 
with lower limb amputations, but is not particularly 
commercially viable. Every year, VA researchers develop dozens 
of new health care related technologies and other inventions 
like these that benefit VA patients, other veterans, and all 
Americans.
    Research at work at more than 100 medical centers 
conducting research, most of which have formal affiliations 
with academic institutions and hospitals. Many full and part-
time VA employees also have academic appointments. Many 
clinicians and researchers have laboratory access at both VA 
and academic affiliates.
    Because of these arrangements, most VA inventions are 
jointly owned by the VA and its academic affiliates making 
technology transfer a collaborative effort.
    VA research relies on researchers self-reporting invention 
disclosures. This process is very similar to the one used by 
academic partners. Without proper filing of invention 
disclosures, VA is unable to review and appropriately make a 
determination of rights.
    VHA will review the Technology Transfer Program to ensure 
compliance with regulations and statutes concerning invention 
disclosures.
    VA recently reviewed the Technology Transfer Program 
materials related to Dr. Schinazi, a Ph.D. scientist who has 
retired from VA service. As you know, certain information 
regarding Dr. Schinazi's employment and invention disclosures 
made to the department are protected from public disclosure 
under the Privacy Act. This includes discussions of Privacy Act 
protected information in public oversight Committee hearings 
like this.
    I did provide specific information in a letter to the 
Committee pursuant to the ccongressional exception to the 
Privacy Act in furtherance of your oversight function. While 
I'm happy to address any specific additional questions 
regarding Dr. Schinazi in a Committee briefing or a closed 
hearing and, in fact, offered to do so in advance of this 
hearing, I am prohibited from disclosing protected information 
in this public forum.
    I recognize the Technology Transfer Program requires an in-
depth evaluation, and I have directed VHA to begin that 
evaluation internally, but also requesting assistance from 
academic affiliates, other Federal agencies, and industry 
leaders to advise VA on the current role, scope, and 
configuration of our Technology Transfer Program.
    Thank you for the opportunity to testify before you today. 
My colleagues and I look forward to any questions.

    [The prepared statement of David Shulkin appears in the 
Appendix]

    The Chairman. Thank you very much, Doctor. I appreciate you 
being here and your colleagues that are with us to testify 
today.
    I just want to, for the record, make sure that the dates 
that I am using are correct. We emailed your office and 
followed up with a hard copy on the 21st inviting Dr. Schinazi 
to be along with you while you testified. I received 
information this morning and I just want you to confirm that he 
officially put his papers in to retire on the 21st, so that 
would be the day after we asked you to testify; is that 
correct?
    Dr. Shulkin. I think that is correct.
    The Chairman. Okay. Although his retirement went into 
effect a couple of days ago, he did have a research lab and a 
program at the Department of Veterans Affairs. So what is the 
status of that facility and laboratory at this time?
    Dr. Shulkin. My understanding is that he had numerous 
active research programs and grants and that they will be 
appropriately transferred over to other researchers who will 
assume those responsibilities.
    The Chairman. Does he have any access at all to any of that 
laboratory or any of the information that you are aware of?
    Dr. Shulkin. After a person leaves Federal Government, 
they--they relinquish their access to Federal information and 
resources.
    The Chairman. And so you say he has got a couple of active 
projects now and those will be picked up by--he can't carry 
that with him? It stays within the VA?
    Dr. Shulkin. Anything that's done with VA resources or time 
or effort will remain with the VA, cannot be transferred, no.
    The Chairman. I don't think this is going to affect privacy 
rules and regulations, but did Dr. Schinazi make any 
disclosures of what he was doing at the VA?
    Dr. Shulkin. As you know, Mr. Chairman, I have sent you a 
letter and--and a couple to the Ranking Member as well that has 
given that specific information to you, but I am not able to 
discuss any specific disclosures in a public hearing. I 
certainly would be glad to discuss in a closed hearing or any 
other forum that's private for that information.
    The Chairman. And I do appreciate that. I am not asking 
about any specific disclosures. I am saying did he make any 
disclosures?
    Dr. Shulkin. I--again, I've provided that information to 
you. There is a listing of those, yes.
    The Chairman. So he did make specific disclosures?
    Dr. Shulkin. In the--in--in the letter that I sent you, I 
provided you that information.
    The Chairman. Help us understand a little bit. If, in fact, 
it is found that he didn't make appropriate disclosures, is 
there any statute of limitations that would prevent the 
Department of Veterans Affairs from going backwards after the 
appropriate licensing and recoupment of any of the dollars that 
may be out there?
    Dr. Shulkin. Yeah. I am equally as concerned to make sure 
that the rights of the Veterans Administration and the 
taxpayers are being upheld here. As you are aware, I am asking 
that this entire situation be looked at.
    I am not aware of a statute of limitations, although that 
may be in a statute that I'm not aware of. But it would 
certainly be my intent to understand this situation in complete 
detail so that we could make sure that everything that should 
have been followed was followed.
    The Chairman. And if, in fact, when there is a look-back 
and it is found out that disclosures were not made, that there 
are some rights that can be asserted by VA, does VA intend to 
assert those rights?
    Dr. Shulkin. I don't want to make any presumptions about 
what we will find. As I said, I want to do a thorough review, 
get to the bottom of this. But I can assure you it would be my 
intent to fully pursue every option that would be available to 
the government to protect the rights and to make sure that 
everything that should have been done was done.
    The Chairman. Okay. Thank you.
    Ms. Brown.
    Ms. Brown. Thank you.
    During the summer, I think, we put up an additional billion 
dollars for this drug which is one of the best drugs out. It 
has a 99 percent rate and it is very, very good. But you see I 
have a little problem with figures. I don't understand why 
other countries can spend $900 and we are spending $40,000. I 
mean, it was very confusing. I can't see the disparity.
    Can you explain it to me?
    Dr. Shulkin. That would definitely be beyond my expertise 
to understand the pharmaceutical industry's pricing schemes. 
But, you know, I think--I think that everyone who knows even a 
little bit about this topic understands that the prices charged 
by many companies in the United States are higher than what's 
available in many third-world countries.
    Ms. Brown. Are we talking about the same formulary, though?
    Dr. Shulkin. Yes. Yes, it's the same--it's the same 
molecule. There is pricing differences between what U.S. 
customers are charged and the--and, as you know, most of the 
press focused on the Canadian drugs that--that you can get the 
same drugs in Canada often cheaper as well. But, you know--
    Ms. Brown. And Mexico, too?
    Dr. Shulkin. What's that?
    Ms. Brown. And Mexico, too?
    Dr. Shulkin. Yes, yes. So--but, you know, that--that 
certainly is not determined by the government. We're a 
customer. We make sure that when the government buys drugs 
through the VA that we obtain the very best pricing possible, 
but we don't get to determine the price.
    Ms. Brown. I am going to ask that the Chairman, can we have 
a hearing just on the drug pricing because one of the things 
that we do, we push that the Department of Defense and the 
Department of VA negotiate the prices of the drugs so we can 
keep the costs down.
    I think that is extremely important because if we buy it in 
volume, the taxpayer, the veterans or the military or the 
spouses should benefit from the research that we are doing. So 
this is very disturbing to me, Mr. Chairman. I hope we can have 
a hearing just on drug pricing, in the immediate future
    And with that, I yield back the balance of my time.
    The Chairman. Thank you very much, Ms. Brown. We will look 
at that possibility. You and I can have an opportunity to 
discuss it.
    And I would let you know that even at the $40,000 number or 
$42,000, that is a discounted rate of what the drug actually 
retails for out there. And that is another discussion. I am not 
into price fixing. I am not into setting the government doing 
that.
    But if, in fact, it is found that it was a Department of 
Veterans Affairs' employee that did, in fact, discover the drug 
and did not do what was appropriate, I think that it is 
important that this Committee do its oversight. And I 
appreciate Dr. Shulkin and certainly the secretary and the 
deputy really trying to get to the bottom of it by going to the 
inspector general.
    And with that, Mr. Lamborn.
    Mr. Lamborn. Thank you, Mr. Chairman, and I really 
appreciate your leadership on this issue and having this 
hearing today. And I appreciate the hard work of the staff and 
their research in bringing this to light. And I am really 
concerned about this.
    Dr. Shulkin, are there other possible inventions, whether 
it is pharmaceuticals or prosthetics or anything else, Nicotine 
Patches, that we rightfully claim as part of the heritage of 
what the VA has researched and developed that might be out 
there that we have not gotten the fair share for the taxpayer 
and for your budget?
    Dr. Shulkin. Congressman, I, too, am equally concerned 
about this. And I can't tell you today that I have a good 
enough understanding to say that I can assure you that there 
aren't other issues out there. That's one of the reasons why I 
am going to take a thorough review of this both internally and 
externally and I want to get to the bottom of it to make sure 
that I can tell you that there aren't issues out there.
    Anything that was done prior to the year 2000 like the 
Nicotine Patch and other inventions that we've talked about, we 
have no claimed intellectual property. That was our policy pre 
2000 that VA didn't want anything.
    Since 2000, though, if there was VA resources and time, we 
would expect that information would be disclosed and that we 
would have our right to assert or not to assert ownership over 
that. So I'm--I'm going to get to the bottom of this.
    Mr. Lamborn. And I know the Chairman has already started 
probing on this, but if there were any disclosures not properly 
and fully made by Mr. Schinazi, does that give grounds to 
review and perhaps claw back some of the money that it sounds 
to me should have gone to the taxpayer?
    Dr. Shulkin. Yeah. You know, Congressman, although I'm 
going to--I'm not going to comment on any specific individual 
here, there is enough concern that has been raised here that I 
am asking for a review of all these facts. And should there be 
anything that comes out of that review where we have violated 
the policies or procedures including disclosure or anything 
else, we are going to take full rights to make sure that VA 
does get its proper ownership.
