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481–620PS 2003

VA RESEARCH AND NONPROFIT VA RESEARCH

CORPORATIONS AND EDUCATION FOUNDATIONS

JOINT HEARING

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT AND

INVESTIGATIONS

AND

SUBCOMMITTEE ON HEALTH

OF THE

COMMITTEE ON VETERANS’ AFFAIRS

HOUSE OF REPRESENTATIVES

ONE HUNDRED SEVENTH CONGRESS

SECOND SESSION

MAY 16, 2002

Printed for the use of the Committee on Veterans’ Affairs

Serial No. 107–30

(
COMMITTEE ON VETERANS’ AFFAIRS

CHRISTOPHER H. SMITH, New Jersey, Chairman

BOB STUMP, Arizona

MICHAEL BILIRAKIS, Florida

TERRY EVERETT, Alabama

STEVE BUYER, Indiana

JACK QUINN, New York

CLIFF STEARNS, Florida

JERRY MORAN, Kansas

HOWARD P. (BUCK) MCKEON, California

JIM GIBBONS, Nevada

MICHAEL K. SIMPSON, Idaho

RICHARD H. BAKER, Louisiana

ROB SIMMONS, Connecticut

ANDER CRENSHAW, Florida

HENRY E. BROWN, JR., South Carolina

JEFF MILLER, Florida

JOHN BOOZMAN, Arkansas

LANE EVANS, Illinois

BOB FILNER, California

LUIS V. GUTIERREZ, Illinois

CORRINE BROWN, Florida

JULIA CARSON, Indiana

SILVESTRE REYES, Texas

VIC SNYDER, Arkansas

CIRO D. RODRIGUEZ, Texas

RONNIE SHOWS, Mississippi

STEPHEN F. LYNCH, Massachusetts

SHELLEY BERKLEY, Nevada

BARON P. HILL, Indiana

TOM UDALL, New Mexico

SUSAN A. DAVIS, California

PATRICK E. RYAN, Chief Counsel and Staff Director

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

STEPHEN E. BUYER, Indiana, Chairman

BOB STUMP, Arizona

MICHAEL BILIRAKIS, Florida

TERRY EVERETT, Alabama

JOHN BOOZMAN, Arkansas

JULIA CARSON, Indiana

BARON P. HILL, Indiana

TOM UDALL, New Mexico

SUBCOMMITTEE ON HEALTH

JERRY MORAN, Kansas, Chairman

CLIFF STEARNS, Florida,

HOWARD P. (BUCK) MCKEON, California

JIM GIBBONS, Nevada

MICHAEL K. SIMPSON, Idaho

RICHARD H. BAKER, Louisiana

ROB SIMMONS, Connecticut

ANDER CRENSHAW, Florida

HENRY E. BROWN, JR., South Carolina

JEFF MILLER, Florida

JOHN BOOZMAN, Arkansas

BOB FILNER, California

RONNIE SHOWS, Mississippi

SHELLEY BERKLEY, Nevada

CIRO D. RODRIGUEZ, Texas

LUIS V. GUTIERREZ, Illinois

VIC SNYDER, Arkansas

STEPHEN F. LYNCH, Massachusetts
(III)

C O N T E N T S

May 16, 2002

Page

VA Research and Nonprofit VA Research Corporations and Education

Foundations .......................................................................................................... 1

OPENING STATEMENTS

Chairman Buyer ...................................................................................................... 1

Hon. Jerry Moran, Chairman, Subcommittee on Health ..................................... 3

Prepared statement of Chairman Moran ....................................................... 41

Hon. Bob Filner, prepared statement of ................................................................ 43

Hon. Julia Carson .................................................................................................... 17

Prepared statement of Congresswoman Carson ............................................ 41

Hon. Jeff Miller ........................................................................................................ 44

WITNESSES

Baldwin, Wendy, M.D., Deputy Director for Extramural Research, National

Institutes of Health .............................................................................................. 33

Laracuente, Antonio, Chairman, National Association of Veterans’ Research

and Education Foundations and Executive Director, Atlanta Research and

Education Foundation .......................................................................................... 30

Prepared statement of Mr. Laracuente, with attachment ............................ 82

Mather, John H., M.D., Chief Officer, Office of Research Compliance and

Assurance, Department of Veterans Affairs ...................................................... 6

Prepared statement of Dr. Mather .................................................................. 66

Roswell, Robert H., M.D., Under Secretary for Health, Department of Veterans Affairs, accompanied by Tim McClain, General Counsel, Jack Feussner,

M.D., Chief Research and Development Officer, Veterans Health Administration; and Mindy Aisen, M.D., Director, Rehabilitation Research and Development, Veterans Health Administration ..................................................... 19

Prepared statement of Dr. Roswell ................................................................. 75

Slachta, Jr., Michael, Assistant Inspector General for Auditing, Office of

Inspector General, Department of Veterans Affairs, accompanied by John

Bilobran, Deputy Assistant Inspector General for Auditing ............................ 4

Prepared statement of Mr. Slachta, with attachment ................................... 45

Zieve, Franklin, M.D., president, McGuire Research Institute, Inc. ................... 32

Prepared statement of Dr. Zieve, with attachment ....................................... 91

MATERIAL SUBMITTED FOR THE RECORD

Statements:

The American Legion ....................................................................................... 99

Disabled American Veterans ........................................................................... 104

Paralyzed Veterans of America ....................................................................... 106

Written committee questions and their responses:

Chairman Buyer to Michael Slachta, Jr., Assistant Inspector General ....... 111

Congresswoman Carson to Dr. Robert Roswell, Under Secretary for

Health, and Dr. John Feussner, Chief Research and Development

Officer ............................................................................................................ 117

Congresswoman Carson to Dr. John Mather, Chief Research Compliance

and Assurance Officer .................................................................................. 138

Chairman Buyer and Chairman Moran to National Association of Veterans’ Research and Education Foundations ................................................. 160

Chairman Buyer to Dr. Franklin Zieve .......................................................... 179

(1)

VA RESEARCH AND NONPROFIT VA RESEARCH CORPORATIONS AND EDUCATION

FOUNDATIONS

THURSDAY, MAY 16, 2002

U.S. HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS,

JOINT WITH SUBCOMMITTEE ON HEALTH,

COMMITTEE ON VETERANS’ AFFAIRS, Washington, DC.

The subcommittees met, pursuant to notice, at 10:20 a.m., in

room 334, Cannon House Office Building, Hon. Steve Buyer (chairman of the Subcommittee on Oversight and Investigations)

presiding.

Present: Representatives Buyer, Carson, Snyder, Hill, Moran,

Boozman, and Filner.

OPENING STATEMENT OF CHAIRMAN BUYER

Mr. BUYER. I’ll bring this hearing to order. Good morning. I first

would like to also thank my colleague, Chairman Moran. This is a

joint hearing today. I also want to thank Ranking Democratic

Members Julia Carson and Bob Filner for their cooperation.

Since this is a joint hearing, Chairman Moran and I will both

share the gavel. Today’s hearing will focus on four areas: (1) followup of the hearing held in April 1999 on the suspension of medical

research at West Los Angeles and Sepulveda VA medical facilities;

and the status of VA’s medical research accreditation program;

and, third, review of the management and effectiveness of VA research and education foundations; and (4) intellectual property

rights of the government and investigators with respect to VA inventions and discoveries.

In April of 1999, this full committee’s two subcommittees held a

hearing to find out what happened at the West Los Angeles and

Sepulveda VA medical facilities that caused the suspension of all

medical research at those facilities. What we learned at that hearing and at subsequent hearings held in September of 2000 was

very alarming.

We learned that at least eight medical facilities were in noncompliance of VA regulations that govern VA research involving

human volunteers. We also found out that veterans were used as

human research subjects without their prior informed consent. In

fact, one of the veterans had even refused his consent not once but

twice. The veterans in question were elderly and sick, and they
2

were betrayed by the VA system that was supposed to take care

of and protect them.

How could this have happened when the VA is subject to the regulatory requirements of the ‘‘common rule,’’ which is derived from

the federal policy for the protection of human subjects? The VA is

one of 17 federal agencies who are co-signataries to the common

rule. In fact, the VA has incorporated the common rule in its own

regulations. VA is legally bound to adhere to the regulations, which

include detailed descriptions of informed consent and the structure

and responsibilities of Institutional Review Boards. It is important

to note that all VA research is subject to the regulatory requirements of the common rule.

During today’s hearing, we hope to learn what the VA has done

since the 2000 hearing to ensure that veterans who participate in

medical research have not been harmed in any way. Furthermore,

at this point in time, we would like to know if we can feel reasonably confident that veterans who participate in medical research

are doing so willingly.

Another issue that is paramount to patient safety is the need to

ensure that Institutional Review Boards are adequately funded and

sufficiently staffed to perform their oversight responsibilities and

ensure the protection of all subjects, some of which of whom are

our most vulnerable.

Since we serve as the watchdog for veterans’ issues, including VA

research, I want you to know that we intend to hold a hearing in

September on VA medical research and the role played by VA research corporations and education foundations to foster valid VA

scientific research.

Ms. Carson and I think and recognize that many accomplishments made by the VA in discovering new drug therapies and developing medical devices have benefitted not only veterans but all

Americans. For instance, the VA invented the implantable cardiac

pacemaker, developed the nicotine patch, performed the first successful liver transplant, and developed the predicate for the first

oral vaccine for smallpox.

The question then is: Does the VA reap the benefits of the research and development? I’m not entirely clear on what arrangement the VA has with respect to patent rights and revenues generated by new discoveries. We hope to hear today how the VA

plans to make certain that they get their rightful share of royalties

that are collected.

The many discoveries made by the VA through its biomedical research have saved lives and alleviated the pain and suffering associated with many diseases. However, there is a hidden risk attached to performing the necessary scientific research, in that

something can go wrong.

I guess one of the most tragic examples is what happened at

Johns Hopkins when volunteers participating in its clinical trials

died. This is indeed tragic, and we want to do everything we can

to make sure this doesn’t happen at one of our VA research facilities. We must make sure that the strictest standards in protecting

human subjects participating in medical research are in place. Unfortunately, the West Los Angeles VA medical facility is not the

only facility that has had restrictions placed on its medical re-
3

search. We need only look at the VA medical facility right here in

the nation’s capital to find a flagrant disregard for the protocols

governing medical research. Fortunately, no one was harmed at the

Washington, DC or Martinsburg facilities.

However, we cannot overlook the fact that the Office of Research

Compliance and Assurance identified numerous areas where these

two facilities were in noncompliance and both had restrictions

placed on their human subject research. This is not good. We can

do better, and it is the role of Congress to make sure that all possible precautions are taken to protect our veterans.

We look forward to all of the panels today.

And sort of, as a sidebar, this issue of the Federal Government

assisting in medical research, and then companies and corporations

then reaping the royalties and benefits, whether it is corporations

or universities, take UCLA, for example. There is a lot of money

UCLA has received from the Nicoderm patch. I have not seen tuition go down any. That doesn’t happen. And yet the taxpayer needs

to ask the question: What are we getting out of this?

Yes, there is a benefit to society, but there is a real question

about the royalties. And I am very interested in the comments of

the panels today. If they could deliver their opinions to us, I think

it would be important.

What is happening, for edification to the panels and listeners,

there are some conferences that are going on right now. We are

doing the welfare reauthorization bill, building off of the successes

of the bill that we had done, but there are still yet some differences.

We are going to go ahead and proceed. And I am going to ask

unanimous consent that Mr. Len Sistek, counsel for Ms. Carson, be

permitted to ask questions on her behalf. A statement of Ms. Carson will be submitted for the record, without objection. And we will

go ahead and proceed with this hearing.

I will yield to Mr. Moran for any comments he may have. Chairman Moran.

OPENING STATEMENT OF HON. JERRY MORAN, CHAIRMAN,

SUBCOMMITTEE ON HEALTH

Mr. MORAN. Chairman Buyer, thank you very much for your cooperation in holding this hearing. The VA has a longstanding medical research and development program, and I know it is a source

of pride for this committee and for the VA. It has made a difference

for many of our veterans, our sick, and disabled in the Armed

Forces.

There are many things that VA investigators can be proud of.

There are many instances in which things they have done have

made a difference. They have been recognized with a Nobel prize

on three occasions, and the Albert Lasker Medical Research Award,

sometimes called the U.S. Nobel Prize, which has been utilized to

recognize the excellence in science and medicine at the VA.

Our VA researchers have published literally thousands of papers

referenced in journals across the entire spectrum of medicine and

bioscience, including the New England Journal of Medicine, the

Lancet, and journals of every medical discipline.
4

Its research is one of the VA bedrock programs. It provides vital

link to VA academic partnerships in 107 of our schools of medicine,

and forges relationships with other health care professionals and

health care professional schools.

While research is an acknowledged hidden treasure at the VA,

it has also been the source of some challenges in recent years, as

seen during committee-held hearings in 1999 and 2000, on the

problems of research activities at several VA facilities, particularly

the largest one in Los Angeles.

More recently, problems surfaced in VA facilities in Baltimore,

Durham, Washington, DC, and some other sites. The committee

has expressed concern in the past about the adequacy of the VA’s

informed consent practices, its conflict of interest policies, and its

internal research management practices, including the effectiveness of supervision exercised by VA Institutional Review Boards,

the resources committed to IRBs, and VA local research management including proper recordkeeping, and other documentation

requests.

I would like to note for the record that the problems observed in

VA research are duplicated in university biomedical research programs outside the VA, and even some of our nation’s most prestigious universities. Many of these cases have come to light in the

press in recent years, so the VA is not alone in regard to these

concerns.

Today, we will reexamine some of the VA programs in research

with a focus on the legislation we passed to give the VA authority

to set up nonprofit foundations to assist VA managed extramural

research fund such as NIH, corporate, and philanthropic grants.

I look forward to the testimony of our witnesses today, and I am

also very interested in the VA’s experience to date with intellectual

property law, and the VA’s technology transfer program, which I

believe is another success story for VA’s research.

Mr. Chairman, I thank you again for your cooperation, and look

forward to our discussion today.

[The statement of Chairman Moran appears on p. 41.]

Mr. BUYER. Good morning.

Mr. SLACHTA. Good morning.

Mr. BUYER. Mr. Slachta, if you would please proceed. We are

going to proceed with the 5-minute rule. And we appreciate you

being here.

Mr. SLACHTA. Yes, sir.

