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25–018 2017

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

PROGRAM 

HEARING 

BEFORE THE

COMMITTEE ON VETERANS’ AFFAIRS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

SECOND SESSION 

WEDNESDAY, FEBRUARY 3, 2016 

Serial No. 114–52 

Printed for the use of the Committee on Veterans’ Affairs 

( 

Available via the World Wide Web: http://www.fdsys.gov 

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(II) 

COMMITTEE ON VETERANS’ AFFAIRS 

JEFF MILLER, Florida, Chairman 

DOUG LAMBORN, Colorado 

GUS M. BILIRAKIS, Florida, Vice-Chairman 

DAVID P. ROE, Tennessee 

DAN BENISHEK, Michigan 

TIM HUELSKAMP, Kansas 

MIKE COFFMAN, Colorado 

BRAD R. WENSTRUP, Ohio 

JACKIE WALORSKI, Indiana 

RALPH ABRAHAM, Louisiana 

LEE ZELDIN, New York 

RYAN COSTELLO, Pennsylvania 

AMATA COLEMAN RADEWAGEN, American 

Samoa 

MIKE BOST, Illinois 

CORRINE BROWN, Florida, Ranking Member 

MARK TAKANO, California 

JULIA BROWNLEY, California 

DINA TITUS, Nevada 

RAUL RUIZ, California 

ANN M. KUSTER, New Hampshire 

BETO O’ROURKE, Texas 

KATHLEEN RICE, New York 

TIMOTHY J. WALZ, Minnesota 

JERRY MCNERNEY, California 

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. 

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(III) 

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 

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Leonard.horne on VACREP0180 with DISTILLER

(1) 

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 reportLeonard.horne on VACREP0180 with DISTILLER

2 

edly 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 

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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. 

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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. 

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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. 

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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 indepth 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. 

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[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. 

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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 

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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. 

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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. 

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11 

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. 

Leonard.horne on VACREP0180 with DISTILLER

12 

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. 

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13 

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, 

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14 

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 oneeighth 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 

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15 

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 firstclass 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. 

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16 

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. 

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17 

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. 

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18 

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? 

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19 

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. 

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20 

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? 

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21 

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. 

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22 

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 

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23 

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 

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24 

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 billiondollar 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. 

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25 

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? 

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26 

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. 

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27 

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. 

Leonard.horne on VACREP0180 with DISTILLER

28 

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? 

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29 

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. 

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30 

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. 

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31 

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.] 

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(32) 

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 

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33 

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. 

f 

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. 

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• 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. 

f 

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 

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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. 

Æ 

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