    Mr. Lamborn. And I have no objection to people working hard 
and becoming wealthy as a result of that, but I think the U.S. 
Government, the taxpayers, and the veterans should have their 
share if they were entitled to that.
    Dr. Shulkin. That was the purpose of setting up the 
Technology Transfer Program, absolutely.
    Mr. Lamborn. And I am glad that the VA is now starting to 
get behind this. It sounds a little belated to me, a little 
behind the power curve. I wish the VA had been more on top of 
this from the year 2000.
    Okay. How can we be assured--I know you are saying some 
good things and I appreciate it--
    Dr. Shulkin. Yeah.
    Mr. Lamborn [continued]. --but how can we be assured that 
this is not going to be a pattern in the future like it has 
apparently been in the past?
    Dr. Shulkin. Well, first of all, I just want to make sure 
you have the right information. I think the Chairman gave--gave 
some statistics. But we have been disclosing, our researchers 
have been disclosing, VA has been asserting its ownership. We 
have been patenting and licensing inventions.
    But I think you're asking about the internal controls. How 
can we be assured that we're not missing anything? And today, I 
cannot tell you that I have good enough confidence that we have 
the right internal controls in place.
    We absolutely have internal controls. I just can't tell you 
that I think they're robust enough and that they're working 
well enough. And that's one of the reasons why I'm going to be 
doing this review to make sure that I have confidence that 
those internal controls are in place. And it's something that I 
absolutely will get back to you on.
    Mr. Lamborn. That is really good, but it sounds like when 
other agencies have ten times the amount or way beyond the 
amount of royalties coming back, it sounds like VA has dropped 
the ball.
    So you say that you have been taken advantage of this 
program. It doesn't really sound like it has been taken 
advantage of very much up until now.
    Dr. Shulkin. Well, let me just give you my perspective 
which is--which is--I share this with you which is that--which 
is that, again, until I have confidence that we have the right 
controls in place, I can't tell you for sure that we are doing 
everything we should be doing.
    But as--as the Chairman said, we have $1.8 billion in 
funding. One point two billion are external funds into the VA 
from NIH and outside grants. Six hundred and thirty million, 
$637 million to be precise is internal VA money. That internal 
VA money isn't like other research labs in the Federal 
Government.
    We use $93 million for health services research which never 
generates really patentable or licensable ideas. We use 
internal money for prosthetics research which when it generates 
licenses or patents, it doesn't generate commercially very 
financially viable ones. They help veterans. That's what we're 
doing, but they're not really meant to do that.
    The money that you would look at that would say is 
comparable to other agencies is about $171 million for 
biomedical research. So--so our number is a little bit smaller 
in comparison. That's not to say that--that we're not going to 
look at this very hard.
    Mr. Lamborn. Okay. Thank you, Mr. Chairman.
    The Chairman. Mr. O'Rourke.
    Mr. O'Rourke. Thank you. Mr. Chairman, thank you for 
bringing this issue to the attention of the Committee and to 
the public.
    And, Dr. Shulkin, thank you for your commitment to try to 
resolve this.
    I think some of the questions that I would like to know the 
answer to, you have already said you cannot answer. I would 
like to know what additional controls need to be in place, and 
you said that you are going to review that process and make 
that determination hopefully soon or shortly.
    You mentioned earlier that what the VA is doing when it 
comes to technology transfer is similar to what the academic 
world does. I would just ask that you ensure that we are 
absolutely following the best practices and precedents from the 
academic world where we have seen tremendous success in 
transferring marketable technologies.
    And then, of course, I think all of us want your assurance 
that you are going to aggressively pursue the interests of the 
taxpayer and ensure that their rights and returns are protected 
and sought after and that we actually receive that benefit if, 
in fact, it is owed.
    Lastly, I will say that there is no one in Federal service 
that I respect more than you given your commitment to come into 
the VA with very little time to implement a significant 
transformation. And you have hit the ground running, have come 
up with some very bold proposals which I think the majority of 
this Committee supports. You had a tremendous conference 
yesterday on veteran suicide which I thought was great.
    And it is too bad that Dr. Schinazi can't be here in 
person, but just his story, the selling this company for $11 
billion after working at the VA ostensibly to help veterans, a 
company which then charges $40,000 per treatment, just to put 
it in context, one of the gentlemen sitting behind me, David 
Combs who is himself an Iraqi combat veteran and is on my staff 
and supports me here, makes just a little bit more than one of 
those treatments. But he is here because of his sense of 
purpose and service to his country.
    And you and I have had this conversation when we try to 
address veteran suicide, for example. We need more mental 
health care providers. If you are just graduating from medical 
school, this is probably not the most desirable place to work 
right now.
    How do we connect with people's sense of public service to 
draw them in to help prevent more veteran suicides, to provide 
more mental health access, to pioneer the kinds of treatments 
that we see here that truly are life saving and transformative?
    You almost don't want to have to have the controls in 
place. You want the people in there who are doing this for the 
right reason. So I don't know what questions, frankly, you can 
answer today, so I just thought I would use my time to make 
that appeal, commend you for your service. I know that you are 
going to aggressively pursue this.
    I have got a little over a minute and a half left. If there 
is anything you would like to add on any of those themes, we 
would love to hear your comments.
    Dr. Shulkin. Well--well, thank you and thank you for your 
commitment to veterans' issues. And--and I think that our 
passion for making this better is very much appreciated.
    I would like to add I take this very seriously. As I said, 
I'm going to get to the bottom of this. As you also said, I 
come from the private sector where I have a lot of experience 
in this. And I have already begun to reach out to my academic 
colleagues because I want to make sure that the VA has the very 
very best processes in place for technology transfer. And I do 
believe that that exists among our academic affiliates and that 
we will come up with improvements that we're going to put in 
place. I'm pretty confident of that.
    I also appreciate your concern making the VA a place where 
physicians and other professionals in health care want to come 
to serve because this is a terrific place to spend your time 
and to do something very meaningful and to give back to your 
country. And I want this to be the type of environment, and 
that's what we're working hard to do, where people do want to 
come to work. And I hope that together we can create that 
environment.
    Mr. O'Rourke. Thank you, Mr. Chairman. I yield back.
    The Chairman. Thank you very much.
    Dr. Abraham, you are recognized.
    Mr. Abraham. Thank you, Mr. Chairman, and thanks so much 
for holding this hearing.
    Certainly the taxpayers should be outraged and certainly 
even from a moral bankruptcy point, I think we could argue that 
this hearing is very important.
    Dr. Shulkin, thank you for being here. I know you aspire, 
and I truly believe that you do aspire to make the VA a better 
system. And I understand you are treading water on a daily 
basis on some of these issues.
    Let's go back to Dr. Schinazi just for a minute and then we 
will move on. When an employee at any company, whether it is 
Federal, civilian, it does not matter, if he works 26 years and 
he is going to retire, there is usually a big party and a 
watch. There is usually notice of months of advancement. And 
certainly in his position as a lead researcher where you have 
ongoing projects, he needs to groom those under him to take the 
torch, so to speak, carry that research on to make sure that 
all the research before that is not repeated not so much for 
the money, just for the expediency of time.
    So my question was, did Dr. Schinazi, did he give a two-
week notice, a four-week notice, a six-week notice, or did he 
just go?
    Dr. Shulkin. I think--I think the Chairman already gave the 
dates that--that I am aware of. I---I got--I've never spoken to 
Dr. Schinazi.
    Mr. Abraham. We got an email and he was out the door the 
next day. Is that a fair statement?
    Dr. Shulkin. I'm sorry. Repeat it again.
    The Chairman. Excuse me. If the gentleman would yield. For 
the record, he put his papers in on the 21st of January and 
retired on the 1st, so less than ten days.
    Mr. Abraham. I understand. Thank you. And there was no 
prior notice that we know of. Okay. Thank you.
    Go back to the post 2000 internal reset, so to speak--
    Dr. Shulkin. Uh-huh.
    Mr. Abraham [continued]. --about the patents, royalties, 
those types of deals. Is there anything now in place where if a 
researcher develops a home-run drug--
    Dr. Shulkin. Uh-huh.
    Mr. Abraham [continued]. --that can saves lives of veterans 
and civilians, just a great drug like Harvoni, these types of 
drugs--
    Dr. Shulkin. Uh-huh.
    Mr. Abraham [continued]. --does the VA have in place a 
policy to incentivize for that research if it comes to fruition 
that it is a great drug or does that researcher get a 
percentage of the profits now as compared to pre 2000?
    Dr. Shulkin. Yeah. First of all, the VA currently and since 
2000 has in place a number of controls to make sure that it is 
the investigator's obligation to disclose information such as 
that. Once--once a disclosure and a form is completed, it then 
goes to our Office of General Counsel and there's generally 
three decisions that happen.
    One is, is that the VA asserts no rights and says you 
didn't use VA resources. You didn't use any time. We're not 
going to assert rights. The VA can assert its right of 
ownership total--
    Mr. Abraham. Okay.
    Dr. Shulkin [continued]. --totally, absolutely.
    Mr. Abraham. So the researcher, he just gets his or her 
salary?
    Dr. Shulkin. The--the VA could do that, absolutely, and 
assert a hundred percent ownership. What typically happens, 95 
percent of our researchers are called duly appointed. That 
means that they share an appointment with an academic 
affiliate.
    So for 95 percent of these, they actually go between a 
negotiation. We have a--what's called a cooperative tran--
transfer technology agreement with the academic affiliate where 
we negotiate with the academic affiliate. We say you're going 
to get a piece of this. VA is going to get a piece of this. The 
research potentially could get a piece of that.
    Mr. Abraham. But whether the researcher gets a piece of the 
pie is up to the academic institution and not the VA. Is that a 
fair statement?
    Dr. Shulkin. A duly appointed--a duly appointed personnel 
which, again, 95 percent of our researchers are, would have to 
negotiate that with their academic affiliate and with the VA.