STATEMENTS OF MICHAEL SLACHTA, JR., ASSISTANT INSPECTOR GENERAL FOR AUDITING, OFFICE OF INSPECTOR GENERAL, DEPARTMENT OF VETERANS AFFAIRS, ACCOMPANIED

BY JOHN BILOBRAN, DEPUTY ASSISTANT INSPECTOR GENERAL FOR AUDITING; AND JOHN H. MATHER, M.D., CHIEF

OFFICER, OFFICE OF RESEARCH COMPLIANCE AND ASSURANCE, DEPARTMENT OF VETERANS AFFAIRS

STATEMENT OF MICHAEL SLACHTA, JR.

Mr. SLACHTA. Mr. Buyer, Mr. Moran, members of the committee,

I am accompanied by Mr. John Bilobran, the Deputy Assistant Inspector General for Auditing. As you know, we are here today to
5

report on the Office of Inspector General’s work related to the VA’s

nonprofit research corporation. I will summarize my written testimony, and I ask that the testimony be provide for the record.

As delineated in our written testimony, from fiscal years 1994 to

1997, we have published three reports that have identified a need

to improve accountability and oversight related to the administration of funds by VHA research corporations. Issues that we have

reported include:

In a fiscal year 1994 audit of one research corporation, we found

that the corporation’s board of directors and officers had not established sufficient written policies and procedures to ensure the stewardship of their corporation’s activities, or developed an effective

internal control structure.

In another 1994 report, we reviewed a million dollars of $3.6 million in expenditures spent at three research corporations and identified about $625,000 that was spent on activities not directly related to research. We found that funds were spent for salaries of medical residents and on staff travel not clearly related to research or

administration. And we found that funds were spent for non-research-related conferences, honorary gifts, awards, entertainment,

other non-research expenditures.

In a fiscal year 1997 report, we found that one medical center

provided radiology and laboratory services to an affiliate medical

school, but the research corporation, not the medical center, billed

and received payment from the school for the services.

Since fiscal year 1993, we have also issued four other reports

that addressed issues related to VA’s management of the research

program. Although these reports do not directly address funds administered by the research corporations, the issues reported were

related to VHA’s administration of the research program and control over research funds.

In these reports, we made recommendations to strengthen controls over the use of research funds, personnel, and medical care

fund reimbursements. In response to our recommendations, VA

agreed to publish national policy for the operation of research corporations that included guidance for administration, accounting,

budgeting, and oversight.

VA published such a policy chapter governing nonprofit research

corporations in May 1994. In our view, that policy did not adequately address expenditures controls, and did not provide adequate guidance over the appropriate use of research funds. Subsequently, in November of 2001, VHA published VHA Directive 1200;

and in December 2001, VHA published the handbook 1200.17, to

provide further guidance for governing research corporations.

In response to the committee’s questions regarding the monitoring and accountability requirements for VA’s research corporations,

we obtained responses to the questions from the Under Secretary

for Health, the Executive Director of National Association of Veterans’ Research and Education Foundations, and the chairman, Office of General Counsel’s Corporations Panel. We compiled their answers and have included them for your information to our written

testimony.

At the committee’s request, my staff reviewed the responses provided. To date, we have focused our review on determining whether
6

the required reports were submitted to the Congress for fiscal year

2000.

Our work included verifying that each VA research corporation

required to obtain an independent financial audit and report corporate information to the Internal Revenue Service was in compliance and accurately reported timely information. We found no evidence to lead us to believe that the information VA reported to

Congress was not complete and reliable.

Based on our current review, we found that 18 of the 88 research

corporations reported total annual revenues of more than $3 million in fiscal year 2000. Accordingly, as an observation, there may

be an opportunity to reduce administrative and overhead expenditures associated with maintaining 88 individual financial management and payroll systems, obtaining annual audits, meeting Internal Revenue Service reporting requirements, and other administrative costs by consolidating and reducing the number of research

corporations and redirecting those funds to direct support of

research.

This concludes my testimony. Mr. Bilobran and I would be please

to answer any questions that you and the members of the committee may have.

[The prepared statement of Mr. Slachta, with attachment, appears on p. 45.]

Mr. BUYER. Dr. Mather.

STATEMENT OF JOHN H. MATHER

Dr. MATHER. Mr. Buyer, Mr. Moran, Mr. Filner, good morning.

Thank you for this opportunity to appear before you. And I would

ask that my written testimony be entered into the record of this

oversight hearing.

Mr. BUYER. No objection.

Dr. MATHER. The focus of my remarks this morning will be on

the progress that has been made in establishing the Office of Research Compliance and Assurance. It is usually referred to as

ORCA, since Dr. Kaiser, the then Under Secretary for Health, announced his formation in April 1999.

I have some additional information on the reinvigoration of the

human subjects research program at the West Los Angeles VA

Medical Center, now the Greater Los Angeles Health Care System,

since September of 2000.

Finally, I will also briefly discuss some of ORCA’s involvements

in the VA’s program for the accreditation of human research protection programs at VA medical centers.

At the outset, I want to emphasis that ORCA’s primary concern

is that every research subject involved in research conducted in VA

medical facilities is afforded all of the protections to which they are

entitled.

The overall purpose of ORCA is to promote enhancements in the

ethical conduct of research in conformance with regulations and

policies while simultaneously monitoring the extent of this

compliance.

ORCA’s structure, scope, philosophy, and product lines are all designed to reenforce this mission. My written statement provides

further information on how this mission has been operationalized.
7

ORCA’s regional office is taking the lead with central office

oversight.

Throughout all of our work, ORCA’s staff strived to keep the veterans needs and welfare in mind. To that end, we have developed,

and are now distributing a brochure: ‘‘I am a veteran. Should I participate in research?’’ The brochure is intended to be used by veterans and their families, who are interested about learning about participation in VA

research. The brochure has a balanced view of VA research and

summarizes patients rights and welfare when they enroll as subjects in research.

One of the features of the brochure that is expected to be very

useful for the veteran is the one page list of questions that a veteran should be prepared to ask about participation in a research

study.

In March 1999, the research program at the Greater Los Angeles

Health Care System was suspended by HHS’s Office for Protection

from Research Risk, now the Office for Human Research Protections, often referred to as OHRP.

The problems with serious and egregious violations of the regulations to which the VA subscribes, known as the ‘‘common rule,’’ and

VA’s own policies and procedures. The research program was immediately placed on administered probation. Although suspension

was soon lifted by OHRP, the VA put in place an approved and detailed research program recovery plan.

There were immediate improvements and evidence of compliance

with the regulations for the protection of human subjects. In spring

2000, a new associate chief of staff for research and development

was installed, which triggered the date one year later for review of

the assigned probationary status.

ORCA conducted an intensive and comprehensive follow-up review of the Greater Los Angeles Health Care Systems Research

Program in April of 2001. The conclusion endorsed by the Under

Secretary for Health was that sufficient progress had been made to

warrant the lifting of probationary status, and authorization was

given to the medical center to submit documents for the activation

of a new federal-wide assurance.

The follow-up review report contained recommendations for additional improvements in the research program. ORCA has been reviewing the implementation of the recovery action plan, which responded to the report’s recommendations. Almost all of the recommendations have been implemented and should be completed

within the next 3 months. This will then result in a written closeout letter from ORCA.

In summary, the Greater Los Angeles Health Care System’s Research Program is now demonstrating that it is dedicated to the

protection of veterans and its human research activities. This has

been a difficult and complicated process to accomplish, which has

necessitated the allocation and expenditure of many additional

resources.

For the balance of my time, I would like to briefly discuss

ORCA’s relationship with the VA’s accreditation program for

human research protection programs. ORCA has a direct liaison

with the human research protection program of accreditation spon-
8

sored by the National Committee for Quality Assurance, often referred to as NCQA, and on the contract of the VA through the Office of Research and Development.

Until just recently, ORCA has acted in a general advisory capacity offering its ideas and suggestions. Now that the contractor for

this accreditation program, NCQA, has begun to notify VA medical

centers, it has surveyed all of the accreditation status, the level of

activity for ORCA has significantly increased.

NCQA has made determinations of accreditation status at 11 of

the 23 sites it has surveyed, issued notice of not accredited at three

VA medical centers, and accredited with conditions at another

eight VA medical centers. These accreditation determinations are

of great concern, especially those designated as not accredited.

ORCA makes immediate contact with the VA medical centers

that are not accredited to make a preliminary assessment of the

situation. Within 48 hours, a focus review team of one or two

ORCA staff is on-site to make a focused assessment as to whether

human subjects enrolled in the research protocols might adequately

protect and determine, as far as possible, whether there has been

any medical harm.

An evaluation is also made as to whether there is any serious or

egregious non-compliance with the regulations. So far, the three

completed focus review reports are reassuring, but they’re insufficient to make a complete determination of the extent and magnitude of possible regulatory noncompliance.

Each of the VA medical centers that receive notification of not

accredited were surveyed several months ago by NCQA, and all of

them have indicated an intent to appeal within a 30-day limit. Filing an appeal with NCQA freezes the notification until NCQA’s appeals power considers additional information provided by the VA

medical center and renders a final decision.

ORCA needs in-depth and current information about the VA

medical center’s human research protection program activities; has

created a systematic post-accreditation review, referred to as a

SPA, to fully address the situation at VA medical centers when

NCQA gives a not accredited designation, or conducts an on-site

SPA review at the VA medical center.

The SPA’s charter defines a purpose for these reviews, and the

expectation is to assess the full scope and significance of the issues

that relate to the performance of a VA medical center’s human subject’s research activities. The SPA report including recommendations, is available 2 weeks after the team completes its on-site review, and the first SPA report is due the end of this week.

During the course of the on-site review, serious and egregious

noncompliance with the regulations that protect human subjects

may become apparent. If so, ORCA may issue a suspension or restriction on the VA medical center’s assurance.

While the final SPA reports have yet to be issued, ORCA has

issued a restriction on the assurance at one of the VA medical centers that was not accredited for serious but not egregious noncompliance with several provisions of the common rule.

When the SPA report is completed, ORCA decides on the next

steps and elicits a recovery action plan from the VA medical center,

which must substantially address the recommendations.
9

As needed, ORCA will notify the other regulatory agencies such

as OHRP and the FDA. Eventually, when the recommendations

have all been fully implemented to ORCA’s satisfaction, the VA’s

Office of Research and Development will be notified. This will signal that consideration might be given to a new review of the VA

medical centers human research protection program through the

NCQA’s accreditation program.

In summary and in conclusion, in the last 3 years since the

Under Secretary for Health announced the establishment of this office, ORCA has committed considerable time and much energy to

achieve the required expertise and competence.

The die has been cast to firmly establish ORCA as the primary

office within the VA for oversight of the VA research enterprise in

regard to the responsible conduct of research. This role and responsibility has been fulfilled in collaboration with other VA offices, the

relevant other federal departments and agencies, and nongovernmental organizations.

Over the next few years, the foundation that has been established in ORCA will allow for the elaboration of an even more robust research enterprise where the rights of human subjects will

be continuously protected.

Again, I appreciate the invitation to discuss these important

issues with you, and I will be pleased to try and answer any questions you might have.

[The prepared statement of Dr. Mather appears on p. 66.]

Mr. BUYER. Thank you very much. A letter was sent from me,

as Chairman of the Oversight Subcommittee. Did you see the responses to the letter?

Mr. SLACHTA. Yes, sir, I have.

Mr. BUYER. How would you characterize these responses?

Mr. SLACHTA. I would generally characterize them as incomplete.

Mr. BUYER. Aren’t you kind? Let’s use that as a baseline.

Mr. SLACHTA. Yes, sir.

Mr. BUYER. They almost remind me of the interrogatories sent

to the President during impeachment. I mean these are not—these

are very—this a very poor document.

Mr. FILNER. Mr. Chairman, I wonder if you would, for the record,

tell us what the letters are, because I am not sure what you are

referring to.

Mr. BUYER. On March 22, I sent a letter, a 6-page letter, requesting the IG review of a long list of questions that had arisen in the

reports, and what I can do is I will pause at this moment. I will

share these. You ought to take a look at these responses, and I will

move on to another question.

Okay. Let’s just move to another question. We will allow Mr. Filner to take a look at them.

You know, we are not asking questions to be bothersome. This

is the taxpayers’ money and we are interested, and there are also

people out there which we are very sensitive about, and we will

come back to that.

I am curious in understanding this relationship with the research corporations. There are 88 of them?

Mr. SLACHTA. Yes, sir, 85 active.
10

Mr. BUYER. Eighty-five. And a director of a research corporation,

are they also—or some of them can be VA employees?

Mr. SLACHTA. The director is supposed to be the medical center

director.

Mr. BUYER. So all of them are VA employees?

Mr. SLACHTA. Yes, there are five directors. There should be two

public directors, two non-VA employees.

Mr. BUYER. Okay. Now, in your testimony when you had cited that in another IG report about this $625,000, that’s back in 1994.

Mr. SLACHTA. Yes, sir.

Mr. BUYER. Right?

Mr. SLACHTA. Yes, sir.

Mr. BUYER. So they are supposed to be doing annual audits, is

that correct?

Mr. SLACHTA. Yes, sir, they are, with certain limitations, yes.

Mr. BUYER. And is that being done?

Mr. SLACHTA. We looked at the reports for fiscal year 2000, and

the audits were being performed.

Mr. BUYER. Okay.

Mr. SLACHTA. We found one facility that was not timely, but it

still was done.

Mr. BUYER. All right. Since I am also participating in something

called Enron and Arthur Andersen, let’s define the word ‘‘audit,’’ okay?

What’s an audit, and what are you looking at?

I know what it is. But what is the definition that is being used?

Mr. SLACHTA. The audit that was required for the research

corporation was an audit of their financial statements. So the audit

that was performed for most of the corporations was done by independent public accountants on the reasonableness of their

statements.

There were some additional auditing Circular VA: 122 requirements on those corporations receiving federal funds, and those

were done by the Department of Health and Human Services.

Mr. BUYER. So the audit is more of an accounting, follow the

dollar—— Mr. SLACHTA. Yes.

Mr. BUYER (continuing). Checks and balances?

Mr. SLACHTA. Correct.

Mr. BUYER. Are they auditing what they are actually spending

to support VA research and medical care appropriations?

Mr. SLACHTA. They are auditing the reporting of the funds on

how they are being spent.

Mr. BUYER. So the answer is no?

Mr. SLACHTA. I can’t say yes or no, because I have not reviewed

their audits.

Mr. BUYER. All right. So let me ask this. I am always bothered

if someone is spending money that should not be spent—having

spent, and then they get merit bonuses, and things like that. Did

that occur?

Mr. SLACHTA. I am not aware of any bonuses being paid to the

research corporations, to the directors of the research corporations—in fact, the directors are VA employees, and they should not

be receiving any renumeration on their research corporations.
11

Mr. BUYER. They are dual-hatted, though.

Mr. SLACHTA. Yes, sir, they are. There is no question about that.

Mr. BUYER. So you could have a director get a merit bonus, and

claim it was for these activities, not related whatever with the research corporation?

Mr. SLACHTA. That is possible. Oh, absolutely, that is possible.

Mr. BUYER. Uh-huh. How does this system work? Is it a good

system or a bad system?

Mr. SLACHTA. It was set up by—— Mr. BUYER. The question is, is it too much responsibility for one

person, or is it working all right?

Mr. SLACHTA. I can’t answer the question as to whether it is too

much responsibility. In some of the corporations, it is working well.

In other corporations, you have got problems. You have got individuals who are not monitoring. They are not performing their oversight activities. In others, it seems to be okay.

Mr. BUYER. All right. I am asking you for your personal opinion

here. If you have got 85 of them out there, it is working in what

kind of percentage?

Mr. SLACHTA. I am really not in a position to respond to that. I

have not done a systematic review of research corporations since

1994.

Mr. BUYER. Right, but you are going to.

Mr. SLACHTA. Yes, sir, obviously.

Mr. BUYER. It is a question of—from the system analytical approach—that is what I am sort of asking here, is the system right

or not, or are you saying it is the human element? If it is the

human element, then obviously it is about management, management styles, and some are proactive and some are reactive, you

know.

Mr. SLACHTA. If I might, you are always going to have the

human element in anything, no matter what you are doing. So you

are going to have individual problems.

The questions that come to our mind, the questions that we

looked at, are basically the same questions that every auditor has,

it is the monitoring and oversight of the activities that go on. Is

there sufficient monitoring and oversight of the corporations? Who

does it? Those are the questions we think that really need to be

answered.

Mr. BUYER. All right. I have some questions for Dr. Mather. But

at this time, I yield to Mr. Filner for questions he may have.

Mr. FILNER. Mr. Chairman, on the questions that you would ask,

I yield to you my time to pursue those if you’d like.

Mr. BUYER. So I have it back? Have you seen these answers?

Mr. SLACHTA. Oh, yes, sir.

Mr. BUYER. Let me ask this question. When you see this, and

you see these types of answers coming from the VA to this committee, what do you—what is your reaction? What do you do about it?

I know what I’m going to do about it. What do you do about it?

Mr. SLACHTA. We thought they were incomplete. If you do not

mind, I would like Mr. Bilobran to explain some of the issues that

we have with the questions.

Mr. BUYER. Only if that is a handoff and not a punt.

Mr. SLACHTA. Oh, no. It is not a punt.
12

Mr. BUYER. All right.

Mr. BILOBRAN. Mr. Chairman, I think we would agree that the

responses are, in general, inadequate to give the committee an

overview of the operations of research corporations. Some of the responses raise the specter that VA and VHA does not have good visibility over the operations of the research corporation.

There are two or three responses, in what I would consider to be

significant areas, where VHA has responded that they do not have

the information to respond to the question. There are several questions where the response appears to be too short and incomplete to

give—and, perhaps, even avoiding a direct answer to the question.

We need to follow up with VHA and respond to the committee with

more complete answers.

Mr. BUYER. Dr. Mather, have you seen this?

Dr. MATHER. Yes, sir, but I do not know anything about that.

Mr. BUYER. Oh, wow.

Dr. MATHER. Mr. Chairman, it does not come under the purview

of ORCA, which is why we have not spent time on the issue.

Mr. BUYER. I understand. I was just curious. You know, I can’t

decide whether this is intentional evasion, ignorance, laziness, or

just did not want to be bothered. I do not know how to interpret

it. But I am going to ask of you, in your review, you have been

around enough to know how to—you know, what this is.

I am just going to let it chill for a moment, because I do not react

very well to this type. We are here to do a job. You are there to

do a job, everybody is, and Congress should not be treated like this.

Mr. Filner, let me yield back to you. I will put it down before I

say something I regret.

Mr. FILNER. Mr. Chairman, I just want to submit my opening

statement for the record.

[The statement of Congressman Filner appears on p. 43.]

Mr. BUYER. It will be submitted for the record. Dr. Snyder, you

are recognized.

Dr. SNYDER. Thank you, Mr. Chairman. Mr. Chairman, I want

to be sure I am looking at the same—and I apologize for coming

in late. We are talking about this Exhibit 1, Compiled Responses

to the Questions in the Committee, that is what we are talking

about?

Mr. BUYER. Yes.

Dr. SNYDER. Mr. Bilobran, would you—I have 5 minutes in this.

Until that red light goes off, would you use my 5 minutes and go

page-by-page, and let us know, and the committee know, which of

these answers you—which of these answers you consider acceptable, which you consider unacceptable, and for what reasons.

And, you know, I don’t know what the extent of your looking into

this is. But if you want to, you know, punt, in the chairman’s

words, on some of them—but would you please go through that for

me?

Mr. BUYER. Can I add one? What is your greatest concern?

Dr. SNYDER. Yeah, which question caused you the most heartburn? But I’d like you to go page-by-page through it in the time

that I have.

Mr. BILOBRAN. Well, let me answer the question about greatest

concern first. I think from our perspective, the greatest concern
13

would be those responses that would indicate that VA and VHA

does not have good visibility over the activities of the research

corporations.

When the corporations were established, they were created to facilitate research. They were created because there was a perception

that research—non-VA funding that was administered by universities to conduct research at VA medical centers was subject to extraordinarily high overhead charges from the university, and that

the idea was that by creating these not-for-profit corporations affiliated with VA medical centers, we would be able to avoid those

charges.

Dr. SNYDER. If you wouldn’t mind, if you could go—we have got

15 pages, and about 4 minutes left. That gives you about 18.2 seconds per page.

Mr. BILOBRAN. Beginning on page 3 of Exhibit 1, there is a question to identify the current VA-approved research projects that are

funded through VA research corporations delineating the type of

research that is conducted.

The first bullet was drug trials for pharmaceutical companies.

And the response says that one-half of foundation revenues come

from the private sector and include grants from pharmaceutical

companies, as well as other private sector organizations.

That would be the first incomplete response in the sense that it

does not directly answer the question, how much comes from pharmaceutical companies? And I might say that the anecdotal information that we have is somewhat different from that response, so we

would have to have that clarified.

The next series of questions relates to other categories of research; and the response is that we do not have this data. And that

would be a major concern that we are not able to accumulate that

data.

Question—What was the percentage that was spent on overhead.

The answer was that expenses averaged about 10 percent? Again,

we need clarification of what that means. Are we talking about just

charges that have been established by the not-for-profit for overhead—charges against the researchers’ funds that are held on account? Are we talking about all indirect costs that might be—— Dr. SNYDER. It also seems like the question there was—my attitude towards that question would be that you were supposed to go

through each corporation and say what is overhead expense.

By this question, one could have had a 50 percent overhead expense, and others could have had a 1 percent overhead expense,

and the average would be about something—yeah.

Mr. BILOBRAN. Indeed, well, two or three questions later there is

a question on the range of overhead expenses? And that range goes

from 0 to 43 percent.

Dr. SNYDER. Oh, yeah, yes.

Mr. BILOBRAN. Farther down on page 4, there is a question, what

were the criteria for considering an expenditure, a research

expenditure?

And the answer is—if an expenditure is related to research, it is

considered to be a research expenditure, a somewhat circuitous response that does not—I think needs clarification.

Dr. SNYDER. No.
14

Mr. SLACHTA. Oversight questions.

Dr. SNYDER. I am sorry?

Mr. BUYER. Oversight questions.

Mr. BILOBRAN. Where is—— Dr. SNYDER. Page 5.

Mr. SLACHTA. One of the concerns that I had, in particular, as

a manager, is the oversight functions. The oversight is being

pressed down to the executive review at the research corporation,

the board of directors, the local facility.

And it says in here, ‘‘What oversight functions are in place to review these reports, compiled in accordance with requirements?’’ Dr. SNYDER. I am sorry, sir. Where are you at?

Mr. SLACHTA. I am sorry, page 5.

Dr. SNYDER. Page 5.

Mr. SLACHTA. Right, and it dealt with the oversight being at the

facility level. Network fiscal officers, as well as personnel, Office of

General Counsel—well, that’s local general counsel, and the Office

of the Inspector General.

The Office of the Inspector General has not looked at research

corporations in a long time, and the Office of the Secretary. Well,

that is the compilation. That is at the summary level. Nobody is

looking at the facility level, and I think that is a major issue that

needs to be looked at.

Mr. BUYER. I ask unanimous consent the gentleman from Arkansas be granted an additional 5 minutes to complete his line of

questioning.

Dr. SNYDER. Thank you, Mr. Chairman. If you would just continue, please. That increases your per second per question, but we

have still got 10 pages to go. You have 5 more minutes.

Mr. BILOBRAN. Going to page 6, ‘‘What is the total amount VA

received from donated funds for 2001, and how was it accounted

for?’’ And the response is that we do not have data for total VA

donations.

Again, it does not address why—what that specific response

means. Do we have information on some of them, but not all? And

it certainly does not address—— Mr. BUYER. Because if you don’t even know how much money you

got in, there is no way you can be accountable.

Mr. BILOBRAN. Exactly. And I guess this points to another of our

concerns, which is related to the utility of the annual report in providing federal oversight of these activities.

Is this report sufficiently detailed and comprehensive to provide

the oversight? These responses seem to point to the need to improve the detail and the scope of the annual reporting.

And next. During the past 5 years have any research corporations earned revenues from general fundraising, investing, and/or

business-like activities?

And the response is that a few corporations have participated in

minimal fundraising, and some participate in the CFC, and that

they invest funds and instruments backed by the full, faith, and

credit of government.

I would like to see a direct response to the balance of the question, with regard to business-like activities. Who is responsible for

any monitoring? And provide documentation of those reviews.
15

The response is that IRS, as well as each corporation’s accountant, auditor, and board of directors provides monitoring to ensure

that all revenues and expenditures are consistent with the corporation’s tax exempt purposes, and are reported accurately. Fundraising expenditures are reported in Form 990 and interest. Again, I

think that the——

Dr. SNYDER. Well, that’s an acknowledgement there is no VA

monitoring at all.

Mr. BILOBRAN. It appears to be an acknowledgement that there

is no VA monitoring.

On top of page 7, what oversight requirements are in place to

monitor research corporations?

Each corporation has a board of directors that has responsibility.

In addition, the corporation has a CPA accountant and an external

auditor. Further, the Inspector General, the Comptroller General,

and the IRS, and government of the state in which the corporation

is incorporated, have the right to examine the records of a corporation at any time.

Again, this response indicates those organizations and elements

that have rights to monitor. It does not address what I would perceive to be the intent of the question, which is ‘‘Who in VHA monitors the activities of the corporation, and how is that monitoring

taking place?’’

Expenditures are directly related to research. This was a——

Dr. SNYDER. I am sorry, sir. Where are you at?

Mr. BILOBRAN. I am sorry, page 8, roman numeral VIII.

Again, the question was: Please list the amount each research

corporation spent in 2000 and 2001 on the following, and the response is that the corporations are not required to report the above

categories of expenditures.

It raises the question of whether or not they could be required

to report, or whether the information could, in fact, be provided. It

points to the question of the detail of accounting information on expenditures that may be available in the field, and whether or not

it is maintained in a manner to be able to answer that question.

The response further indicates that guidance is published in regard to what expenditures are considered proper versus improper.

The guidance is provided in the attached handbook. I believe that,

to my knowledge, that is in fact straightforward—all of the guidance is available is in that handbook.

Dr. SNYDER. Mr. Bilobran, my time is up. I will yield back.

Mr. BUYER. I would ask unanimous consent that the gentleman

is doing such a great job that we go ahead and complete the document, with no objection.

Dr. SNYDER. We are determined to get through the 15 pages, Mr.

Bilobran.

Mr. BILOBRAN. There is a question of a conflict of interest in advocacy issues.

Dr. SNYDER. Again, where are you at, please?

Mr. BILOBRAN. I am sorry, page 9, roman numeral IX.

Dr. SNYDER. Oh, right, got you.

Mr. BILOBRAN. And the response is that the question is probably

best answered by NAVREF. And NAVREF, in fact, did provide a
16

response, but I would be interested to see VHA’s position in answering questions regarding conflict of interest.

And I believe it perhaps points back to the remarks the chairman

made a little bit earlier with regard to whether or not the current

structure for management and directorship of the corporations is in

fact working effectively. Because, in part, it deals with VA officials

who have to wear two hats—one to administer the medical center

and one to administer the research corporation.

Question—What percent of funds for the research corporations

are spent for advocacy issues?

Dr. SNYDER. We are now on page 10?

Mr. BILOBRAN. On page 10. And, again, the response from the

Department defers to NAVREF, and points to the potential that we

do not have visibility over how that category of funds is spent.

Several other questions are posed by the committee that are answered in a similar fashion—NAVREF is asked to provide the answer for the question. I would like to see—I would like to know

why the Department is unable to answer the question.

Mr. SLACHTA. Thirteen.

Mr. BILOBRAN. I am sorry?

Mr. SLACHTA. Move to page 13 on the research consultations.

Dr. SNYDER. What page are you on now please, Mr. Bilobran?

Mr. BILOBRAN. Page 13, roman numeral X, Research Funds Expended for Consultation Service and awards, were any research

corporation funds expended for consultative services during the

1998 through 2001, and for each expenditure identify the corporation who spent the fund.

The Answer is that VA does not collect information on consulting

fees paid by corporations, however, such fees, if any, are reported

on IRS, Part II, Form 990. Again, this points to the question of

whether or not we have visibility over that kind of expenditure, or

whether we are able to obtain that information.

Dr. SNYDER. One detailed question, Mr. Bilobran, is Form 990,

Part II, to the IRS, is that a public document?

Mr. BILOBRAN. Yes. Question—for 1998 and 2001, were any research corporation funds spent on awards, media, and other public

relationship efforts?

Answer—Some corporations make donations, some activities are

designed to educate the general public. Members of Congress are

often invited guests. Again, I don’t believe there is adequate detail

in the answer—either pointing to an incomplete answer, or the inability to obtain the information.

Next question. For each award, identify the research corporation

that made the expenditure, the research from which it was made,

and the amount of each award, and identify the recipient of the

award, and reason for the award.

Again, the question is that that the corporations are not required

to report awards, raising the question of whether or not the information is or is not available.