    Mr. Abraham. Okay. Thank you.
    Mr. Chairman, I have three more questions I will ask to 
submit for the record for a written response later if that 
would be okay.
    The Chairman. That would be fine.
    Mr. Abraham. All right. I will yield back. Thank you, sir.
    The Chairman. Thank you, Doctor.
    Mr. Walz, you are recognized.
    Mr. Walz. Thank you, Mr. Chairman.
    And, Dr. Shulkin, I am going to also echo a little bit what 
my colleague, Mr. O'Rourke, said. I think it is important for 
folks to know what you were doing yesterday convening a 
national summit on veteran suicide, everyone from the Chairman, 
Mr. O'Rourke, others in this Committee, Elizabeth Dole, the 
work she has done, and this Nation's leading researchers as 
well as Clay Hunt's family and Daniel Somers' family.
    So thank you for that. We are very grateful. I think what 
you have heard here is reestablishing the trust in the VA is a 
critical component as well as the delivery of health care and 
everything else.
    And looking at this, and it is premature, and I think I 
have no frustrations with your inability to answer because this 
is all fast and that is what you are supposed to do and there 
are rules for that, I totally get that, but you can see where 
this thing is made for TV and the frustration of the American 
public that, again, feeds back into the idea that the VA is not 
doing things right.
    The sad part of this is, this is a huge success story or 
should be for what the VA does, from the research we do, what 
we do collectively as a Nation to solve problems. There should 
be a mechanism to move these for efficiencies into the private 
sector.
    The interesting thing is, is that we socialized the risk 
and the investment and privatized the rewards to this. And 
there is an irony in this discussion going on here that I am 
sure is not being missed on anyone.
    For me a couple things, though, really stand out. My first 
concern, though, comes to this issue, the cost of this drug and 
delivery of life-saving care to our veterans. That is the main 
priority here. We will go back and figure out what Dr. Schinazi 
did and there is need to recoup, fix the system, but that is 
the one.
    And I know you have spoken a little bit about it. We as a 
Nation, I would say not just the VA, have to get a handle on 
this. It is unacceptable. It is stunning to me that you have a 
veteran. You have this miracle drug. We are going to have to 
have the discussion of life-saving principles or how expensive 
they are and the care we give.
    So I know you are very aware of that, but just the second 
part is just, I mean, it is mind boggling. I was thinking of 
this one-eighth of the time to develop this. I was thinking to 
myself, Vice President Biden needs to get this guy on board for 
the cancer project because this is a go-getter apparently. And 
it is frustrating me because you see where we are coming from.
    I am pontificating to you, but I just want to be clear on 
this that, again, it is another good thing that is happening in 
the VA. There is life-saving ability here. There are some 
things we can do to streamline the system to get this drug to 
our veterans, and to the private sector who need it, at the 
same, time understanding that collective research that can't be 
done or won't be done by the private sector in many cases is 
still a role of government, but not at this type of expense.
    And I know you have articulated. I don't want to ask you 
anything specific. I want you to know we get it. I think the 
Chairman is right in calling this and bringing it to the 
public's attention. They want to hear about it. There is a lot 
more that needs to be done before we can say what happened.
    But, again, I can't stress enough that the public's 
perception of the VA is tenuous right now. Any story like this 
comes out, sets us back and it sets back the great work that 
you and your team and others were doing yesterday.
    So thank you for that and please know we know it.
    Dr. Shulkin. Well, thank you. First of all, I do want to 
thank you for your leadership as we approach the anniversary of 
the Clay Hunt Act. It was you who was the cosponsor in the 
House and thank you for that.
    And thank you, Mr. Chairman and Mr. O'Rourke, for being 
there yesterday as well and Ms. Brown.
    But establishing the trust with the American people and our 
veterans is our top priority and I couldn't agree more. That's 
why I take this very seriously. I do appreciate the Chairman's 
leadership in this, and we are going to make sure that we get 
to the bottom of this with all the facts, with the external 
reviews that we've set in place and the internal reviews.
    The issue of hepatitis C, this is truly a miraculous new 
drug. We have, thanks to the support of Congress, have the 
resources now to make sure that we are going to treat 
thousands. In fact, this year, 36,000 veterans we are going to 
be able to deliver this drug to and hopefully cure at very very 
high rates. So thank you.
    Mr. Walz. No, we appreciate that. And, again, I can say 
this is a great story. And I don't know and I don't want to 
pass judgment on Dr. Schinazi.
    Dr. Shulkin. Uh-huh.
    Mr. Walz. This is a miraculous achievement and it is one 
that it is unfortunate that we are in a position where things 
seem to be clouded and we can't all celebrate this. And he 
should see the fruits of his labors to a certain degree, but 
not to the numbers we are talking.
    So I yield back. Thank you, Mr. Chairman.
    The Chairman. Before I recognize Mr. Huelskamp, is there 
anything that would prevent the VA from buying a veteran a 
first-class ticket and allowing them to fly to one of these 
countries and purchase the drug for $900?
    Dr. Shulkin. I am sure there is something that would 
prevent us in--in spending our money that way, but--but--but--
but I understand. I understand the point of your question. And 
so I'm going to give you my personal opinion as a physician 
having practiced for as many years as I have and patients 
asking me this question.
    I tell my patients that you are safest when you get your 
drugs in the United States of America with the FDA protections 
and our controls and our systems. When you go to a foreign 
country, we don't have as many protections as we have here in 
America for safety.
    And so you're not always sure exactly what you're getting. 
So I wouldn't recommend that a policy that we send our veterans 
to Egypt for that, but--but--but certainly it's hard to 
understand the price differential. I understand that point.
    The Chairman. I don't believe you would find a whole lot of 
argument from the Congress that would allow you to purchase a 
first-class airline ticket at $7,000, $8,000 to reap a $900 
drug regime. And, you know, maybe we ought to look at it. I 
understand the efficacy issue, but this is the exact same drug 
made by the exact pharmaceutical company and so I asked that 
question.
    Mr. Huelskamp, I will tee it up for you. You are 
recognized.
    Mr. Huelskamp. Thank you, Mr. Chairman. I don't know if you 
were suggesting a one-way first-class ticket for me, but thank 
you. I appreciate the doctor being here.
    But based on what I have heard now, I just want to make a 
statement. If I understand correctly, if the VA would assert 
ownership on just a few of these issues such as the hep C or 
HIV treatment, that could create an influx of billions of 
dollars into the VA for our veterans. Is that accurate?
    Dr. Shulkin. This is--this is all hypothetical because--
because I don't know what percent ownership we potentially 
could assert. But potentially, this drug is a--certainly a 
multi-billion dollar drug, absolutely.
    Mr. Huelskamp. Have we asserted any ownership in this drug?
    Dr. Shulkin. No, we haven't.
    Mr. Huelskamp. Okay. Five questions I would like to quickly 
get through just for the record, Doctor. What were the total 
number of invention disclosures received by TTP for fiscal 
years 2013 and 2014?
    Dr. Shulkin. I believe that we disclosed in '13 272 and in 
'14 304.
    Mr. Huelskamp. And how many inventions did VA assert in 
ownership interest in fiscal year 2013 and 2014?
    Dr. Shulkin. How many--
    Mr. Huelskamp. Ownership interests.
    Dr. Shulkin [continued]. Oh, of those, 100 in '13 and 98 in 
'14.
    Mr. Huelskamp. Okay. Is there a backlog or what is the 
backlog of invention disclosures waiting to be processed by 
TTP?
    Dr. Shulkin. There is a backlog. In '13, there was still 
five pending and in '14, there were 23 pending.
    Mr. Huelskamp. Okay. And how many of these VA-owned 
inventions are jointly owned with the academic affiliate?
    Dr. Shulkin. Most are jointly owned with the academic 
affiliate. Around 95 percent are jointly owned.
    Mr. Huelskamp. And you are able to identify what percentage 
is owned by the affiliate?
    Dr. Shulkin. Yes. Yes. It's a high percentage. About 95 
percent are owned jointly with our affiliates.
    Mr. Huelskamp. And what percentage is generally owned by 
the affiliate? Is that variant?
    Dr. Shulkin. Oh, oh, what percent. That would--that would 
really vary, depending upon where the research was done and 
where the time and effort was--was put in. Sometimes VA has a 
small amount. Sometimes VA has the majority amount.
    Mr. Huelskamp. Okay. And how many patent applications did 
VA file in fiscal year 2013 and 2014 for solely owned 
inventions?
    Dr. Shulkin. In both fiscal year 2013, 25 and also the same 
number, 25, in '14.
    Mr. Huelskamp. And were those patent applications approved?
    Dr. Shulkin. They were filed. They're not approved. So--so, 
you know, the patent process, as I'm sure you're aware, often 
takes a couple years, but those are the numbers that were 
filed. I think that three patents were approved in '13 and four 
in '14.
    Mr. Huelskamp. And, Dr. Shulkin, how long have you been in 
this position again?
    Dr. Shulkin. Almost seven months.
    Mr. Huelskamp. Almost seven months. And were you with the 
VA before and what position?
    Dr. Shulkin. No, no, no. I'm--I have spent my entire life 
in the private sector. I had a pretty good job before doing 
this, and I was asked to come in to help turn around the VA.
    Mr. Huelskamp. Apparently not as good as Dr. Schinazi had 
as well, Doctor. But what is bothersome to me amongst many of 
these things is the fact that the sale was, I guess, public 
four years ago.
    I mean, what has the VA been doing to establish an 
ownership interest? I mean, could you describe what has been 
occurring? And obviously you have only been there six months, 
but this occurred three years before you even came and we are 
talking about billions of dollars. Can you describe the process 
that the VA has done to establish an ownership interest and to 
investigate this issue?