Question—please list the internal controls that ensure medical

care appropriations are appropriately reimbursed for services and

resources used to support research protocols. And the answer is

that the board of directors and facility management are responsible
17

for ensuring that medical care appropriation is appropriately

reimbursed.

Dr. SNYDER. That, by definition, is not an internal control is it?

Mr. BILOBRAN. No, it does not—the answer does not describe

what ability we have here centrally to ensure that that is accomplished. It does not describe a control itself.

Question—What has VA done to develop and implement the recommendations from the 1994 OIG report?

Dr. SNYDER. I am sorry.

Mr. BILOBRAN. That is on page 15, roman numeral XIII.

Dr. SNYDER. Yes.

Mr. BILOBRAN. The VA response is that provisions specifying use

of commonly accepted accounting practices and other recordkeeping

guidance were added to the handbook. Additionally, corporations

follow recordkeeping procedures and accounting principles established for nonprofits by FASB, and the American Institute of Certified Public Accountants.

Again, it describes what governing policy or criteria are available. It does not touch on the—what steps have been taken to ensure that the recommendations are implemented as intended.

Dr. SNYDER. Thank you. Thank you, Mr. Chairman.

Mr. BUYER. Thank you. Thank you, Dr. Snyder, for taking us

down that path. I would like to yield to Ms. Carson for any questions she may have.

Ms. CARSON. Thank you very much. Dr. Mather, in your testimony, you addressed your lack of regulatory authority and your

need to forge a different paradigm. ORCA embraces what you refer

to as an ACE approach.

How do you know if the ACE approach is working? How will you

measure success?

Dr. MATHER. Madam, the ACE approach represented in the testimony is sort of a paradigm of balancing our roles of being supportive and also having to oversee to make sure there is compliance

with those regulations that support an adequate human subjects

research protection program.

We think that since we are not a regulatory entity ourselves, we

have to balance off what is on the left-hand column, as we call it,

which is the issue of assurance of consultative and educational activities, against the responsibility to assess, to enforce, and be a little bit of a cop. So that is the sense of what that paradigm is about.

We spend, certainly, a lot of our time thinking through how we

can fulfill both roles, being both supportive and also being a clear

oversight entity. VA medical centers I think still remain a little bit

ambivalent about us, as to which side of that we are going to come

down on in many circumstances.

Clearly, we have a responsibility when there are issues of research improprieties that are brought to our attention, we investigate them, and we do, and we have a mechanism for doing that

through these focus reviews, and these special inquiry force team

reviews. But we also have developed a program called our ‘‘Multiassessment Program,’’ which is a prospective way of helping facilities get their program in shape.

We have a self-assessment program where we have been able to

give to VA medical centers in a very detailed way, indeed, as ref-
18

erenced in my testimony, a CD-Rom, which has all of those regulations set forth, so they understand what it is that they are supposed to do. And we are willing to come in later to help them make

sure that they understand what they have done in that regard in

an on-site review.

Ms. CARSON. Thank you. Thank you, Mr. Chairman.

Mr. BUYER. Thank you. A little follow-up. Dr. Mather, what is

the present status of the protection of human subjects now at West

L.A. VA Medical Center?

Dr. MATHER. Mr. Chairman, I hope my reference in my oral testimony moved to the answer of that question. As of today, they have

I think some several recommendations coming out of a follow-up review that we did in April of last year.

And I am assured by my regional office director on the West

Coast, as of yesterday, that he estimates that those few items will

be, as it were, cleaned up within the next month or so. He intends

going back there and making quite sure that those recommendations are completely fulfilled before he advises me on providing the

facility a closeout letter, which, in essence, closes out the issues

there at West L.A.

I personally visited there a couple of times, and it is very clear

that they have a dedication from the director, and more especially

the ACS, for research and development, Dr. Yamaguchi, to get it

right and do it right.

Mr. BUYER. Do you have any concerns about the resources that

have been relocated to bring about the ‘‘recovery,’’ and is it enough?

Dr. MATHER. Everything that I have seen at West L.A., sir, that

you are referring to I think indicates that the director has certainly

taken a lot of medical care funds to add to that activity to do what

is necessary.

They have added three Institutional review boards, over and

above the original two that they had. They have certainly hired a

lot of additional staff to get the job right.

Mr. BUYER. When you have a VA medical center that received a

not accredited rating, should the VA medical centers whose human

subject research programs remain in that status be allowed to continue with their programs, or be shut down?

Dr. MATHER. Mr. Chairman, I think when we received the first

indication of a place being not accredited, we were somewhat

alarmed, because we were not exactly sure what that meant. The

surveyors had been into the facility, been there several months ago,

so one could posit that the situation had gotten worse, it stayed the

same, or in fact had even gotten better, in terms of improvement.

So we went there, as I indicated in my testimony, to do a focus

review to really answer two questions: is there anybody today who

is a human subject enrolled in an active research program being

harmed, I mean, literally medically harmed, physically and

mentally?

And we have found in each of the three places, now that we have

been in to do these focus reviews, we have been assured, and we

have done a scrambling job to do that, as you can imagine, this

place for a couple of days, there is no evidence of anybody’s being

actively harmed.
19

Are there sufficient protections? Which is the other part of that

question we want answered. And, that is, are there serious or egregious noncompliance with regulations so that human subjects enrolled in the research are put in some degree of harm or jeopardy?

The place that we went to and finished our first systematic postquotation reviews, the SPA, I was out there at the end of that visit

a couple of weeks ago and we were concerned that there were some

serious matters that needed to be attended to, some seven serious

violations of the common rule regulation.

And I was really in no position but to issue a restriction letter

right there on the spot, which says that their actual research protocols cannot accrue any new human subjects into those protocols

until they had all been reviewed in conjunction with the IRB and

the principal investigator.

Mr. BUYER. What facilities that have been reviewed are not

accredited?

Dr. MATHER. They are the North California Health Care System,

sometimes known as the Pleasant Hill VA Medical Center; the second is the Pittsburgh Highland Drive Division; and the third is the

Providence VA Medical Center.

Mr. BUYER. Mr. Boozman, you are recognized. Do you have any

questions?

All right. Ms. Carson, do you have any follow-up? All right.

We want to thank you for coming, your testimony. And, Mr.

Slachta, we will have follow-up with you, I am sure.

Mr. SLACHTA. Yes, sir.

Mr. BUYER. Thank you.

Mr. SLACHTA. Thank you, Mr. Chairman.

Mr. BUYER. Thank you.

Our second panel will be the Honorable Dr. Robert H. Roswell,

who is the Department of Veterans Affairs Under Secretary for

Health. I will ask him to introduce his—do you have any staff with

you? If you do, please introduce them. You are now recognized.

STATEMENT OF ROBERT H. ROSWELL, M.D., UNDER SECRETARY FOR HEALTH, DEPARTMENT OF VETERANS AFFAIRS, ACCOMPANIED BY TIM McCLAIN, GENERAL COUNSEL, JACK FEUSSNER, M.D., CHIEF RESEARCH AND DEVELOPMENT OFFICER, VETERANS HEALTH ADMINISTRATION;

AND MINDY AISEN, M.D., DIRECTOR, REHABILITATION

RESEARCH AND DEVELOPMENT, VETERANS HEALTH

ADMINISTRATION

Dr. ROSWELL. Thank you, Mr. Chairman. It is a pleasure to appear before the committee today. With me this morning, I have Mr.

Tim McClain, our general counsel; Dr. Jack Feussner, the Chief Officer for our Research and Development Office; and Dr. Mindy

Aisen, who directs our rehabilitation research and development

office.

I appreciate the opportunity to appear before you to discuss nonprofit research corporations and educational foundations and the

Department of Veterans Affairs Human Studies Protection Program. With your permission, I will briefly summarize my submitted statement, and then be prepared to respond to your questions.

Mr. BUYER. No objections.
20

Dr. ROSWELL. My formal statement discusses the background,

operational functioning, and accomplishments of the research and

educational corporations. These corporations have helped VA research by increasing flexibility, with respect to staffing and handling of donated funds and grants.

Also, as a result of the Millennium Act, we are now able to establish corporations to facilitate educational activities of the Department. Such activities would include work-related instruction and

training for VA employed staff, as well as broad, instructional, and

learning experiences directed toward improving and maintaining

the health of the veteran patient.

As of June 1, 2001, 88 research and/or education corporations

had been chartered; of these, 85 remain active. Recently, two facilities have established education corporations that are separate from

research corporations already serving those facilities.

Revenues from a variety of sources, but excluding dollars appropriate for VA health care are increasing through the VA research

corporations. With these increased revenues, the expenditures in

support of VA research and education are increasing and the expertise of management is improving steadily, as evidence by corporation audits.

Mr. Chairman, you also requested that I provide an update of

VA’s activities to assure that VA research is conducted in accord

with the highest standards, and with the highest regard for research participant safety and health. As you know, VA undertook

significant efforts in this regard following hearings conducted by

the House Veterans Affairs Committee in 1999 and 2000.

My formal testimony discusses these efforts in some detail. However, the creation of the Office of Research Compliance and Assurance or ORCA and the leadership VA has provided to establish an

external accreditation process for research programs are noteworthy, and are leading the nation in many respects.

Dr. Mather has testified earlier about ORCA activities and accomplishments regarding the accreditation program. I am very

pleased that VA has worked with the National Committee for Quality Assurance, or NCQA, a private non-profit, accrediting organization dedicated to improving health care quality to develop this accreditation process.

NCQA has developed accreditation standards and will survey

and determine the accreditation status of all facilities conducting

human subjects research every 3 years. Accreditation site surveys

began in September of last year.

Survey results and accreditation reports will be valuable learning

tools for all who have a role in VA research, and will significantly

add to our oversight and assurance activities.

Also in your opening comments, Mr. Chairman, you asked, and

I would like to respond about intellectual properties. VA has made

considerable progress in asserting its right to intellectual properties developed with support from VA research programs and resources. And we would be happy to answer questions concerning

that.

To conclude, the VA is committed to assuring that its investigators follow the highest standards for assuring respect of the rights,

dignity, and safety of research participants. We believe the ap-
21

proach VA is taking with this continued emphasis on training and

education, independent oversight, and mandatory external accreditation will result in a system-wide human subjects protection program that will place VA at the forefront of ethical science.

Mr. Chairman, I very much appreciate the committee’s support

of these efforts over the years. This concludes my statement. My

colleagues and I would be happy to answer your questions.

[The prepared statement of Dr. Roswell appears on p. 75.]

Mr. BUYER. Thank you very much. There is plenty of testimony

about money for oversight, but no testimony about money for the

Institutional Review Board.

What is the Office of Research and Development sending to the

field in recurring funds nationwide to cover the IRB expenses?

And how much, if any, did this go up after West L.A. shut down?

Dr. ROSWELL. Currently, approximately, $380 million is distributed from our medical care appropriation to VA facilities in support

of the research mission. There is a research adjustment to the veterans equitable resource allocation or VERA model that distributes

these monies based pro rata on the amount of funds administered

through the research program.

In addition to that, almost $380 million in appropriated medical

care dollars, an additional $45 million from the research appropriation is distributed by the Office of Research and Development to

the research programs within VA to provide administrative oversight in support of activities including IRB functions.

Most recently, we have actually moved to a uniform charge for

IRB review of protocols submitted by non-VA investigators including pharmaceutical companies seeking to do drug trials and other

types of activities.

Mr. BUYER. Well, you have permitted a proper segue for me. I

have been up here for 10 years. And I, like a lot of members here,

we fund a lot of research whether it is at our land grant institutions for agriculture and food safety, or there is a medical arena,

or environmental, there is a lot of research tax money goes out

there to press the bounds of science and other things.

Society benefits, yes, but there are people that make a ton of

money off of that. And it is something that has—it has bothered

me. It is one of those things that sticks in my craw a little bit.

And so, let me turn to you—is it Aisen, Dr. Aisen? I do not control the ag budget, so I can’t complain about that one. But this is

an arena where we do have control over oversight.

And so, let’s talk about some of these products that we, the taxpayer, has helped finance, and now it is in the marketplace, and

somebody else is making profit. I use the example of UCLA.

Do we even know what type of monies are being made off of our

joint research? Yet, we, the government, then get nothing in return, or the VA. And these other entities just profitize then off really what the taxpayer had set up.

Dr. AISEN. Well, with your permission, thank you for the question. You know, if we go back far enough I think one could calculate hundreds of millions of dollars. You have alluded to a number of the inventions that came out of VA.

One that you didn’t mention was the cardiac angioplasty stint

currently marketed by Johnson and Johnson. The VA does not
22

make any money from that. And that is something of great value

to many people, but also a great profit generator for that company.

I think it is important to remember that although VA has had

the ability to take ownership of intellectual property since 1950.

And 1956, officially, it was published in the Federal Register, the

mechanism for doing that, it wasn’t the culture to do that.

And you alluded to Nobel Prize winners like Rosalind Yallow,

who invented the radio immunoassay, and put that into the public

domain. And she has been, in her autobiography, she says, ‘‘I have

no regrets about that. It was a different culture.’’ But things started to change dramatically in the mid-1990s,

when universities woke up and realized that by joining with corporations they could realize not only dissemination of research but

revenues. And since Dr. Feussner’s tenure in research and development, there has been a real effort to assert fairly VA’s ownership

rights.

In part, that became a major thrust of his work, since the research realignment advisory group made a point of telling him to

exercise VA’s ownership rights. So, actually, VA has not—do I have

to stop speaking?

Mr. BUYER. Oh, no.

Dr. AISEN. Okay. Actually, VA has not really changed policy, but

has become more participatory, and I suppose more systematic, and

to some more assertive about taking ownership rights.

And so we have, without an increase in staff, actually, just with

reorganizing the staff we have within the research and development office, begun to systematically educate the field about when

a research finding is an invention; and so, how they can protect

themselves, and not publish before they disclose to us, so that we

can help them with the patenting process.

So we now have a very clear disclosure process. We have forged

a close relationship with the Office of General Counsel and now

have a good working relationship, in terms of advising them when

we think there is research worth taking ownership of, and they

then look at the legalities of whether there is a right.

So our numbers of disclosures have gone up rapidly. Our numbers of cases in which we take ownership has gone up substantially. Our numbers of patents have increased a great deal. We

have begun to realize revenues.

We have also forged relationships with the majority of our significant academic affiliates. And I say significant when we have a

research program that is funded in the range of a million dollars

or more a year. So I think that we are working hard to do our job.

Mr. BUYER. This is rather all new, isn’t it?