    Dr. Shulkin. I--well, I'm going to--I'm going to refrain 
from--from anything specific about Dr. Schinazi. I think that 
much of what we've been looking into when I became aware of 
this is a result of the Chairman's letter to us. So--
    Mr. Huelskamp. And that raises the question, the concern. 
Again, this is four years ago when he sold this $400 million 
profit. And we are sitting in the hearing today and this is the 
first time I heard about it.
    When did you first hear about this and, again, has the VA 
done anything until January of 2016?
    Dr. Shulkin. I--the Chairman's letter to us was dated 
December 17th of 2015. I first became aware of it January 15th 
of 2016.
    Mr. Huelskamp. What is the status of an investigation and 
did anything happen before you were made aware of it? Again, 
three years after the sale. I mean, this drug has been on the 
market and the VA finally discovered this guy works for you and 
was working for you a year ago when you first discovered this.
    Dr. Shulkin. Yeah.
    Mr. Huelskamp. And tell me what investigation has occurred.
    Dr. Shulkin. So we were certainly aware that Dr. Schinazi 
has been an employee of VA for 33 years. No question about 
that. That wasn't a surprise.
    Mr. Huelskamp. But he just sold a company for $400 million. 
Did anybody know about that?
    Dr. Shulkin. I'm not aware of who knew what three or four 
years ago. That's one of the reasons why I'm going to make sure 
that we take a look at everything that's involved in this to 
make sure that we do get answers to the types of questions 
you're asking.
    Mr. Huelskamp. Well, I want an answer. The question is, why 
an investigation has not occurred more quickly? Why are we 
talking about it years after the fact? We are talking about 
millions of dollars that should go probably to the VA.
    I mean, what we also need to investigate is what did he 
leave with in the last ten days. He is seven-eighths of his 
time. I can see where he walked out with a lot of stuff. I 
don't know.
    Dr. Shulkin. Yeah.
    Mr. Huelskamp. Is he allowed to maintain an email network 
on his own that--do we even know any--
    Dr. Shulkin. No.
    Mr. Huelskamp [continued]. --answer to these questions?
    Dr. Shulkin. No. Once you leave Federal employment, 
everything will stop in terms of that. There--there--
    Mr. Huelskamp. Unless he took stuff home beforehand or took 
it to the affiliate. My question is we are talking about 
millions of dollars and I still--Mr. Chairman, I don't know why 
they didn't look into this before your letter. Thanks for the 
letter. I mean, this is shocking.
    Dr. Shulkin. Yeah.
    Mr. Huelskamp. And we are talking about billions of 
dollars. So I would appreciate if you would provide the 
Committee as soon as possible--
    Dr. Shulkin. Yeah.
    Mr. Huelskamp [continued]. --evidence that an investigation 
occurred long before this comes up before the VA Committee.
    Dr. Shulkin. I think there--Congressman, I think there are 
two things. One is, I would be willing and absolutely at any 
time that you want to sit down in a closed hearing or--or 
privately, I just can't do this in a public forum, and share 
with you everything that I know right now, abs--and--and I have 
provided a letter with some of that, but I would be glad to 
share everything that I know to this date.
    But as I said, my intention is to actually find out more 
and to do a thorough review of the details. So we could either 
sit down now or sit down later, but absolutely, I will share 
that with you.
    The Chairman. Your time is expired, Mr. Huelskamp. Thank 
you.
    And I will be happy to provide for any Member of the 
Committee the information that Dr. Shulkin has provided to us. 
We do want the IG to have an uninhibited opportunity to review 
this because this is extremely serious and this is one 
individual.
    And I would be remiss in saying, you know, this is one of 
the good things that is happening now in what Dr. Shulkin is 
saying. Regardless of what has taken place in the past, the 
change in leadership throughout the agency is beginning to 
change the culture, some of the lax oversight that was done 
internally.
    And this is the way it is supposed to work. We do our job 
as the oversight Committee, provide the information or ask the 
questions of the department. The department doesn't get 
defensive about it. They go about what needs to be done and we 
don't have a political football which, by the way, we try to 
keep it as bipartisan as we can in this Committee and bicameral 
as well.
    So, you know, again, I think the line of questioning is 
appropriate. I think the answer is appropriate as well and we 
do want to say thank you.
    Mr. Takano, you are recognized.
    Mr. Takano. Thank you, Mr. Chairman.
    Regarding the $40,000 price, I am a little bit confused as 
to why we know it is $40,000, because I recall asking Sloan 
Gibson the same question. I asked them, what is the price of 
this hep C drug? And he says--he told me he couldn't--he would 
rather not answer the question.
    So, is it that that question cannot be answered or he 
rather--or the VA would rather not? All of a sudden we are 
talking about the exact price or--
    Dr. Shulkin. Right.
    Mr. Takano [continued]. --is this an estimated price?
    Dr. Shulkin. Right. That is an estimate price. We are 
prohibited from giving out confidential pricing information. 
That $40,000 figure, I think I have seen 41,000 also in the--in 
the public domain, in newspaper articles, but VA does not give 
out its exact pricing.
    Mr. Takano. So, I am confused as to how we can sort of say 
it is $40,000. So, it is off by a few thousand, not off by tens 
of thousands?
    Dr. Shulkin. I--
    Mr. Takano. Because, in California, I recall reading in--
    Dr. Shulkin. Yes.
    Mr. Takano [continued]. --in the LA Times, this case of a 
doctor and a patient in a dispute with an insurer over when the 
insurer would approve the drug. The woman definitely had 
hepatitis C, but it was a matter of the timing. The doctor said 
we need to administer it sooner because it was going to impart 
damage to her body.
    Dr. Shulkin. Yes.
    Mr. Takano. The insurer said, no, we have a different 
opinion, and so they were bending much higher numbers. And I 
was trying to get a handle on how much the VA pays.
    Dr. Shulkin. The list price of the drug is approximately--
you know, it depends. The average course of treatment is 
somewhere between eight and twelve weeks, so it depends on the 
individual, so the price varies, so these are all estimates. 
But the average list price is $84,000.
    VA's--the numbers that are in the public domain of 
approximately $40,000, again, we don't give out our pricing, 
but these aren't bad estimates.
    Mr. Takano. Well, how are your budget estimates made, with 
respect to the hep C drug?
    Dr. Shulkin. We know exactly how much we pay--
    Mr. Takano. You know internally?
    Dr. Shulkin. Yes.
    Mr. Takano. My--you know, I just had a chat with somebody 
in the industry last night, the pharmaceutical industry, and he 
says that two-thirds of new drug discoveries happen in our 
country, and, really, we finance both, through basic research 
from the Federal Government and investment in private research, 
as well as the back end where consumers also pay these prices. 
And Americans are really not understanding why other countries 
can benefit from all of this. Countries like Australia, 
European countries, they pay far lower amounts, but it is 
because we--our market develops all of these drugs; is that 
right?
    Dr. Shulkin. Two-thirds of them, yes.
    Mr. Takano. Two-thirds, I mean that is a huge share of the 
market.
    Dr. Shulkin. Yes.
    Mr. Takano. And, of course, we don't want to see this 
innovation stop, but it doesn't seem quite fair that American 
consumers and taxpayers are the ones that are primarily funding 
these discoveries, and there is something amiss here.
    How much research does the VA do? I wasn't aware--this 
technology transfer was--I was kind of scratching my head over 
this Technology Transfer Program. But you say that most of 
these researchers have a dual appointment.
    Dr. Shulkin. Yes, sir.
    Mr. Takano. So, is--are there VA laboratories or is it 
mostly done at the universities?
    Dr. Shulkin. No, there are VA laboratories.
    VA has about 2,000 researchers, but 95 percent are dually 
appointed, which means they share with an academic affiliate. 
Our--our research program for internal funding is 637 million. 
Our total funding is 1.8 billion, because we get external 
funds.
    Mr. Takano. I realize I can't ask specific questions about 
Dr. Shinazi is it?
    Dr. Shulkin. Yes.
    Mr. Takano. But, is it theoretically possible for an 
agreement to have been made where the researcher, a VA 
researcher with a dual appointment, could have full ownership 
without--full ownership of what they do? I mean can--could such 
an agreement have been crafted?
    Dr. Shulkin. Although--although, I am sure you appreciate I 
am not going to talk about--specifically talk about Dr. 
Shinazi--
    Mr. Takano. You are not talking about--I am not asking--I 
am just asking hypothetically, could that happen?
    Dr. Shulkin. Yes, it could.
    The way that--the way that this works is that we ask all 
researchers to disclose conflicts of interest and financial 
interests. We also look at whether any VA time or resources are 
involved.
    If there is no VA time or resources involved and there is 
not a conflict of interest, it is possible that somebody could 
own something outside of VA.
    Mr. Takano. Well, thank you.
    Mr. Chairman, I really thank you for your letter. This is 
really, I think, a very important topic that you have raised, 
and I will be eagerly wanting to see that information that you 
got.
    The Chairman. Absolutely. And we will make it available for 
all of the Committee Members as soon as we get it in.
    Dr. Wenstrup, you are recognized.
    Mr. Wenstrup. Thank you, Mr. Chairman.
    Thank you, Doctor, for being here. Thank you for leaving 
that pretty good job from the private sector to join us and try 
to do some good things.
    And it is really a shame what has happened, because this is 
pretty much a stain on an, otherwise, very great moment for VA 
research.
    Dr. Shulkin. Uh-huh.
    Mr. Wenstrup. I think the first question I have is, what 
prompted the VA to take up this type of research? What was the 
stimulus for going in that direction? Was it a high number of 
patients with hepatitis C or where did that come from, do you 
know?
    Dr. Shulkin. Yeah. I think that--I think there--there are 
two things about this. If we are talking about the research 
primarily that Dr. Shinazi has been doing--and this is in the 
public domain that has been released through the Freedom of 
Information Act; that is why I am sharing this--almost all of 
his research has been done in antiviral medications and 
treatments, and mostly related to HIV. So that has--that has 
been where the focus of his advances in career have been.
    The focus on hepatitis C, not necessarily research, has 
been related to the fact that so many veterans, unfortunately, 
have this disease. And prior to this particular new course of 
treatment, the old treatments were so toxic and were not 
curative, in fact, Dr. Chang, to my right, is actually--she is 
a researcher and a clinician in hepatology and has spent her 
career, 16 years at VA, dually working with the University of 
Pennsylvania, and this is exactly what she does in treating 
patients and studying this--this.
    Mr. Wenstrup. So, typically, for VA research, there is high 
evidence of a condition that drives the need for going in that 
direction?
    Dr. Shulkin. Our research program is dedicated to doing 
research to help veterans.
    Mr. Wenstrup. So, as we move forward and as we look at the 
current situation, what are the rules as you begin research, 
you know, as far as you mentioned disclosure and conflict of 
interest. Does VA have, like, an ethics committee that 
overlooks these types of things? Does the researcher sign 
something and say what is proprietary, what belongs to the VA 
and what doesn't? And what is going on and what do you envision 
it should look like, I guess?
    Dr. Shulkin. There--there are a number of things. We have 
VA handbooks on--one on intellectual property, and one on 
research oversight, as well as other VA handbooks. Every 
researcher that is funded has to sign off on the fact that they 
are following those handbooks and those policies, and that they 
acknowledge their responsibility.
    There is no research that is done, unless it is approved by 
the associate chief of staff at the VA medical center. Our 
research is actually decentralized; it happens at the medical 
centers, these 100 medical centers.
    We do have a research oversight committee who has to look 
at and approve all protocols to make sure the resources are 
used, and no researcher can begin research without the sign-
offs on the Committee and by the associate chief of staff.
    So we do have a number of controls. What I am not 
comfortable with to tell you today is that they are sufficient 
enough.
    Mr. Wenstrup. Okay. The intent is to have legal standing 
with--
    Dr. Shulkin. Absolutely.
    Mr. Wenstrup [continued]. --legal intent.
    Dr. Shulkin. Yes.
    Mr. Wenstrup. Okay. Well, thank you very much.
    I appreciate it and yield back.
    The Chairman. Mr. Costello?
    Mr. Costello. Thank you very much.
    And, Dr. Shulkin, thank you for being here today and your 
testimony. And I am--part of me, obviously, wants to ask 
questions that I know that you can't answer, because I feel 
there is, at least, a possibility that we could all end up 
being outraged by what we find, and I respect the fact that you 
are constrained, so I don't want to probe you--
    Dr. Shulkin. Uh-huh.
    Mr. Costello [continued]. --to try and answer questions 
that you can't answer. And so, if you can't, I certainly can 
respect the fact that you are not trying to conceal information 
from us or are complicit in any way, it is just you need to 
respect the integrity of the review process.
    The other part of me is actually somewhat optimistic that 
there can be, moving forward, after your review, a little bit 
more of an entrepreneurial approach to the way you go about 
research, mindful, though, that your research--and it says 
right here, I think in your testimony, your focus is on 
research areas most likely to benefit veterans and not 
necessarily what a normal entrepreneur would do, is to make 
money.
    Dr. Shulkin. Right.
    Mr. Costello. But I suspect that there might be some 
potential there, and I think that all of us are eager to see 
what your review yields.
    You have used the word ``review,'' and so I want to sort of 
disentangle various iterations of what the word ``review'' can 
mean.
    Dr. Shulkin. Uh-huh.
    Mr. Costello. Again, if you can answer this, has this been 
referred to the IG--and I am speaking specifically of Dr. 
Shinazi--or would you prefer not to answer that question?
    Dr. Shulkin. I would--I would prefer not to answer that.
    Mr. Costello. And I am not going to follow-up.
    Dr. Shulkin. I made--I made as much as I could, talk about 
that, I made that clear in the letter to the Chairman.
    Mr. Costello. Are you able to answer the question as to 
whether or not Dr. Shinazi completed a Federal conflict of 
interest form or would you prefer not to answer that question?
    Dr. Shulkin. I can't answer that specific question right 
now.
    Mr. Costello. Fair enough.
    Dr. Shulkin. Yeah. And in closed session, I would be glad 
to share that with you.
    Mr. Costello. Okay. And, obviously, you know, I would just 
say for the record that I think that a constituent of mine or 
any American, in learning some of this information, would say, 
there has to be--something is not right about that.
    So if, in fact, Dr. Shinazi did not submit a completed 
Federal conflict of interest form, or did not do it properly, 
obviously that invokes a potential for criminal violations and 
the extent to which this should be a criminal probe, on that 
basis, I think, obviously, it should be.
    The other piece of any use of the word ``review'' sort of 
invokes whether or not an audit should be done. And I do--you 
just were speaking a minute ago about you had some internal 
controls and the ability to know who is doing research and in 
what capacity and for what reason, but, yet, no audit has been 
done, moving backwards.
    You have been here seven months?
    Dr. Shulkin. Uh-huh. Yes.
    Mr. Costello. I have been here one year and one month, so I 
don't pretend to know it all.
    But do you think an audit is appropriate for patent 
applications, issue patents, and royalties from co-owned 
inventions?
    Dr. Shulkin. From--from my--
    Mr. Costello. Going backward.
    Dr. Shulkin [continued]. --from my initial review, which 
has been two weeks long--
    Mr. Costello. Right. And initial.
    Dr. Shulkin [continued]. Yes. I do believe that we are 
going to want to strengthen this process. I think you have 
identified something that I have also identified, which is that 
we, the VA, have turned over much of the responsibility for 
patenting and licensing and monitoring to our academic 
affiliates, and I have to say I am not particularly comfortable 
leaving it there without either a robust audit provision in 
there or VA actually assuming some more of those 
responsibilities. So I think you have identified an area that I 
have concern about.
    The second area that I have concern about is--and I have 
identified so far--is, I want to make sure the conflict of 
interest and financial disclosure forms are broader than what 
we are doing. We are doing them project by project now, and I 
think they should be blanket, across the board for researchers.
    Mr. Costello. And as part of your review, is it possible 
that you might be issuing recommendations to approve the 
process? I mean I think you just said that you probably will be 
doing that, but can you see even something broader, in terms of 
improving the TTP system, which may actually, I would also say, 
may actually be more welcoming to systems of higher-ed to be 
more involved in this.
    Because I think that there is a real--I mean, from what I 
have reviewed, part of me really wants to ask a lot of 
questions about Dr. Shinazi. Part of me wants to say, what are 
the opportunities here to make this system and actually be a 
revenue-enhancement measure for purposes of VA funding down the 
line?
    Dr. Shulkin. Well, I--I think that you are looking at it 
exactly correct. I look at it both ways as well. One is, we 
have to assure that we are protecting the rights of the 
taxpayer in this. That is--that is one of the ways that this 
was set up.
    But another reason why the TTP program was set up was 
actually to facilitate commercialization and access to 
technology to veterans.
    One of the things also, that I see as an opportunity out of 
this is something Mr. O'Rourke said, which is that one of the 
reasons why clinicians like to work at the VA is because they 
actually have the opportunity to do both, clinical work and 
research. That is becoming much less common in academic 
centers, where you have to focus, you are either a researcher 
or a clinician.
    So I do think this is one of our recruitment tools, to make 
it a place where you can come and both, see patients and do 
research and do it easily. And so out of this process, I don't 
want it to be more bureaucratic, I just want to make sure it is 
fair, that we are not having the government taken advantage of, 
but it is actually a place you can do research and do it 
easily.
    Mr. Costello. That is an excellent point.
    I see my time is expired. Thank you.
    The Chairman. Mr. Coffman, you are recognized.
    Mr. Coffman. Thank you, Mr. Chairman.
    Dr. Shulkin, are you outraged by all of this?
    Dr. Shulkin. I don't know enough to be outraged. I will 
tell you, Congressman, I am taking this very seriously, and I 
reserve the potential to be outraged, but I don't know enough 
to be able to say that.
    Mr. Coffman. Well, that is the pattern we get here from the 
VA; it is always somebody that they bring to testify that is 
just new and they can't be held accountable for anything that 
has occurred over any given issue.
    So what you are doing is no different than the person 
before you and the person before you testifying before this 
Committee has been done. And it is interesting to me that the 
VA is so bureaucratically incompetent, that they can never 
figure out their own problems, that they have to come in from 
the outside.
    So you are here, not because you identified the problem or 
because anybody in the VA identified the problem; it is because 
you were asked by this Committee to be here, who has recognized 
the problem. And how hard would it be to recognize a problem? 
Somebody on your team develops this vaccine and VA contracts 
for it at about $40,000 per patient and can't figure it out. 
Can't quite--you know, how hard is that to do?
    And what is also extraordinary, because this fits in the 
same pattern that the person who is responsible always seems to 
retire just before the investigation starts. In Colorado, we 
have a billion-dollar cost overrun on a VA hospital, and just 
before the individual in charge was to be interviewed, he 
retired. He retired the day before.
    So, I mean, this just fits this whole pattern. And, you 
know, I think at the end of the day, what I hope comes out of 
all of this is we give these research dollars to people that 
know how to do it. The NIH, just like in the situation in my 
town where that billion-dollar cost overrun of the VA hospital, 
we stripped the authority of the VA to manage the construction 
of another hospital, and it went to the Army Corps of Engineers 
who builds the same facilities for the Department of Defense, 
on budget, on schedule; they have taken that responsibility 
over from the VA. It is their day job.
    I mean, who was in charge of this doctor? Who--can you 
identify who was in charge of him during this time that he 
developed this patentable vaccine?
    Dr. Shulkin. Yeah. As I said, VA research is decentralized, 
so it would be the Atlanta VA that actually oversees this 
research program.
    Mr. Coffman. Who is the internal--who, can you tell me, was 
in charge of this person?