Dr. AISEN. Since Dr. Feussner, I would say, and it has been escalating. Success builds on success, I would say.

Mr. BUYER. And what do you anticipate when you said revenues

are beginning to generate? And when those revenues come in,

where do they go?

Dr. AISEN. That is the easier question, where the revenues go?

We have a well-developed policy for that. When revenues come in,

we keep 15 percent for the technology transfer program, for administrative costs, because we do have costs, which I could tell you

about. But 85 percent goes back to the field.
23

This is money after the inventor gets his or her share, which will

either be determined by the university community in which they

are working, or by the federal guidelines, if they are not a university,

Mr. BUYER. What is the field?

Dr. AISEN. I am sorry. The VA medical center that particularly

nurtured the inventory.

So, in other words, if there is an inventory at the West Roxbury

VA, that inventory will get his or her share of the revenues as the

inventory; and then whatever money comes back to us, we keep 15

percent; and then 85 percent goes back to that VA medical center;

50 percent for that inventor’s laboratory; another 25 percent for the

research program at that VA; and then another 10 percent.

That adds up to 85 percent for the medical director to use to sort

of celebrate for the veterans that their medical center nurtured an

invention. And it is my hope that that will engender a feeling of

pride and engender a greater intellectual climate and excitement

about doing research.

Mr. BUYER. I hate to dominate the time on this. But as we—if

this is going to be coming—if we are at the beginning of something

new here, is that equation the right equation to be using?

Dr. AISEN. We thought hard about developing that equation. We

have gotten nothing but positive response from the field, from the

VA medical centers, and the inventors.

Mr. BUYER. Say, for example, the one, the Nicoderm patch, and

millions and millions of dollars now are pouring in, that VA medical center ought to just become then the premium medical center

then. Is that what you are saying?

Dr. AISEN. You know, I suppose that will be a nice problem to

have. I think that most of the time—and this may get me into

something that is more difficult to describe. Most of the time, the

major inventions are with dual appointment people, people who are

affiliated with medical school, and the VA medical center, so we

share those revenues when that happens.

But, yes, if there is a huge hit, there is that possibility that one

particular place would get more income than others. And I guess

it would be at the pleasure of the Secretary to decide.

Mr. BUYER. Do you have any idea how much in millions of dollars you think the government gave up by not doing what they

should have been doing since 1956?

Dr. AISEN. I think it is probably in the tens to hundreds of millions of dollars.

Mr. BUYER. Astounding figure probably, isn’t it?

Dr. AISEN. Yes.

Mr. BUYER. All right. Ms. Carson.

Ms. CARSON. Yes, and thank you very much, Mr. Chairman. I

have a very brief question.

In 1996, 1997, and 1998, respectfully—respectively—VA applied

for zero, one, and two patents. How many patents did the VA file

for in the last 3 years?

Dr. AISEN. In the last 3 years, in 2000, VA alone applied for

three. And VA, in conjunction with its affiliates, applied for 27, so

that is a total of 30 in 2000; in 2001, VA alone applied for 11; and
24

in conjunction with our affiliates, another 34; and then, year-todate, VA alone has applied for 16.

Ms. CARSON. Okay. Do you know what the status of those are?

Dr. AISEN. The ones that have been issued? The total that have

been issued are five. Five have been issued. But there are licensing

discussions going forward in anticipation of the issuing of the

patents.

Ms. CARSON. Thank you. Mr. Chairman, may I ask one question?

Mr. BUYER. Yes.

Ms. CARSON. Mr. McClain, this refers to the Chairman’s exhibit.

Exhibit 1, item 9, expresses concern with a potential conflict of interest regarding legal services and sharing of VA legal counsel.

Is there any ethical problem with this arrangement? How would

a state’s canon of ethics view this?

Mr. MCCLAIN. Ms. Carson, thank you for the question. We don’t

see it as a conflict of interest. Our client is and will always remain

the Federal Government. One thing that we have with these research corporations, the reason that they were formed, was a unity

of interest with VA in the research area.

If, at any time, those interests would diverge, then we would stop

giving any advice to the research corporations, because our client

always is and remains the Federal Government. We provide legal

advice to the research corporations on federal matters to—in order

to clarify things for them, and to allow them to function properly

under the laws and regulations of the Department and the Federal

Government. And that is the extent of our advice.

Ms. CARSON. Okay. I have one other question, Mr. Chairman, if

you don’t mind. Dr. Roswell, or Dr. Feussner, whichever. When a

non-federal organization conducts research at a VA research facility with funding by the NIH, I would assume that VA incurs indirect expenses as a result of hosting that research.

What are the indirect resource requirements for hosting this research? Is VA reimbursed for any of it?

Dr. FEUSSNER. Well, there is a divergence of opinion on that

question, ma’am, between us and our colleagues at NIH. At the moment, the answer to your question is no. When NIH-funded research is conducted largely in a VA facility, the entity responsible

for the grant is either the university that is affiliated, or in rare

cases the nonprofit foundation, and under those circumstances the

VA does not recover indirect costs.

We call them facility and administrative costs. NIH calls them

operations and management costs. We have been discussing this

matter with the NIH for some time.

Ms. CARSON. Do you potentially benefit from the research that is

conducted at a VA facility?

Dr. FEUSSNER. Yes, ma’am. I think all of us benefit. I think veterans benefit; I think the VA benefits; I think the NIH benefits; I

think it is a win-win for the Federal Government. And, in the past,

from 1968 to 1989, in fact, the NIH did provide a 15 percent addon to the VA to support these revenues.

That policy was changed in 1989. I am not exactly sure why. I

would not vote for that change if I were asked. And we have been

discussing this matter directly with leadership at the NIH for the
25

past several years, trying to find common ground. And I should say

that they have been open to these discussions.

Ms. CARSON. When you say 15 percent add-on that has

summarily been discontinued, the 15 percent add-on was to your

benefit?

Dr. FEUSSNER. Yes, ma’am.

Ms. CARSON. VA, then?

Dr. FEUSSNER. Yes, ma’am.

Ms. CARSON. But then they dis—NIH discontinued the add-on?

Dr. FEUSSNER. The NIH discontinued the add-on with concurrence of the VA, yes, ma’am.

Ms. CARSON. With the concurrence?

Dr. FEUSSNER. Yes, ma’am.

Ms. CARSON. Well, now, wait a minute. Mr. Chairman?

Dr. FEUSSNER. That was in 1989, ma’am.

Ms. CARSON. Okay. I am confused.

Dr. FEUSSNER. I am sorry.

Ms. CARSON. Sorry. We get confused sometimes in Congress. The

VA concurred with——

Dr. FEUSSNER. The discontinuance.

Ms. CARSON (continuing). Discontinuance——

Dr. FEUSSNER. Yes, ma’am.

Ms. CARSON (continuing). Of receiving resources, to put it

simply?

Dr. FEUSSNER. Yes, ma’am. In 1989, there was agreement, just

as before that time, there was agreement between the NIH and the

VA to accept those dollars in 1989. There was agreement between

the NIH leadership to discontinue that arrangement.

Ms. CARSON. Is that because VA had so much money, they didn’t

have anywhere to put it?

Dr. FEUSSNER. Well, actually, that is a fair question. And I think

that no is the answer to that question. But there was some concern

back in 1989 whether the VA would be able to be responsive to

NIH requirements for tracking and managing the finances. I think

that was a valid concern at—perhaps, a valid concern at that point.

So it wasn’t that there was too much money. I think there might

have been concern within both departments that the VA didn’t

have the appropriate financial mechanisms in place to track the

money appropriately.

Ms. CARSON. I am sorry. Mr. Chairman, please let me ask one

more question. I realize I have exhausted my time.

VA facilities provide space, et cetera, for the research conducted

by NIH?

Dr. FEUSSNER. Yes, ma’am.

Ms. CARSON. And, at one point, they had a 15 percent add-on to

accommodate the costs of research being conducted at the VA

facility?

Dr. FEUSSNER. Yes, ma’am.

Ms. CARSON. Comparatively—and this is probably an elementary

comparison—but if you rent a place, and you pay rent to the place

where you rent, then it is—is it any of your business what happens

with the rental income?

Dr. FEUSSNER. Well, yes, ma’am.
26

Ms. CARSON. I use that analogy because if you are providing the

resources—pardon me—the space, et cetera, for NIH research, then

you are saying that NIH had some criteria, in terms of tracking

what you did with the money that you received from NIH—— Dr. FEUSSNER. Yes, ma’am.

Ms. CARSON (continuing). For the use of your facilities?

Dr. FEUSSNER. Well, the NIH is another federal entity like us.

And they have strict guidance that the money that is allocated is

spent in the way in which it was intended. And we, as another federal entity, in my opinion, should comply with that requirement to

manage and track the monies to show good financial faith. And so

I do think it is reasonable for the NIH to make that request. Yes,

ma’am.

Dr. ROSWELL. If I may, Ms. Carson, none of us at the table were

involved in the rationale or the formulation of the decision to concede the 15 percent indirect in 1989. So it would only be conjecture

on our part what led the Department to decline—or to ask that

those revenues not be accepted.

I think what is clear is that today, we are extremely confident

of the oversight of our research programs, the financial management of those programs, and believe that we should in fact have

the ability to receive the indirect or the FNA costs from NIH, and

would very much like to be able to receive those costs today.

Ms. CARSON. Thank you very much. And I yield back time that

I didn’t have.

Mr. BUYER. Mr. Boozman.

Mr. BOOZMAN. Yeah, on the patents, did you say that we have

really been aggressively pursuing that for the last 3 years? Is that

kind of the timeframe, or—— Dr. AISEN. I would say so. I would say so. I would say it began

in 1997/1998, but in full force probably around 2000.

Mr. BOOZMAN. Okay. Did we try and go back? And, I mean, is

there a statute of limitations on that that we would try and go

back as far as any of the others that maybe slipped?

Dr. AISEN. To some extent. If we were—we decided, you know,

to set some limit on this if we found out that people had not disclosed, which was a requirement always. The typical way things

were handled was people disclosed; VA employees disclosed.

The Office of General Counsel handled that, and as a rule of

thumb gave back ownership. If that was the case, that was—they

were legally covered, and they did what they needed to do with the

property.

If people had not disclosed, we did start to ask them why they

hadn’t disclosed. And there were situations where people had not

disclosed, other parties had gone ahead and patented, and we

asked to be included in ownership. And that has happened.

Mr. BOOZMAN. Do we cut off people that do not disclose?

Dr. AISEN. So far it hasn’t come to that, but it is their obligation

to disclose. It is the obligation of the ACOS, the Associate Chief of

Staff of Research, to make sure that his staff knows to disclose.

We remind them all of the time with faxes. We maintain a web

page. We really try to educate the VA employees. Yes, if they don’t

disclose, they are reminded, et cetera, et cetera, we will stop paying

them.
27

Dr. FEUSSNER. We had a case that was so—I don’t know what

the word is—but so blatant—that we have had to cut anybody off

for——

Dr. AISEN. No, we haven’t. People will come around.

Mr. BOOZMAN. So we haven’t cut anybody off, but you don’t feel

like we have had a case that was so—— Dr. AISEN. People have in the end complied. They have argued,

but they have complied.

Mr. BOOZMAN. Okay.

Dr. AISEN. The other avenue that—that is in terms of disclosing.

There have been—if VA takes ownership, people have an appeal

route. And, at first, there were a great many appeals. And that has

now fallen to about zero, because we think we have communicated,

and we think there is a very good understanding now between the

field and VA Central Office about what their obligations and rights

are.

Mr. BOOZMAN. So you feel comfortable that if we have people

that are not playing by the rules—and I guess, you know, in everything there are people like that.

Dr. AISEN. Right.

Mr. BOOZMAN. You feel comfortable that you have the authority

to cut those people off or—— Dr. FEUSSNER. Well, we would have the authority to cut off their

research support, yes, sir.

Mr. BOOZMAN. Okay. Thank you.

Mr. BUYER. Mr. McClain, I have a sense that Senate Bill 2132,

if it comes out of the Senate, it will head over here to the House.

And so I have got some questions on it.

It appears about the VA’s opinion regarding the extension of tort

claim protections to a non-government entity, and at the same time

open up appropriate health care monies to these entities, I mean,

I am just curious about your job. This would be a tough one.

Tell me about your opinions about these two provisions.

Mr. MCCLAIN. Well, Mr. Chairman, the first provision is covering

the employees under the Federal Tort Claims Act, we have supported for many years. So we do support that provision in the bill.

They are without compensation employees, and we believe that

they should be covered under the Federal Tort Claims Act.

The second provision that you mentioned is probably the greater

issue, as far as we are concerned, and that is the ability—giving

the nonprofit corporations the ability to enter into contracts with

the Department. We oppose that provision. We opposed it in testimony before the Senate committee.

The main reason is that this would change significantly, this

rather small issue would change the dynamic significantly, of the

VA as it relates to its nonprofit corporations.

Right now, as they are formulated, there is almost an in trust

sort of relationship, a trustee sort of relationship of the money that

is received by the corporation to be used for VA, the benefit of VA

research.

By statute, we have the director of the medical center and two

other VA employees on the board of directors of the nonprofit corporation. If we now enter into contractual relationships with the

nonprofit, now we are beginning to act in more of an arm’s length
28

sort of relationship. This creates tremendous conflict of interest

problems. I talked before, in response to Ms. Carson’s question regarding the unity of interest, and I think that that dynamic will

change if we begin to incrementally move away from the current

status that we have today.

Mr. BUYER. I guess being a lawyer myself, words have definition.

And so I always pay attention to words. So when you use the word

‘‘revenue,’’ the monies in that research corporation, what are they?

Are they public or private? And if so, are they defined and

described?

Mr. MCCLAIN. Well, I am not the expert on the appropriations

part of it.

Mr. BUYER. You are the General Counsel. Is it actually written

somewhere?

Mr. MCCLAIN. As to what those monies are?

Mr. BUYER. Yes.

Mr. MCCLAIN. Well, the monies, as I understand it, come from

private companies. I think that they would be private monies.

There are other monies that come from NIH and federal sources.

They certainly would start out to be public monies.

Mr. BUYER. And then they become comingled?

Mr. MCCLAIN. Yes.

Mr. BUYER. Do they lose their identity?

Mr. MCCLAIN. I don’t have an answer.

Dr. ROSWELL. Possibly, I can speak to that. I at one time, earlier

in my career, actually served as a member of a board of directors

for a VA nonprofit research corporation. The source of funds can be

varied—pharmaceutical companies, other people engaged in supporting research in the VA, private donations is another source of

funds. No appropriated VA health care dollars, however, enter the

corporation.

Typically, when funds enter a corporation, they are for a designated approved research project, and those are cost-accounted

separately. Most of the nonprofit research corporations do charge

an administrative fee, as you heard earlier, from 0 to 43 percent,

with a median cost of around 8 or 10 percent. That money goes into

the general operating expense for the corporation.

All of the corporations, as you know, are 501(c)(3) nonprofit corporations. The annual audit review and they also have liability insurance to make sure that operations are in accordance with the

law. So I think, for the most part, the accounting mechanisms in

place to attract these dollars are very effective.

Mr. BUYER. To go back to this issue on protections of intellectual

property, patents, do you, in the Office of General Counsel, do you

now have a patent lawyer, or have you always had one?

Mr. MCCLAIN. Mr. Chairman, we do now have a patent lawyer.

He came on board about 6 months ago. We had been using private

counsel up till then to do these patent applications. We now have

an experienced person, a lawyer, on board who is handling that

now for the Department.

Mr. BUYER. Since this is an evolutionary change of culture—I

will try to take the word you said, Dr. Aisen—tell me about what

that relationship is then with some of the companies in America?
29

I don’t care whether it is Johnson and Johnson, one that was described, or other companies. Are they—or universities—are they a

little bothered now of saying, ‘‘What is the Federal Government

doing getting into the private business here?’’ I am just curious

about relationships.

Dr. ROSWELL. I would say, Mr. Chairman, that corporate America is not averse to this. Corporate America, if you will, the health

care industry, is eager for the receipt of new technology, and is

well-accustomed to paying the cost associated with the research

and development that leads to new technology.

If there has been a difficulty in our efforts to assert the government’s rights to its intellectual properties, it has probably been

with our affiliated medical schools, who before were the beneficiaries of the majority of intellectual properties developed by the

VA.

Despite that difficulty, I think that there has been remarkable

progress through Dr. Feussner’s office. We currently have 53 cooperative technology administration agreements with our affiliated

medical schools; that is, a joint and mutual agreement that provides that we operari agree to share the intellectual properties.

Even when those agreements don’t exist, we still have an opportunity to negotiate for our rights during the disclosure process and

the general counsel has been quite helpful. At my level, I am working with the Association of American Medical Colleges, who represents all of the medical schools we are affiliated with to enhance

that relationship, and to continue to move this effort forward.

Mr. BUYER. The last comment I have is recognized from—at least

from our standpoint here with the American taxpayer. I think the

taxpayers trust us to make these decisions, to press the bounds,

and to work cooperatively with entities in our society; they reap a

benefit. But they also want to have access to these technologies and

these new discoveries. And when they are denied access relative to

costs, all of the stuff gets traced back, and they view it rather simply, as saying, ‘‘Do you mean to tell me my tax money finances this

but I can’t afford to gain access to that particular drug, or device,

or procedure?’’

And then it is only going to those of whom X, Y, and—it just—

then you end up messing up the whole science applications with

politics, and you lose on PR. It gets into a mess.

But you have a great story to tell, and you should be telling it,

because you can have an impact with other departments and agencies to be more proactive in doing this and selling your story.

Mr. Boozman, or Mr. Carson, do you have any other questions?

Ms. CARSON. No, sir.

Mr. BUYER. All right. Thank you very much for coming.

Ms. Carson, I yield to you.

Ms. CARSON. I just wanted to have permission to put my opening

statement in the record, Mr. Chairman.

Mr. BUYER. Ms. Carson has moved that her opening statement

be submitted into the record. Hearing no objection, so ordered.

[The prepared statement of Congresswoman Carson appears on

p. 41.]

Mr. BUYER. On the third panel, we will now recognize Mr. Antonio Laracuente.
30

Mr. LARACUENTE. Thank you.

Mr. BUYER. Chairman of the National Association of Veterans’ Research and Educational Foundations, and Executive Director of

the Atlanta Research and Education Foundation, Dr. Franklin

Zieve.

Dr. ZIEVE. Good.

Mr. BUYER. And also is president of McGuire Research Institute

is Mr.—I am confusing everyone. You are the president of McGuire.

I should just look up.

Mr. Hickman, Executive Director of the Brentwood Biomedical

Research Institute.

Mr. HICKMAN. Yes, sir.

Mr. BUYER. And Dr. Wendy Baldwin is the Deputy Director of

Extramural Research at the National Institute of Health. And you

were invited here.

Let’s just go ahead and open them up. Who wants to go first? Go

ahead.

STATEMENTS OF ANTONIO LARACUENTE, CHAIRMAN, NATIONAL ASSOCIATION OF VETERANS’ RESEARCH AND EDUCATION FOUNDATIONS AND EXECUTIVE DIRECTOR, ATLANTA RESEARCH AND EDUCATION FOUNDATION; FRANKLIN ZIEVE, M.D., PRESIDENT, McGUIRE RESEARCH INSTITUTE, INC.; AND WENDY BALDWIN, M.D., DEPUTY DIRECTOR

FOR EXTRAMURAL RESEARCH, NATIONAL INSTITUTES OF

HEALTH

STATEMENT OF ANTONIO LARACUENTE

Mr. LARACUENTE. Good morning, Mr. Chairman, and members of

the subcommittees. Thank you for the opportunity to present testimony this morning. I am Antonio Laracuente, Executive Director

of the Atlanta Research and Education Foundation, and Chairman

of the National Association of Veterans’ Research and Education

Foundations.

NAVREF is a membership association of the 83 VA- affiliated

nonprofits. As many investigators, ACOS’s for research, and administrators have said, these foundations are a tremendous asset to

VA. Their ability to support VA research and education goes handin-hand with providing the best possible care for our veterans.

I am the first to acknowledge that managing a VA-affiliated nonprofit is challenging. Like all state-chartered tax exempt corporations, the VA nonprofits must comply with local, state, and federal

requirements.

In addition, management must comply with 38 U.S.C. 7361, and

the VA implementing guidance in handbook 1200.17. All told, the

corporations are highly regulated with oversight by many different

entities. This is provided in my written statement.

Over the past 14 years, the foundations have experienced tremendous growth, and have taken advantage of opportunities to

support the increasingly diverse VA research program. Research

personnel, the boards, and the medical center management quickly

recognized the value of the nonprofits, and due to the potential for

scrutiny, have worked hard to manage them well.
31

Boards have been proactive in developing policies and procedures. Reports are sent to CO annually, and the audit requirements imposed by Congress in 1996 has raised awareness of financial accountability and internal controls. Also, boards better understand our oversight and fiduciary responsibilities, and are learning

to exercise them effectively.

Is there room for improvement? Of course. The corporations are

at different points in their business life cycles. But we feel strongly

that all are headed in the right direction. Every one associated

with the nonprofits is acutely sensitive to the possibility that poor

management of one corporation has the potential to reflect badly

on all of the nonprofits.

This is the main reason that so many corporations are engaged

in educational activities provided by NAVREF and others. You

have also asked whether the VA nonprofit partnership is effective.

I am confident that the partnership is highly effective and beneficial to the VA, and, more importantly, its veterans.

The corporations are an integral and essential component of facility research programs. They fill in the gaps when VA resources

fall short. And, more recently, they were helping facilities meet increasingly complex and stringent human research requirements by

hiring research compliance and Institutional Review Board staff.

Currently, VA appropriated funds for these needs are inadequate

at the facility level. Extremely low operating costs and a unique relationship with VA medical centers have allowed the corporations

to expend an average of 90 cents of every dollar on direct support

of VA research and education.

Expenditures are for research equipment and supplies, space

renovations, travel, and salaries for research personnel. Using my

Atlanta foundation as an example, we fund numerous small, but

essential, renovation projects that include design and remodeling of

laboratories.

Over the last 3 years, these costs have totaled over $70,000. We have donated $355,000 to enclose a 1500 square foot patio in order

to provide the research program with much needed laboratory

space; partnered with the VA to purchase $120,000 high tech microscope by allocating $9,000 to renovate a room to house it in.

AREF has a young investigator award program that funds up to

three $25,000 grants per year, so that young investigators who hold

VA clinical appointments may collect preliminary data and compete

for grants at the national level.

Finally, AREF has partnered with a medical center to develop a

clinical study center. While VA pays a clinician director, AREF annually invests over $200,000 to staff the center and pay for training in human studies compliance. This center is the centerpiece of

our program, and is the most important contribution that AREF

has made to the medical center.

This group works with the university IRB to ensure that our veteran patients receive the highest quality of care, while assuring

that they participate in a safe research environment. In addition

to these tangible benefits, there are significant intangible benefits.

AREF assist the Atlanta VA in recruiting clinician investigators

by supporting recruitment travel costs, and often pays to upgrade

the laboratory to suit a new investigators particular needs. Effi-
32

cient services are provided by AREF. Increased principal investigator satisfaction and productivity help VA retention rates.

AREF helps make up for inadequate VA travel funding by supporting the costs of attending scientific meetings to disseminate VA

research findings. I believe that all of these illustrate the VHA

nonprofit partnership—that the VA nonprofit partnership is far

more effective than anyone had expected in 1998.

The corporations cannot replace a robust federal appropriation

for VA research program and medical center support. However,

they can help leverage appropriated dollars in a way that benefits

the research program, VA facilities, VA staff, and VA patients.

I would like to take—I would like to ask for 1 minute to respond

to the VA IG’s comment regarding consolidation if I may. In our

opinion, the consolidation of foundations would minimize the current oversight that is afforded through local administration and

control.

We feel strongly that these corporations currently run with great

efficiency and provide prompt service and response, and ultimately

consolidation would minimize the support provided locally to all

PI’s and veterans.

I also would like to say that all foundations, at this point and

time, can respond to the detail of questions as submitted by Congress to VA.

This concludes my prepared remarks. I would be pleased to answer any questions.

[The prepared statement of Mr. Laracuente, with attachment,

appears on p. 82.]

Mr. BUYER. Dr. Zieve, I would like to yield to you for any comments that you may like to make.

STATEMENT OF FRANKLIN ZIEVE

Dr. ZIEVE. I am here representing a specific research program of

the research corporation, McGuire Research Institute, in Richmond, where I am also associate chief of staff for research, and

have been for 25 years.

Our program and my written statement, which I would like to

have entered into the record, if I could——

Mr. BUYER. So ordered.

Dr. ZIEVE (continuing). Concern sort of the intersection of human

subjects protection and the corporations because we found in 1999,

after the Duke shutdown, which is what really got our attention,

we did a detailed review of our program. And, at that time, we

were using the Institutional Review Board of our affiliate, Virginia

Commonwealth University.

And after we had really immersed ourselves in the regulations,

it was clear that this was grossly deficient, and that we had to set

up our own program immediately, which we started to do. And this

we got a great impetus in this because our university got an FDA

warning letter, and anyone who read that letter would realize that

they were about to be shut down.

And so, we started, set up our separate independent IRB on September 1st of 1999. We have met weekly ever since, and put together our program. The expenses were very high. In the first year

we spent, I put in my written statement, we spent a total of about
33

$470,000, all of which came from the research corporation; and our

ongoing expenses net are about $400,000 a year.

There are five things that we are spending our money on, I think

all of which are key to our program: the professional IRB, the investigational pharmacy, an extensive program, our research database, and our research day. And I think all of these pieces, while

expensive, we feel are worthwhile, and we feel that this is the most

important use for our money.

I would particularly point your attention to our McGuire IRB

database, which we paid for the development of, which has been

now put into place at 19 VA medical centers, and should benefit

the system.

I guess I will stop and answer any questions you have.

[The prepared statement of Dr. Zieve, with attachment, appears

on p. 91.]

Mr. BUYER. Dr. Baldwin. Would you like any comments based on

testimony you have heard?

Dr. BALDWIN. I am prepared to make an oral statement.

Mr. BUYER. Sure.

Dr. BALDWIN. Would you like me to do that? Thank you.

Mr. BUYER. It would be wonderful.

STATEMENT OF WENDY BALDWIN

Dr. BALDWIN. I am really pleased to appear here to reflect on our

relationship with the VA in a very important area of biomedical research. You have raised important topics of efficiency and oversight

of protection of human subjects, and of course intellectual property.

These are issues that we think are very important to the support

of basic research and of clinical research, which is where many of

our VA collaborations are. The partnership that NIH has with the

VA is rather complex because we may fund research directly at a

VA institution; the VA foundation, or at a university, where one of

the performance sites is a VA site. So it is really not possible to

have just one view of how the NIH interacts with the VA.

When we make grant awards they are guided by our grants policy statement, which does have some specific features relative to

our support of other federal agencies. For example, it would be inappropriate of us to pay other federal employees salaries through

our extramural program.

On the other hand, it is certainly quite possible that when there

is a research relationship with another entity that there would be

additional administrative costs over their routine and, or indirect

costs, or administrative costs, and those are costs that we would be

willing certainly to sit down with the VA to discuss.

I am very pleased, frankly, to hear the report of the IG this

morning that there really have been improvements in oversight

and auditing. Because for us to move forward in an avenue like

this, we have to have an opportunity to have a dialogue about what

those additional costs are, and our ability to document them if we

are going to develop a collaborative relationship. Now we already

pay indirects to the VA Foundations, but not where the award is

directly to another federal agency; e.g. the VA.

You have already had some discussion of intellectual property

issues, and there it is probably useful to remember that the pro-
34

gram that I am discussing, the extramural program of the NIH,

functions under the Bayh-Dole Act. The Bayh-Dole Act is very clear

about where intellectual property rights are vested and that is with

the institutions to which we make awards.

And so, we have made clear that our applicant institutions understand what their obligations are under Bayh-Dole, then they

can go on to work out relationships with their inventor on their

campus, or whoever they are collaborating with.

The most difficult situations occur when people have joint appointments. That is certainly an issue, but really that is an issue

that has to be worked out between the universities and the VA.

Our position, certainly through Bayh-Dole is clear.

Human subjects protection. I would just like to echo the comments that you have heard this morning. Human subjects protections are extremely important, and it is an issue that we take very

seriously. The NIH supports research on how to do research well

in consideration of ethical issues and, also support training in this

area. Finally, this year we probably will have about $40 million

that goes directly to improve those systems through research advocate programs, or through direct support to Institutions. We are

very aware of the kinds of circumstances that have been pointed

out to you.

The importance, not just to the IRB—and I just want to point

this out because sometimes we focus so much on the IRB. And, yet,

there are very important protections that come through data safety

monitoring boards, or the data safety monitoring procedures, that

must not be forgotten, and we are trying to be supportive of them

as well.