    Dr. Shulkin. The specific name of a person?
    Mr. Coffman. Yeah.
    Dr. Shulkin. I don't--I don't have that information. I 
don't know whether my colleagues do.
    Mr. Coffman. That is typical, because that is the question 
I ask always when there is a problem, who was in charge? And 
nobody can ever give me the name of anybody that was in charge.
    Can you get me that name?
    Dr. Shulkin. Well, I can find that out for you, absolutely.
    Mr. Coffman. Can you find that out for me? I mean I just 
think this is just a--just absolutely, I mean, extraordinary.
    And the sad part about it, really about, you know, is it 
bureaucratic incompetence or is it corruption or is it a 
combination of the two that leads us to these massive problems? 
You know, this wasted resource is why this Nation is unable to 
take care of the men and women who have served this country in 
uniform.
    And I just think that, you know, if I were you, I would be 
outraged.
    And, Mr. Chairman, I yield back.
    The Chairman. Thank you.
    Dr. Benishek?
    Mr. Benishek. Well, thank you, Mr. Chairman.
    Well, Dr. Shulkin, welcome to your new job. Isn't this 
something, aye? You are learning a lot about it, I am sure.
    You know, frankly, I tend to agree with Mr. Coffman with 
many of his thoughts, you know, and that once--you know, I 
agree, once again, we have a new guy who wasn't here and 
doesn't know the name of the person who is in charge.
    Well, I don't want to dwell on the past too much. I am 
hopeful, you know, from knowing you a little bit, that you will 
continue to work on it. And you mentioned about this internal 
review of this procedure for sharing information or technology 
transfer.
    Is there any consideration of an outside auditor of all 
this, rather than a VA person? Because we have had VA internal 
reviews before that--like wait times that turned out to be 
completely wrong. So, can you delve into that a little bit?
    Dr. Shulkin. This needs external review. That--that is 
going to--that is going to occur in this, and--
    Mr. Benishek. I am glad to hear that.
    Dr. Shulkin. Yeah.
    Mr. Benishek. The other question that always comes up in 
this sort of circumstance is the timeline. You know, we were 
going to do this, honest.
    When will we have the report?
    Dr. Shulkin. There is going to be two levels of report 
here. One is the external review, and in my experience, the VA 
doesn't have the ability to set the timeline of the external 
review, so--so, I can't give you a specific answer to that.
    The internal reviews, we are going to have done within 90 
days.
    Mr. Benishek. All right. Well, I am looking forward to 
seeing that.
    I want to talk a little bit more about this academic 
partnership--
    Dr. Shulkin. Uh-huh.
    Mr. Benishek [continued]. --and the review of the 
agreements and the accountability of what the academic partners 
are doing.
    How do you monitor that?
    Dr. Shulkin. Right now, our system is set up--and this is 
one of the things that I want to take a look at--but our system 
is set up that we give the primary responsibility for the 
patenting and licensing to the academic affiliate. This was--
our program was designed this way, saying that this is what 
academic centers do. They have the competency. This isn't what 
VA does well, so we have turned that over.
    But I think, as we had mentioned before, my concern is 
without the proper auditing of that and without the proper 
oversight of that, that it is hard for VA to know that it is 
getting its proper ownership rights.
    Mr. Benishek. Yeah, well, that is what occurs to me, as 
well, and I am sure to many people.
    Dr. Shulkin. Yes.
    Mr. Benishek. So, are we going to kind of review that whole 
process? Is that a different review then?
    Dr. Shulkin. No. This is--
    Mr. Benishek. Part of the whole scheme.
    Dr. Shulkin [continued]. --there is really--there is really 
several aspects of the review.
    Looking at the overall circumstances and concerns that have 
been raised here, there is a review that we will use external 
people for, to take a look at, do we have the best practices 
for technology transfer that academic centers believe we should 
have, and we are going to be looking internally at our own 
policies and procedures.
    Mr. Benishek. All right. Thank you.
    I am going to maybe direct a couple of questions--I have 
got a minute left--for Dr. Chang.
    And, you know, I am familiar with this class of drugs that 
treat hepatitis C a little bit and the dramatic effect they are 
having on the course of the disease and, really, maybe the 
eradication of the disease and, you know, a much lowering of 
costs in the long run because we are going to--liver 
transplantations and the long-term care, that is going to be 
dramatically reduced.
    As far as the VA population of patients with hepatitis C, 
can you kind of review for me again, you know, how long is it 
going to take us to get this treatment to the patients that are 
there? Can you talk about that a little bit and, I mean, how 
long is it going to take to treat all of the patients?
    Dr. Chang. Right. So we have--first, I thank you for the 
opportunity to speak in this--in this forum, and I really 
appreciate all of your questions.
    We have about 180,000, I believe, of veterans who have 
hepatitis C, plus, perhaps another 20 to 40,000 or so that 
might be uncounted for, as of yet.
    I think in the past year, we have treated about 35,000 
veterans already--I mean 35--yeah--thousand veterans already, 
so I think we are well on our way to treat.
    And I think the key thing with the hepatitis C--you know, I 
started my career actually with hepatitis C as a major 
challenge in my clinical and research goal. And I am actually 
profoundly moved by the progress that we have seen, as all of 
you guys are saying, about the miracle drug that this is.
    I spent the last 15 years of my life trying to treat these 
people with drugs that don't work--
    Mr. Benishek. Right.
    Dr. Chang [continued]. --or drugs that we tried not to give 
to patients because they are suffering and they are actually 
damaged by it and so forth.
    So I am very happy to have these opportunities to really 
cure people. And I want to emphasize the fact that we can cure 
them of the virus and the progression of liver disease; 
however, the disease that have already occurred over the 10 to 
20, 30 years, that, we cannot actually cure.
    So, in any case, I think we will--
    Mr. Benishek. I appreciate your answer, but I am out of 
time. Thank you very much.
    The Chairman. Dr. Roe?
    Mr. Roe. Thank you, Chairman, and thanks to staff for 
bringing this up.
    And I am not going to belabor all the points that have been 
made.
    Dr. Shulkin, I too, gave up a pretty good job to get here 
and I appreciate the fact that you are here.
    And, Dr. Chang, what you said, as a clinician and 
practitioner, it is nothing short of a miracle for patients. 
And as Mr. Walz said, we should be celebrating this, because it 
is a celebration of a real success.
    And the NIH didn't bring this cure, the VA did. And I agree 
with decentralization of the research. As you well know, you 
put it all in one place, you will get one mindset, you will get 
tunnel vision.
    You need a lot of different eyes looking at this from a lot 
of different directions, and so I would disagree with my 
friend, Mr. Coffman, about that. I think it is a big shout-out 
to the VA.
    We will figure out what happened with the doctor that did 
this, but this is a miracle. And even at the cost, it is 
probably a savings. When you look at liver transplantation, 
just the emotional that it does to patients--I had a patient 
come up to me on Christmas Eve who had hepatitis C--her sister 
had just died of a liver--a complication of a liver 
transplant--and she was having problems with her private 
insurance getting the coverage, and fortunately that has 
occurred.
    And as the Chairman brought up, and as Mr. Takano brought 
up, we have a real ethical problem in this country, as a 
physician going into the room, a real ethical problem of, I 
know I have a cure, but I can't pay for it.
    And I--there is just one of the drug companies--I know this 
for a fact--that is grossing $4.5 billion a quarter--not a 
year, a quarter--with this drug.
    Now, hopefully we can eradicate this disease, and I hope 
that that will happen.
    And I have an ethical question for Dr. Chang or Dr. 
Shulkin, either one: What happens if a patient becomes 
reinfected due to behavior? I know we treat patients who smoke 
if they get lung cancer and then bladder cancer and cancer of 
the throat, cancer of whatever, directly related.
    How, ethically--because it is an incredibly expensive--I 
started thinking about this, what if your behavior leads you to 
a second infection, what are we going to do? Have you all 
thought about that?
    Dr. Chang. Actually, we have thought about these things, 
but I have to say I am not an ethicist. I think what we 
typically see is patient in front of us, who we would like to 
take care of.
    I think, typically, the issues that I have had in my 
clinical experience is not so much a reinfection, but a 
recurrence or relapse of viremia, because the drugs that we had 
were so inadequate.
    I think, though, we may have to be ready for that 
consideration.
    Mr. Roe. Well, I think you need to be thinking about it 
now, because it is not inexpensive.
    And I, quite frankly, Mr. Takano, I might buy a--not a 
first-class ticket, as you helped provide us on the way back 
from Kuwait with your frequent flyer miles--but I might buy a 
cabin seat and go take the--and then have my viral tire checked 
and see if I was cured. If I didn't have the money, I might 
make that trip and do that. I think that is a--I think that is 
a huge issue that we have to think about.
    And the other thing we have debated in this country for 
years are the costs--there is no question, a majority of 
drugs--new drugs brought to market are developed in the United 
States. The research is done here. It is brought here, and then 
other countries share in that wealth of knowledge that we get 
that we share with the world, and we should.
    The question is, our people are paying the price for that, 
and when we look at a 42,000--it is 80,000 on the private 
side--to get this treatment, that all goes toward less money in 
your paycheck going home and all those things that other 
countries are not doing. So I think the Chairman and Mr. Takano 
make a great point; I don't know what the answer is. I don't 
want to shut it off, but I also don't want to see gouging 
either of--and make it impossible.
    Dr. Chang?
    Dr. Chang. If I may also add, I think, certainly, the 
development of a drug is a great accomplishment, but I think it 
also is standing on the shoulders of all the researchers 
throughout the world who have actually furthered the cause of 
understanding a viral hepatitis and developing a system in 
which you can actually test these kinds of drugs, and without 
which, none of this would have actually happened.
    So I think there is a particular group of people that may 
be benefitting, but I think this is really something that, 
internationally, people have banded together over the last 25 
years to develop.