You have heard a great deal about how the VA has strengthened

their human subjects protections, and we are very happy to see

this. I will say the remaining challenge is that institutions could

be faced with the VA, OHRP, and the FDA, requirements as well

as with their own institutinal requirements and expectations.

I would hope that we would be able to harmonize those in a way

that we didn’t see precious funds going into duplicative, or hopefully not conflicting activities. So I am very happy to answer any

of your questions. I have a long-term professional commitment to

biomedical research, and a very strong personal commitment to

veterans. So I welcome your interest in these important topics.

Mr. BUYER. Mr. Hickman, do you have any comments?

Mr. HICKMAN. No, sir. I am just here to answer questions, if I

can.

Mr. BUYER. That is the best opening statement today. Thank

you.

Ms. CARSON. Can I ask a question, Mr. Chairman?

Mr. BUYER. Sure, just a second.

Ms. CARSON. You want me to wait, okay.

Mr. BUYER. Just a second. I have a question on human subject

protections you talked about. I only want to take a step back, okay?

Sometimes we accept, we step in and say, ‘‘Well, gosh, is this the

way things are? Is this the way things are done?’’ So I am going

to ask a question, because I don’t know the answer.

If I were to look out there at the industry of medical research,

how much—how many of the protocols of medical research are
35

being done using veterans as human research subjects? Would anybody know the answer to that?

Mr. LARACUENTE. I can speak to my facility. And our facility

runs about 210 current active protocols on human subjects, including veterans, but that is a mid-size facility.

Dr. ZIEVE. Ours is 294, but I can’t answer your question of where

the VA fits in the greater picture.

Mr. BUYER. Let me just say this. If Congress were to come in and

say, you know, ‘‘we are going to fund medical research. But these

veterans, they have served their country when other people didn’t

go serve their country. Why would we subject them to medical research? We are not going to do that to them anymore. We are not

going to do that at all. They have already served their country, why

push the bounds of science and use them as some form of guinea

pig,’’ some critic may say, ‘‘and we will just let others volunteer for

that. We are just not going to let the VA participate in that.’’ What effect does that have out there then?

Dr. ZIEVE. Profound.

Mr. BUYER. Ah, now I am getting closer.

Dr. ZIEVE. Profound.

Mr. BUYER. Now define ‘‘profound.’’ Dr. ZIEVE. There are risks, obviously, which we all hear about,

and benefits of being a subject of having the opportunity to voluntarily participate in a clinical research trial. And the best I can— example I can give you is a lot of the current AIDS therapies, a

lot of the current cancer therapies, the state-of-the-art therapy is

currently experimental.

And there are a lot of—these are conditions for which there are

not clearly—therapies right now that are as effective as we would

like them to be, and sometimes an individual patient’s best hope

is to get into a research study. There are a lot of other people who

will not, who even despite that, will not want the extra effort, because being in a research study does create extra work for the subject, too.

Mr. BUYER. Is the psychology of the veteran participant any different from someone who has not been instilled with military

ideals?

Dr. ZIEVE. I think so.

Mr. BUYER. I do, too.

Dr. ZIEVE. I think so, and I say that as someone who is a veteran, a researcher, and a subject in research studies.

Mr. BUYER. Now let me ask this question. Since these individuals

were instilled with military ideals and have this sense of virtue,

and honor, and service to country, that many others may know the

words, but not live by them, does the present system take advantage of this so-called sense of duty that they are doing it, yes, for

themselves, but they are doing it to serve some more greater or

nobel cause?

Dr. ZIEVE. Let me rephrase that a little bit, because we had this

discussion when we were talking about whether we could rely on

trying to improve the university’s IRB and program, or whether we

had to set up our own.

We felt an important issue here was that you could regard, for

just the reasons you are saying, you could regard the population of
36

veterans who are taken care of in veterans hospitals or not as a

vulnerable population; and that therefore it was necessary to have

the entire process be, first of all, a little more stringent than the

outside world, and I am a believer in that.

And, secondly, that it had to be carried out by people who were

very attuned to this. If I can give one personal example, I referred

a patient of mine, in one of my clinics, to one of my colleagues who

was doing a flu shot study, a VA cooperative study, a few years

ago, comparing the ordinary flu shot with a nasal flu vaccine. And

as tends to be the case with some large trials, it was a long and

rather turgid consent form, this. And my colleague, the man who

was doing the study, started going through this with my patient

and he cut him off. He cut him off. He said, ‘‘Look, I don’t want

to know any of that. What I want to know is am I going to help

someone by doing this?’’ And the answer was, ‘‘You are not going

to help yourself, but you could conceivably help someone else.’’ And

the guy said, ‘‘Well, where do I sign?’’

I mean this, you know, mentality really exists, and I think it is

very important that the whole process be done by people who are

attuned to it, and I think some extra controls have to be put in,

which is what we——

Mr. BUYER. Is that opinion in the minority, or is that shared by

others?

Dr. ZIEVE. I can’t answer that. It may be. You have got to remember my affiliation with the VA goes back over 50 years, so

since I was a child. I grew up on the grounds of the Minneapolis

VA. So I may be a little more attuned to this than most.

Mr. BUYER. I think you are right.

Ms. Carson.

Ms. CARSON. Thank you very much, Mr. Chairman. I have a

quick question for Dr. Baldwin, and thank all of you for being here

today.

The VA/NIH partnership highly valued by both agencies. As well

as being mutually beneficial, is it reasonable to expect that NIH

would help support the infrastructure costs of its partners?

Now let me also add, so we can make this brief for you, in March

of 2001, the NIH Institute Director supported an indirect cost rate

for grants to—I believe—foreign institutions, but, NIH declines to

provide anything to the VA facility. I might have that kind of

messed up, but maybe you could unmess my mind up.

Dr. BALDWIN. We have an invitation to the VA, if they would like

to sit down with us to help us establish a plan.

Ms. CARSON. I am sorry——

Dr. BALDWIN. I would be happy to sit down with the VA to establish what would be an appropriate level of compensation for additional costs. In terms of stewardship of federal funds, it is important that we be able to have that discussion and construct a level

that is appropriate, justified and documented.

I have heard 20 percent; I have heard 15 percent; I heard 10 percent today; I have heard 5 percent from our auditors; we have 8

percent of the suppressed indirect costs rate that is used on some

other mechanisms. I would be pleased to have that discussion with

the VA to see if there is a way to document what would be an ap-
37

propriate and equitable compensation for costs that are above and

beyond appropriated costs, which we cannot augment.

I am not saying there are not additional costs, but we have to

have a process in place. We have not had contact from the VA for

the last year or so, but I would be happy to meet on that topic.

Ms. CARSON. Foreign corporations?

Dr. BALDWIN. Excuse me?

Ms. CARSON. Foreign corporations, is there any——

Dr. BALDWIN. Not corporations, no.

Ms. CARSON. Foreign corporations, is there any validity to the

rumor that NIH does, in fact, have partnership providing support

and direct costs for foreign corporations?

Dr. BALDWIN. Not foreign corporations. Starting in October 1,

2001, we changed our policy in regard to foreign institutions.

Ms. CARSON. Institutions may be the better word.

Dr. BALDWIN. Foreign institutions, universities, and clinics, yes,

that is correct.

Ms. CARSON. You do have a relationship with foreign institutions?

Dr. BALDWIN. Not very many of them, but, yes, that is correct.

Ms. CARSON. Okay. And you are willing to sit down with VA here

in America?

Dr. BALDWIN. Yes, I am willing to sit down with the VA here in

America and determine what would be an appropriate level. We

have had many levels discussed.

Ms. CARSON. Thank you, Dr. Baldwin.

I have no further questions, Mr. Chairman.

Mr. BUYER. Mr. Boozman.

Mr. BOOZMAN. Thank you.

Mr. Laracuente, you mentioned that you are developing some

self-assessment and improvement program standards. Where are

the standards coming from?

Mr. LARACUENTE. They come from a variety of sources including

FDA, VA, the VA guidance documents, the NIH, HHS, and we have

the Clinical Studies Center heading up that process right now.

Mr. BUYER. I am looking at these systems. I don’t want to pick

on you, Dr. Zieve, but you are very eloquent, you are very refreshing, so I am going to pick on you.

Dr. ZIEVE. Pick away.

Mr. BUYER. You are the director. Also, you are the medical director of the corporation?

Dr. ZIEVE. No, I am chairman of the board of directors.

Mr. BUYER. I am sorry, chairman of the board of the corporation.

Dr. ZIEVE. And I am associate chief of staff for research at the

VA hospital, and I run the diabetes program there, which is my

real hat.

Mr. BUYER. Is it easier for a major corporation out there to turn

to you to do the protocols of a particular device or a drug than

something else?

Is it easier for them to turn to you; or if there is a relationship

to this particular drug for us, I will tell you what, we will pay you

$2 million. It may really only costs $300,000 to actually do it. You

get to keep the extra money. You get to call it overhead. There are
38

no such thing as per diems. You can spend that money on however

you want.

Is there something going on here that does not feel right or sense

right?

Dr. ZIEVE. I regret to say that I have never had an offer like

that.

Mr. BUYER. All right. Well, I have got to ask you.

Dr. ZIEVE. However, the majority of pharmaceutical trials, which

represent roughly 80 percent of the influx of funds into McGuire

Research Institute, are usually budgeted on a per patient basis,

and it is a very careful thing. You get so much per physical exam;

you get so much for having your nurse go over the patient; you get

so much for the blood drawing fee; the labs are usually done centrally; and out of this all it—and we compete with other, you know,

private sector entities, and anyone else who could do the trial.

In general, what we compete on is not generally being expensive,

but the quality of the product. In other words, if a pharmaceutical

company is—let’s suppose it is one of the trials which is involved

to bringing a drug to market, rather than assembling data on postmarketing on different ways to use the drug, the worst disaster in

the world for them is to have data they can’t rely on, or to have

a site that they have to shut down because they have doubts about

it because everything is not being done right.

The big competition, the big way we compete for funds is by offering a good product; that if you put a study here, we will see that

everything is done right.

Mr. BUYER. We are almost circuitous. It is also because you have

access to what you called a vulnerable population. So if you have

scientists, medical researchers out there that do not share the dimension of your testimony, and they are so eager to participate,

problems could occur.

Dr. ZIEVE. Problems could occur. There are many inherent conflicts in this which is the reason for having such a careful setup

of—you know, that is the reason that you have all of these regulations, which when you actually look at all of the hoops that, for example, an IRB must jump through, a lot of them seem, you know,

to be tremendously ornate.

But, nonetheless, the meticulous procedural safeguards are an

important thing here. Now one of the things that we did—let me,

if I could just take a minute to describe one particular thing because it was a fundamental decision we made at the very

beginning.

When we looked at the university IRB, we were sharing, and

then we shared Duke’s experience. We talked to them, and we

looked at what we needed. And we felt that there was a problem

with the bid of having an IRB that was made up of volunteers, because you either tended to get people who had a lot of free time,

which probably aren’t the people you want; or you got people who

had some personal gain out of being on the IRB, who had a conflict

of interest, which was just the people.

So right at the beginning, we made the decision that we wanted

to have a separate paid professional IRB that was paid for their

IRB duties, per se, so they wouldn’t have pressure brought on.

Their pressure would be to protect the institution, to protect the
39

veteran, not to approve this project so investigator X gets money.

I think that is a real concern you are bringing up.

Mr. BUYER. How does someone end up with 43 percent overhead?

Dr. ZIEVE. I would suspect—I don’t know, because ours is not. I

will tell you with our overhead rate, we routinely charge 10 percent

until the IRB, until we set up the IRB and the investigational

pharmacy, and then we had to increase it to 15 percent just for

that.

I would suspect that that is probably—the high rate is probably

a relatively small corporation that is administering almost entirely

federal grants. Because with federal grants, you tend to have some

perverse incentives because you only get money if you spend it;

whereas, if you are administering private sector money, your goal

is to keep your administrative expense to an absolutely minimum.

Dr. BALDWIN. Mr. Chairman, could I comment on that?

Mr. BUYER. Yes, go ahead.

Dr. BALDWIN. I am afraid I wouldn’t want to leave any misunderstandings from Ms. Carson’s question, because the question about

paying indirects to the VA directly was the one that we were discussing. We currently pay about 15 percent to the VA foundations,

so we are paying indirect costs to the foundations, and it is about

15 percent.

Mr. BUYER. Oh, okay, good. Mr. Hickman, with regard to West

L.A., have you been involved in the recovery at West L.A.?

Mr. HICKMAN. Well, I am not sure, Mr. Chairman. I came on

board 3 months after the shutdown, and everyone was scurrying

around at that time trying to put things back together in R&D, and

they needed a lot of help from the corporation.

Mr. BUYER. Well, tell us the story.

Mr. HICKMAN. Sure. Actually, the corporation hired about nine

people the first year to work in R&D to support the staff. Most of

those were IRB people and support staff that were working with

the IRB coordinators to put the IRB process on track and get it up

to the standard that was required.

In addition to that, there were other things that we were doing

to support the research operation. We staff a clinical research center at the hospital, and we pay for the staffing, and for the supplies

there. We also supply equipment. We provide seed money for pilot

studies for grants when we can afford it.

Now even though we weren’t involved in any of the events that

led to the shutdown, the shutdown did significantly impact the

nonprofit corporation, both financial and operationally. Over the

past 3 years, our business has declined, so that our income has declined about 49 percent.

And a lot of that has to do with the fact that when the shutdown

occurred, we documented over a million dollars worth of business

that walked away where there were contracts on the table we were

negotiated and the companies walked away.

We can’t document business that didn’t come to us during the period that we were on probation, but we are sure that there were

a lot of companies that were reluctant to bring their studies to us

during that period of time.

And there has been just a slow decline in the pharmaceutical

business. Doctors are more reluctant to take those studies on at
40

our site for a number of reasons. We see our salvation, in the long

term, to be the handling of federal grants. And that is what I

would like to make a comment on.

We have our own federal-wide assurance. We already handle a

small number of R01 grants, and we are fully capable of handling

a lot more. The problem for us is that virtually all of the NIH

grants are being administered by UCLA, even though most of all

of the work is being done at the VA facility, which means the VA

gets nothing back in terms of FNA costs, or anything else.

Whereas, if we were doing those, administering those grants, virtually all of the FNA money that we collect would be going right

back into the VA infrastructure to support the research program.