    Mr. Roe. And, hopefully, this is just a start of instead of 
treating disease, curing disease. I mean just one of the things 
that has really--I have looked at how many diseases I have just 
treated over my career, boy it is remarkable you can walk into 
a patient's room and actually cure them.
    And I was somewhat mixed up in reading the testimony where 
four percent of the veterans that you treat have hepatitis C, 
but then I heard 180--the number is 180,000 active patients 
that we have to treat?
    Dr. Shulkin. No. The--the actual numbers, as I understand 
them, today we have 116,000 patients with known hepatitis C in 
VA.
    The amount of unscreened people--
    Mr. Roe. I got it.
    Dr. Shulkin [continued]. --we think that that will add up 
to the 170, 180,000 patients. So that is what we think is out 
there, but documented, 116,000.
    We also have 46,000 of those who have advanced liver 
disease; those are the ones that we really want to treat now.
    Mr. Roe. Now. And the sooner you can--look, if you are a 
patient, why wait until--I know there are certain categories 
and Dr. Chang knows about who would qualify and all of that, 
but if I have the virus and I want to be cured, I don't want to 
wait until my liver is half-destroyed before I get the 
treatment.
    So, Mr. Chairman, thank you for holding this hearing. I 
yield back.
    The Chairman. Thank you.
    Mr. Takano?
    Mr. Takano. Mr. Chairman and Dr. Roe, that question you 
asked about we don't want to shut it off, we don't want to see 
price gouging either, can I suggest a roundtable or--and this 
is something that affects Energy and Commerce, as well, the 
jurisdiction--I would like to get some expertise from 
economists.
    We don't want to see rent-seeking being incentivized by our 
laws, but we know that the American people pay for a lot of 
research and through the VA--I am learning something new--but 
if we could get a handle on your question, I would think a lot 
could come from that.
    Mr. Roe. Would the gentleman yield?
    Mr. Takano. Yes.
    Mr. Roe. There is a fair ROI when you invest a billion and 
a half dollars from molecule to market. There is a reasonable 
expectation of a return on your investment.
    But some of these, I think, are unreasonable returns on 
investment. And I think when you have patients out there that 
cannot get the treatment, a cure of a disease that is fatal 
because of a cost that is outrageous--and as the Chairman 
pointed out, perhaps as low as one percent of what they are 
charging here, in a foreign country--there is something wrong 
with that balance. So, I agree with you; we should do that.
    Mr. Takano. Well, and then the Chairman mentioned to me in 
a side conversation about the issue of our patents being 
infringed upon in other countries--I mean there is also a trade 
element there going on, but it is hard to know whether that is 
really how valid those arguments are.
    So I would love to see a far more in-depth--it is a big 
issue. I mean I have smaller insurance plans have come to me, 
labor unions, just one or two of their pool could blow up the 
whole plan, so it is enormously disruptive, this drug pricing. 
We have got to get to the root of it.
    The Chairman. Thank you, Mr. Takano.
    Thank you to the Members.
    Also, let me throw another curve in the road to you. There 
actually are those that claim that Dr. Shinazi did not, in 
fact, discover this particular drug. So we have that to deal 
with, as well, as we go through the process.
    I want to ask Dr. Shulkin just a couple real short 
questions. I think in your--not yours--but in the department's 
2015 budget submission, VA stated that researchers collaborated 
with MIT and Brown University on the first powered ankle-foot 
prosthetic that is now commercially available for patients. But 
in your testimony today, I think you said that the device is 
not particularly commercially valuable.
    And so my question is, does VA have ownership in the 
technology?
    Dr. Shulkin. I believe that that is one that we have 
asserted rights on.
    I don't know if you know, Marisue?
    Ms. Cody. Yeah, the--what we talked about in testimony is 
not that same ankle, so we will have to get back to you on 
exactly what our rights are on the ankle you are talking about.
    The Chairman. Okay. Let me also ask you about, there is a 
disposable microchip that is being worked on right now that can 
diagnose a heart attack within minutes, and so what I want to 
know is, has this been disclosed to the VA? And if it has been, 
is the VA pursuing patent protection? And will it be a licensed 
product?
    Dr. Shulkin. We will get back to you on that.
    I don't think you are aware of that either.
    The Chairman. Okay. If you would.
    And the other thing, Doctor--and I appreciate the questions 
that the Members have asked today and certainly your comments 
and answers. I appreciate your letter of February 1st, 
answering my request from back in December.
    And I asked for the following--and I say this, because I am 
going to ask why two things were inserted into this letter--
actually, three things--a list of all inventions disclosed to 
the VA between 2000 and 2015; I asked for a list of VA-funded 
research projects, same time frame; a list of all non-VA-funded 
research projects, same timeframe; and all determination of 
rights, issues--issued by VA.
    I appreciate that. But in your response, you threw in you 
needed budget flexibility. Why did you throw that in your 
response to a very specific letter? In fact, you even talked 
about purchased health care streamlining and modernization.
    I mean, I was pretty specific. Whether you need it or not 
is not a question. Why did you write this response?
    Dr. Shulkin. Right. Right.
    I--I appreciate the fact that that is not directly related 
to your requests.
    The Chairman. Not at all.
    Dr. Shulkin. Yes, I appreciate that. You are correct.
    The Chairman. It is showing up in every single letter that 
comes to us and I am aware--I understand what the department 
would desire and we want to help in that way, any way we can.
    I just--you know, the other thing is, why did you feel it 
necessary in the response to talk about all of the people that 
had been directors of the program over the last few years, by 
name?
    Dr. Shulkin. Yeah. It--it was felt since there was such a 
turnover of people and since Marisue is really in an acting 
role, that if we got questions related to going all the way 
back, that it was important to know that different people had 
served in those roles.
    But it--but--but you did not directly ask for that, sir.
    The Chairman. Okay. And I just--it was interesting that you 
specifically identified individuals.
    I want to thank you again for being here. We have had a 
chance to hear about one specific opportunity, but we think 
there may be others where there had been lost opportunities in 
the technology and transfer program. It appears to have been 
misused, underutilized, and undersupported.
    We appreciate, Dr. Shulkin, your response that it is going 
to be a much more robust oversight on your part. You know, we 
want to determine the extent of lost opportunities that VA has 
experienced, why they were experienced, and what VA is doing to 
ensure that they don't happen again, and to offer VA a chance 
to explain how it has let the program languish for so many 
years, and to establish the next steps to prevent these lost 
opportunities from continuing, so that veterans from the 
beneficiaries of the great inventions that come out of VA's 
research program.
    And, again, I want to thank your candor today, and we look 
forward to the questions that you have taken for the record and 
their answers.
    I would ask unanimous consent that all Members would have 
five legislative days, with which to revise and extend their 
remarks and add extraneous material.
    Without objection, so ordered.
    I want to thank, again, the witnesses and everybody for 
joining us today to discuss what we have, and this hearing is 
adjourned.

    [Whereupon, at 12:04 p.m., the Committee was adjourned.]

                            A P P E N D I X

                              ----------                              

              Prepared Statement of Jeff Miller, Chairman
    I would like to welcome everyone to today's hearing titled, ``Lost 
Opportunities for Veterans: An Examination of VA's Technology Transfer 
Program.''
    Let me begin by stating that the issues we will address today show 
how, despite VA's objections, it is critically important for this 
committee to look at both past and current failures of the department, 
in order to improve the future of Veterans' care. Without our 
investigative effort and our notice to conduct this hearing, VA would 
not have reviewed what we will talk about today. Moreover, VA would not 
be aware of the apparent exploitation of its technology transfer 
program from those inside the department. My concern is that the issues 
we will discuss today may not be limited to one researcher.
    For those who are unaware, Federal agencies are authorized to 
assert ownership in inventions made by Federal employees using Federal 
resources. VA's technology transfer program was developed as the 
mechanism to determine ownership and then to transfer the benefits of 
VA owned technology to veterans and the public through patenting and 
licensing. Unfortunately, this program appears to be habitually 
underused, resulting in tremendous losses to Veterans and taxpayers.
    A glaring example of where the technology transfer program perhaps 
should have been used is in connection with the Hepatitis C drug, 
Sofosbuvir, which is claimed to cure up to 99% of those infected with 
this ultimately fatal disease. This drug, reportedly developed by a VA 
employee, resulted in an $11 billion sale and $440 million personal 
profit to the employee. However, VA appears to have nothing to show for 
it, except a bill from the drug's current owner, Gilead Sciences, for 
VA's use to treat veterans.
    More than two hundred thousand Veterans have been diagnosed with 
Hepatitis C, and VA pays upward of $40,000 for treatment for each 
Veteran infected with this virus. That is about $8 billion to treat 
veterans with a drug reportedly developed using VA resources. During 
last summer's financial crisis, VA had to ask Congress for additional 
funds just to pay for the treatment. So the question is, why is VA 
paying so much?
    What we know is the drug's reported creator, Dr. Raymond Schinazi, 
was a 7/8th VA employee when the Hepatitis C drug was developed. He 
worked at VA for more than twenty five years and retired shortly after 
we requested he testify. Dr. Schinazi is listed as a senior career 
researcher and has received hundreds of thousands of dollars in VA 
research funding. Yet, in a letter to me, dated February 1, 2016, the 
day of his retirement, VA asserts that no money was given to Dr. 
Schinazi for his research on the drug.
    But, questions remain whether earlier research on a different drug 
was used in the development of the hep-c treatment. Additionally Dr. 
Schinazi filed patents while he was a VA employee, but he never 
disclosed these inventions and patents to VA. So how is it that none of 
his claimed lifesaving inventions belong to VA and our Veterans? 
Interestingly, as I mentioned earlier, I asked Dr. Schinazi to appear 
at this hearing, but after being requested to testify, he retired from 
VA, effective February 1 - two days ago.