And that would amount to millions of dollars literally. Right now, we are averaging about $400,000 a year in direct support to the research program; over the last 3 years, about a millionand-a-half dollars, most of that to support the IRB function. I pay

the salaries of two of the people, the coordinator, and two of the

other IRB staff people.

Mr. BUYER. Well, thank you for your work.

Mr. HICKMAN. Thank you. I appreciate that.

Mr. BUYER. Mr. Boozman, do you have anything?

Mr. BOOZMAN. No, thank you.

Mr. BUYER. By way of opening, we will have a follow-up hearing

in September. The lingering concerns on—with regard to human

subjects protections will continue. I agree with Dr. Zieve. You mentioned about a special, and yet vulnerable, population, because of

their sense of duty.

I will anticipate the IG’s findings. We will have sidebar conversations with the VA with regard to the—how they responded to the

letter of inquiry from this committee. We will examine the funding

relationships between the VA and NIH, and make sure that that

is done. And we will have another hearing this September.

Thank you, and this hearing is now concluded.

[Whereupon, at 12:35 p.m., the subcommittees were adjourned.]
(41)

A P P E N D I X

PREPARED STATEMENT OF CHAIRMAN MORAN

Thank Chairman Buyer for his cooperation in holding this hearing.

VA’s longstanding biomedical research and development program is source of

pride for Committee, the VA and for sick and disabled veterans of our armed forces.

Over the years of its existence, VA investigators—

• Perfected antibiotic therapy for tuberculosis

• Established first effective medication for schizophrenia

• Did seminal radio-immunoassay [‘‘radio-immuno-ASSay’’] research that led

to what we know today as ‘‘nuclear medicine.’’

• Invented the Computerized Axial Tomogram, A.K.A. the ‘‘CAT Scan.’’

• Won the Nobel Prize in medicine three times, as well as the Albert Lasker

Medical Research Award (sometimes called the ‘‘U.S. Nobel Prize’’) numerous times, and many other recognitions of excellence in science and

medicine.

VA researchers has published literally thousands of learned papers in refereed

journals across the entire spectrum of medicine and bioscience, including the New

England Journal of Medicine, The Lancety, and journals of every medical discipline.

Its research is one of VA’s bedrock programs—provides a vital link to VA’s academic partnerships in 107 schools of medicine, and with other health professions

schools.

While research is an acknowledged hidden treasure in VA, also been source of

some challenges in recent years—

Committee held hearings in 1999 and 2001 on problems in the research activities

of several VA facilities, including its largest in Los Angeles. More recently, problems

surfaced in VA facilities in Baltimore, Durham, Washington, DC, and in other sites.

Committee has expressed concern in the past about adequacy of VA’s

• informed consent practices,

• its conflict of interest policies,

• its internal Research management practices,

including the effectiveness of supervision exercised by VA Institutional Review

Boards, the resources committed to IRBS, and VA local research management, including proper record keeping and other documentation requirements.

Would like to note for the record that the problems observed in VA research are

duplicated in university biomedical research programs outside VA, even in some of

the nation’s most prestigious universities. Many of these cases have come to light

in the press in recent years. So, VA is not alone in this regard.

Today, we will reexamine, some of VA’s programs in research with a focus on the

legislation we passed to give VA authority to set up non-profit foundations to help

VA manage extramural research funds such as NIH, corporate and philanthropic

grants. Look forward to VA’s testimony and that of other witnesses on these topics.

Also very interested in VA’s experience to date with intellectual property law and

VA’s Technology Transfer program - I believe another success story for VA research.

Look forward to this discussion.

Thank my fellow Chairman.

PREPARED STATEMENT OF HON. JULIA CARSON

Thank you Mr. Chairman.

I too would like to welcome our panelists and our guests to this joint hearing.

At issue today is the third mission of the Department of Veterans Affairs—medical and health-related research.
42

Let me be clear—there is only one goal here—to effectively and safely conduct research to provide better healthcare and to improve the general health of veterans

and other Americans.

In concert with this overarching goal, I encourage VA to also seek research opportunities with the promise to mitigate the impact of bio-terrorist events. Unfortunately this issue now has a place among our national priorities, just as the

healthcare resources of VA have earned VA an important place in our effort to assure homeland security. The Administration must fully recognize the value of VA

in this regard.

We all understand the purpose of medical and health research, but we do not necessarily understand the myriad of issues that impacts research in a large Federal

agency such as the Department of Veterans Affairs. Today, we shall shed some light

on the scope of those issues. We engage in this review to help facilitate a more effective research environment in VA.

A number of issues impact the conduct of VA research and the use of VA research

facilities. I plan to review several of these issues during today’s hearing.

Public Law 100–322 authorized the establishment of a nonprofit corporation at

each VA medical center at which significant medical research is carried out, to provide a funding mechanism for moneys received from other-than-VA appropriations

for research projects approved at the medical center.

Research Corporations provide a funding conduit with specified limitations on how

those funds may be used. While the Corporations serve a clear and necessary purpose, we must assure that adherence to their original purpose remains steadfast.

We can always create other potential funding conduits if research corporations were

to become ineffective or un-accountable.

The VA Office of the Inspector General has conducted at least four reviews of the

Corporations since 1993. In early reviews, the IG noted significant problems regarding accountability and misuse of funds. In recent audits of nonprofit corporations,

the IG found minor problems with reporting. In today’s testimony the IG reports

that they found no evidence that the information VA reported to Congress regarding

the Corporations was not complete and reliable. While performance and accountability seem to be improving, there are many unknowns, and continuing oversight is

needed.

Another interest area with direct impact on VA research is intellectual property

rights regarding the inventions and discoveries of VA scientists and investigators

using funds from research appropriations.

A number of laws and policies impact who gets credit and who owns the intellectual property rights under a variety of circumstances under collaborative research.

We must sort through that labyrinth and assure VA gets due credit for its creative efforts. As a Federal agency, VA should benefit as a result of patent rights

and other revenues generated as a result of their discoveries. Public Laws 96–480;

96–517; 99–502 and 104–113 all impact this issue.

An appreciable portion of VA research involves human subjects. With human subject studies we have tremendous opportunity to directly assess the impact of a new

drug or new medical procedure.

Human subject research has great potential, but it also requires great safeguards.

We must assure that adequate protections are in place to protect and inform the

volunteers in such studies of their own personal risk - they must understand the

process and the risks.

Between 1993 and 1999, the Human Subject Medical Research programs at the

Sepulveda and West Los Angeles VA facilities were shut down because of research

violations pursuant to human studies medical research activity. People, Congress,

and the media all took notice of that problem.

Protections were needed.

In September 2000, VA established the Office of Research Compliance and Assurance or ORCA to oversee human research and protect our all-to-human subjects.

Today, we will receive the testimony of Dr. Mather regarding the progress ORCA

has made under his leadership. I will not hesitate to remind him—using a very

well-worn quip—that his organization has one whale of a responsibility!

Additionally, regarding human subject medical research, we will review the

progress of the National Committee for Quality Assurance. This private, non-profit

accrediting organization has developed accreditation standards for human subject

research. They are in the process of conducting surveys of VA facilities under those

standards.

As Dr. Roswell notes in his statement,

As of May 8, 2002, eleven (11) final reports have been issued, with eight

facilities being ‘‘Accredited with Conditions’’ and three facilities receiving a

preliminary result of ‘‘Not Accredited.’’
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Dr. Roswell, I will later ask your panel to describe the survey process and elaborate on the meaning of ‘‘Accreditation with Conditions.’’ We need to understand the

process and the safeguards better.

Mr. Chairman—as you know, the National Institutes of Health, through the grant

process; is the second largest source of all donations to VA research. This represents

about 1⁄3 of the research pie at VA.

Cooperation between VA and NIH is important to maximize the effectiveness of

research conducted at VA facilities. I asked you to invite Dr. Wendy Baldwin, the

Deputy Director for Extramural Research at NIH to provide the views of her agency

- I now thank you Mr. Chairman, for graciously extending that invitation to Dr.

Baldwin.

Cooperation between principal federal agencies coupled with the express will to

resolve problems is essential to success in results oriented government.

I plan to ask representatives of the principals to this research ‘‘partnership’’ how

the cooperative effort could be streamlined.

Since the opportunity will now present itself, I plan to ask both Dr. Roswell and

Dr. Baldwin if there are options for offsetting the indirect costs incurred by VA

when NIH funds a project through some non-federal agency. I understand that until

1989 the VA received a 15% ‘‘add-on’’ to grants to compensate for indirect costs.

This no longer occurs—why?

Non-Federal organizations receive up to a 26 percent ‘‘add-on’’ to cover administration costs alone. Universities conducting ‘‘on campus’’ research receive ‘‘on average’’ about 50 percent additional grant funding to cover both facility and administration costs. We need to understand this process better and hope that VA, NIH and

NAVREF representatives can shed some light on this process.

Mr. Chairman this is a rare opportunity to hear all sides of the story and hopefully to ‘‘Get Results!’’

I yield back Mr. Chairman.

PREPARED STATEMENT OF HON. BOB FILNER

VA Research

Thank you, Mr. Chairman.

We have a unique opportunity presented to us here today to learn more about

VA’s efforts to improve the quality and safety of its medical research, to develop and

cultivate its research accreditation and compliance processes and to explore the

worlds of nonprofit corporations and intellectual property rights.

That’s a whole lot of territory to cover in one hearing! Our agenda is an ambitious, but an important one. I would like to thank the panelists for their time and

testimony. I also commend the leadership of the gentleman from Kansas for bringing us together for the purposes of conducting a joint hearing. We don’t do this

often. I hope, for myself personally and Members of both Subcommittees, to walk

away from this hearing with a far better understanding of the complex issues surrounding medical research. I am just as anxious to also find ways to foster a more

effective research environment in VA.

VA research has earned a fair amount of distinction in medical, scientific research

and academic circles and has many accomplishments to its credit. I am fascinated

with the breadth of research and the tremendous potential to improve the health

and the quality of veterans’ lives and countless others. I wonder how many cardiac

patients with life-saving pace makers know that VA research helped their hearts

to continue beating regularly or how many reformed smokers know that nicotine

patches are the result of VA research. Recent studies at the VA medical center in

San Diego have found a promising treatment for smallpox. This research takes on

new significance in light of the heightened threat of bio-terrorism.

VA should receive far more national recognition for its numerous contributions

and the funding needed to continue its groundbreaking effort. VA research has realworld applications—applications that have touched everyone here in this room—either directly, or through a family member, friend, coworker or neighbor-and certainly all of us who advocate on behalf of veterans.

I believe it is imperative, however, that we continue to ensure that this research

is done responsibly-protecting the rights and dignity of our human subjects. We

must not only learn from the lessons of the past, but continue to move the bar on

research practices, education, accreditation and industry standards even higher.

Fully meeting our fiduciary responsibilities and full accountability to taxpayers

must continue to be the hallmarks of VA research.

A few week ago, we had a hearing on legislation that will go the House floor on

Monday to expand VA’s role in conducting research and education of vital national
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importance on bio-terrorist related protocols. Once again, I am compelled to reiterate that VA be given a voice and a policy-forming seat at the Homeland Security

table and the funding to support its expanded mission. The grassroots survival of

our nation could very well depend on VA’s highly effective and proven network of

researchers, educators and health care providers across the country.

VA was front and center in numerous support operations at ground zero in New

York City and here in Washington, DC. Where are the funds now to back this commitment and all of the rhetoric that has followed in the wake of these events?

We learned during that hearing from testimony given by Mr. Laracuente of the

National Association of Veterans’ Research and Education Foundations, about a 15

to 20 percent add-on that researchers across the country routinely receive with

grants from the Department of Health and Human Services (HHS) and the National

Institutes of Health (NIH) to cover indirect costs for facility and administrative

overhead. I asked VA to provide me with some additional background information

on this issue. I thank Dr. Roswell and Dr. Feussner for their prompt and insightful

response.

I am pleased that the Deputy Director of Extramural Research Programs, responsible for awarding research grants from NIH, Ms. Wendy Baldwin, was invited to

join us today. I am eager to learn about NIH’s policy decision to grant researchers

across the country and in fact around the world, yet exclude VA researchers from

receiving this added support. I sincerely hope we will develop some in-roads here

today into understanding and hopefully, resolving these inequities.

I like this brochure VA recently developed to help veterans make informed decisions about participating in research project or clinical trial. I applaud these brave

veterans, who continue to serve our nation, in an exemplary and selfless fashion.

Dr. Zieve made a comment in his written testimony that struck a resounding cord

for me when he stated that, ‘‘In all the publicity about VA research, the veteran

volunteer gets far too little credit.’’ Let’s give credit where credit is due!

Thank you, Mr. Chairman.

PREPARED STATEMENT OF HON. JEFF MILLER

Thank you Mr. Chairman.

I would like to thank the members of our panels present today. I appreciate your

testimony and your assistance with this issue.

It is of the utmost importance that the VA, and any body that conducts medical

research using human subjects, establish a system for ensuring accountability in informed consent. VA medical research is too important to not be done to the highest

of medical and ethical standards. It has given veterans and all Americans many pioneering advances in medicine such as the development of the implantable cardiac

pacemaker, the nicotine patch, the first oral vaccine for smallpox, and the performance of the first liver transplant.

It is also important to note that despite these wonderful advances in medical research, the VA has seen little in terms of revenues generated by these discoveries.

Put simply, this is a situation that must be changed. A considerable amount of time,

focus and funding go into VA medical research, and the VA must receive a good return on this investment.

I am thankful that we are having this hearing today to examine the situation and

ensure that the VA has worked to correct past problems and to ensure that what

occurred a couple of years ago is not repeated.

I would like to thank Chairmen Moran and Buyer for calling this hearing today

to discuss this important issue. I look forward to the testimony.
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WRITTEN COMMITTEE QUESTIONS AND THEIR RESPONSES

CHAIRMAN BUYER TO MICHAEL SLACHTA, JR., ASSISTANT INSPECTOR

GENERAL
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CONGRESSWOMAN CARSON TO DR. ROBERT ROSWELL, UNDER SEC- RETARY FOR HEALTH, AND DR. JOHN FEUSSNER, CHIEF RESEARCH

AND DEVELOPMENT OFFICER
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CONGRESSWOMAN CARSON TO DR. JOHN MATHER, CHIEF RESEARCH

COMPLIANCE AND ASSURANCE OFFICER
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CHAIRMAN BUYER AND CHAIRMAN MORAN TO NATIONAL ASSOCIATION OF VETERANS’ RESEARCH AND EDUCATION FOUNDATIONS
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CHAIRMAN BUYER TO DR. FRANKLIN ZIEVE
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