    Secretary McDonald rightly promotes VA as having invented many 
cutting edge technologies like the nicotine patch, the cardiac stent 
and the CT-scan, but in actuality, VA reportedly receives no credit and 
no revenue from these inventions because it did not assert an ownership 
interest.
    Although these inventions were developed prior to the inception of 
VA's technology transfer program, these lost opportunities should serve 
as lessons learned and, in the future, VA should be supporting and 
developing the program so that no other potential opportunities are 
lost. Our Veterans and taxpayers should be benefiting from these 
inventions. It is as simple as that.
    VA oversees a $1.8 billion research program. Yet, in FY 2014, it 
only received 304 invention disclosures, filed only twenty five 
patents, issued only fifteen license agreements and earned only 
$375,674 in royalties. To put that in perspective, the National 
Institutes of Health has a $3 billion intramural research budget and in 
FY 2014 received 370 invention disclosures, filed 153 patents, issued 
222 license agreements and earned $137 million in royalty income, or 
about 360 times more than VA's reported royalties. Similarly, the USDA 
has a $1 billion research program and in FY 2014 received 117 invention 
disclosures, filed 119 patents, signed 412 license agreements and 
received $3.6 million in royalty income or about nine times more than 
v-a's reported royalties.
    This begs the question, why has VA not seemed to capitalize on the 
many research successes it claims? We have already seen the results of 
one potential lost opportunity regarding the new Hepatitis C drug. But, 
how many more are there and how many more will there be? If VA wants to 
take credit for tremendous medical accomplishments, it should have 
something to show for it, certainly more than just talk. Veterans 
deserve the right to reap the benefits of these inventions given the 
fact that they were created by employees and with taxpayer resources 
specifically designated for their use.

                                 --------
                  Prepared Statement of Corrine Brown
      Thank you, Mr. Chairman.
      Since 1980, the federal government has worked to make 
taxpayer funded research more available to the private sector while 
making sure that taxpayers also gain from these research investments.
      This allows all of us the share in important research 
breakthroughs.
      University of Florida developed Gatorade and got a patent 
for it, so anybody who used it had to pay University of Florida 
royalties for its use. This concept of VA keeping its intellectual 
property rights for its employee's inventions can't be hard.
      But we need to strike the right balance here so academic 
institutions want to partner with VA to conduct research and get 
funding for research from royalties from inventions, and so research is 
available for businesses to develop products that help veterans and the 
public.
      This important program that should be overseeing this 
balance may not have received the leadership focus that it needs and 
employee turnover has been high.
      There are questions as to whether the process in place is 
sufficient to strike this balance, from the Veterans Health 
Administration to the Office of General Counsel.
      For this reason, I believe we should have an outside 
organization look at this program. I believe we should request the GAO 
to look into this program and provide us with the facts so that we can 
make sure the program strikes the proper balance.
      Finally, I believe that if this program is not working as 
it should, VA, and taxpayers, may end up holding the bag.
      Just last week the Chairman raised questions and concerns 
over the price paid by the VA for Hepatitis C drugs. He also pointed 
out that the drug was invented by a team led by a VA doctor.
      This doctor subsequently sold the company that developed 
the drug to Gilead (Jill-e-ad) Sciences.
      According to the Chairman, Gilead is charging the VA 
``upward of $40,000'' while in Egypt the drug costs $900.
      Without the VA this drug would not exist.
      In the case of Gilead, we do not know if the process 
worked and whether the VA properly asserted its rights in this matter.
      That is why we requested that Gilead be invited to 
testify today.
      I believe that we should hold a hearing on drug pricing 
and how, moving forward, we can make sure that veterans are getting the 
drugs they need and VA is paying a fair price.
      In addition, according to a recent New York Times 
article, drug manufacturing issues have caused shortages and rationing. 
We need to make sure that we get to the bottom of this to make sure 
that veterans are not unduly affected. Let me repeat myself. We need to 
get to the bottom of this to make sure veterans are not unduly 
affected.
      Making sure that taxpayers are not ripped off, and that 
veterans get the medicines they need is vital.
      I look forward to us working together to explore these 
issues in the weeks ahead.
      One team one fight!
      Thank you, Mr. Chairman and I yield back the balance of 
my time.

                                ---------
               Prepared Statement of David Shulkin, M.D.
    Good morning, Chairman Miller, Ranking Member Brown, and Members of 
the Committee. Thank you for the opportunity to discuss the Technology 
Transfer Program at the Department of Veterans Affairs (VA). I am 
accompanied today by Dr. Kyong-Mi Chang, Acting Chief Research and 
Development Officer, and Dr. Marisue Cody, Director of Research 
Operations.
    VA's Technology Transfer Program is housed within the Office of 
Research and Development, through which VA conducts a robust research 
program whose fundamental mission is to advance the healthcare of 
Veterans. VA research supports over 2,000 research projects at over 100 
VA medical centers (VAMC) throughout the country, with an FY2016 direct 
appropriation of over $620 million. The VA research program is further 
enhanced by private and federal grants awarded to VA researchers, 
meaning total resources available for VA researchers will exceed $1.8 
billion this year. VA research projects focus on VA-relevant biomedical 
laboratory, clinical, rehabilitation, and health services research 
through four research services, a Cooperative Studies Program for large 
clinical trials, and a quality improvement program that uses research 
evidence to improve clinical care. For over 90 years, VA research has 
worked to improve the lives of Veterans: performing the first 
successful liver transplants; developing high-performance prosthetic 
devices; establishing the value of aspirin therapy in improving heart 
health; showing the effectiveness of the Shingles vaccine; and 
developing the nicotine patch.
    Established in 2000, VA's Technology Transfer Program reflects our 
research focus on the Veteran, ensuring that products and innovations 
created by VA researchers are accessible to all Veterans. Prior to the 
establishment of the Technology Transfer Program, VA had no policy on 
intellectual property rights, and generally waived ownership rights to 
inventions, tasking the inventor and usually the academic partner with 
patenting, marketing, and licensing responsibilities.
    The Technology Transfer Program has three main areas of focus: 1) 
protecting and commercializing of intellectual property; 2) 
facilitating technology transfer and cooperative research and 
development activities among academic partners, local VAMCs, and 
industry; and 3) educating researchers within VA about their rights and 
obligations regarding intellectual property management and cooperative 
research activities. Technology Transfer within VA involves multiple 
integral individuals and entities nationwide, including researchers 
within VAMCs, the Office of General Counsel, academic affiliates, 
Nonprofit Corporations, and commercial partners.
    Enabling greater cooperation with academic and private institutions 
is one fundamental goal of the Technology Transfer Program. To support 
this, the program executes over 1000 new Cooperative Research and 
Development Agreements per year, most are for clinical studies, and 
these agreements represent over $35 million in sponsored research 
dollars available to VA research centers.
    The Technology Transfer Program's public mission requires 
aggressive dissemination of educational information to researchers, and 
of products to the market. It is also necessary that VA asserts an 
ownership interest in disclosed inventions whenever appropriate, so 
that discovery can be built upon. This ensures Veterans have access to 
these technologies. Often, as opposed to patenting inventions and 
delaying their availability in the public domain, the Technology 
Transfer Program works to ensure Veterans have immediate access to 
these technologies by releasing them publicly.
    The Technology Transfer Program has had several recent successes, 
particularly in areas that are highly specialized. The program is 
crucial to the dissemination of products that are of limited commercial 
value to private institutions but can greatly improve Veterans' quality 
of life. This has included the development of several kinds of 
prosthetic feet, such as a foot that allows Veterans with lower leg 
amputation to easily change shoes without experiencing balance issues 
(allowing, for example, easier wearing of high heels or cowboy boots). 
This is an important quality of life issue for Veterans with lower limb 
amputation, but is not particularly commercially valuable, and would 
likely not be available to Veterans without the Technology Transfer 
Program. Other examples include products that make it easier for 
Veterans to use wheelchairs, or prevent common injuries (pressure 
ulcer, carpal tunnel syndrome) related to use of wheelchairs.
    Every year, VA researchers develop dozens of new health care-
related technologies and other inventions that benefit VA's patients, 
other Veterans, and all Americans.
    Unlike other Federal agencies, VA has no laboratories whose 
predominant function is research. VA includes research as part of the 
mission of each VAMC, although the primary mission of a VAMC is patient 
care for Veterans. In fact, the majority of VA researchers are active 
clinicians. This leads to a focus on research areas most likely to 
benefit Veterans. VA's research mission is entirely intramural. VA does 
not have authority to award grants to parties outside VA and all VA 
research funding is provided to VA-employed researchers.
    Researchers work at more than 100 VAMCs conducting research. In 
addition, 124 VAMCs have formal affiliations with academic institutions 
and hospitals, and many full- and part-time VA employees also have 
academic appointments or are employed at an affiliated academic 
institution or hospital - they are dually appointed personnel. Many 
clinicians/researchers have laboratory access at both VA and the 
academic affiliate. Because of these arrangements, most VA inventions 
are jointly owned by VA and its academic affiliates, making technology 
transfer a collaborative effort. To better facilitate efficient 
technology transfer, the Technology Transfer Program has executed 
Cooperative Technology Administration Agreements on VA's behalf with 
many academic affiliates, allowing the affiliates to take the lead in 
the management of the co-owned inventions, while maintaining VA's joint 
ownership. This arrangement is particularly beneficial to VA, as 
affiliates are typically better positioned to manage these co-owned 
inventions, having greater flexibility with licensing terms and greater 
access to private sector partners.
    VA research relies on researchers self-reporting invention 
disclosures, and this process is very similar to the one used by our 
academic partners. Without proper filing of invention disclosures, VA 
is unable to review and appropriately make a determination of rights. 
Any suspicion of wrongdoing or evidence of impropriety in this or any 
other VHA program has, and will be, referred to the Office of the 
Inspector General.
    Thank you for the opportunity to testify today and we look forward 
to your questions.

                                 [all]
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