World. And the evidence is that these patent Innovation Box policies are not very good at that because what theyre targeting is the income generated from the patents rather than the research that leads to them. This is true of lots of r d tax credits. In holland they just designed one which is quite intelligent, i think, because it targets the research that leads to the r d. So the labor hired rather than the income generated from that r d. But i think we should remember that, for example, the act which in 1980 allowed publicly funded research to be patented. If you read that act, its really interesting. They also say we better make sure that the taxpayer doesnt pay twice, right . So just like year, i think the nih spent arounded 39 billion in research, both basic and applied. And the problem is what happens to the prices of these drugs . Do they reflect that input . So its not only and ive been reading a lot about this, but the pricing mechanism itself could be one way to be rewarded so that you dont pay twice. But the government has never felt the confidence to cap the prices of drugs because precisely of this long narrative that i talked about before where youre metaling in the market when actually youve created that market. As soon as we talk about government having a say on the price or even the whole obamacare, if you want, vision, where we talk about the government metaling in the health care industry. So this is why we need a new narrative. So what im hearing you say, to boil this down a little bit, is we get more innovation if we do more federal research for basic research, not if we make these giveaways to big Drug Companies. Theres no evidence. So the patent box which has been tried and tested in places, like the uk, theres no etched that that increases investment and innovation. It might increase time that people golf. I dont know. That might happen. But what driechs investments and innovation by the private sector are their perceptions of where the future market and opportunities are. Warren buffett is very good on that. Good. And what were talking about is what actually drivers those future policies. Thats what were talking about and thats what policymakers should be talking been. One more question and then ill hand it over to the congressman. Then ask about Something Like the impact of my medical innovation action which could boost the nih budget by about 20 without aciding new taxes and adding to the deficit by asking the Drug Companies to put a little more of their profits into nih. No surprise, the army of lobbyist thats work for the biggest Drug Companies dont like this bill. But, doctor, could i ask you how the medical innovation action might affect the pipeline of new products and affect the drug industry itself . Well, i think the medical innovation action is a good idea because it provides a substantial sum to the nih for its work in in catalizing drug transformance and development, to make sure drugs are evaluated and approved so that we know that they work and are safe before they can come on the market. So i think that the ufrlts, the amount of money that pharmaceutical companies have made over false advertising and other problems is that has led to a substantial amount of money that they could be contributing back into the into the Development Economy through this medical innovation. Well, naung very much. And its clear from the testimony weve heard today that new drugs are build on a foundation of taxpayer supported investments in basic research. It does not make sense to me that Congress Says that it wants more innovation and then turns around and cuts the budget for nih, for nsf, for our basic research. It is time for lawmakers to put their money where their mouth is. I think the medical innovation action is one way we could get back on the right track. So thank you all. Congressman cummings. Yes. The journey from lab to market certainly involved many steps and is a perilous one that many technologies and discoveries, even some of the most promising ones have not succeeded in making. Is that right . Some of them dont make it. Thank you. And for that reason, the its my understanding its based between the lab and market is often call the valley of debt. Yush in the process of taking a Software Technology that you developed through your research, out of the lab and into the commercial market, just a few questions. Your firm speech has received several Small BusinessInnovation Research grants from the National Science foundation. How important have those grants been to enabling the socalled valley of death . Well, i hope weve crossed it, but were well on our way to if we havent. But critical. I would not have started the company in the first place if those grants didnt exist. Being a propheter, i know how to write proposals. Its something that we do all the time. And so having that there made it a lot easier. But ill also add that university of maryland has been very supported through professor students forming companies and so has developed a lot of programs. And one crucial program, for me, was a program called the venture accelerator. That i joined where you have people with a lot of business acumen who have been entrepreneurs several times. Theyre there to advise you to help you write a business plan, to help you develop a financial model, to help you think like a business because because thats very different from thinking like a professor. In other words, that goes to effectiveness and efficiency of what youre doing. Yes. Is that right . Yes. Sometimes i think you have people that go out there and they were trying to reinvent the wheel and they dont know how to do it. The next thing you know, they fall in the ditches and they never get back up, they become discouraged and the next thing you know, theyll decide on it. Yes. So thats also the goal of the icor program that nsf has developed. Again, that came after i had started so i wasnt able to take advantage of that program. But one of the main things that they have, people who are thinking of being entrepreneurs do is to test the market, to actually go out and talk to your potential customers, to your potential Strategic Partners and understand what is the market need . Because oftentimes we develop technology because we think its great only to find that theres no one thattel really wants that telling. So you want to make sure that you dont waste that time. And theyve been able to reduce the possibility of that happening significantly. How important is Venture Capital funding to getting that technology to market . Dependant on how much money you have. If youre able to generate revenue early, you may not need to get inventory occur capital funding. But if its going to take a control amount of time, to get that kind of traction where youre generating millions of dollars that can support all of your employees and your growth, then you need Venture Capital. You said something and i dont want it to go unnoticed. You talked about how when these younger people cannot get grants to go and to do research, you said they often become underemployed. And neither warren and i have not looking at this whole middle class prosperity situation and the idea that we have one hearing or two where we talked about people being saddled with debt, students come out of school saddles with dead. Then we have a situation here where if they dont have opportunities, then they dont have a job to even pay the debt. Exactly. And i havent even gotten to giving the feel probably of hopelessness and wasted, you know, potentials that they could be giving these great gifts to the world. And thats something that, you know, we just kind of i dont want us to pass by that because weve got a lot of young people who want to go out there and do great things. But unless we open these doors, and senator warren talked about it a lot about how all of this, you know, allows us great jobs. That is significant. Do you see that . I mean, do you see young people . Youre a profront seater. Do you see young people falling by the wayside or becoming discoura discourages . Yes. Even the young scientists who are trained and are able to apply for proposals through nih. I mean, i think theres research that shows its the young investigators that are hurt the most because they dont have the track record that your more established scientist ves. Unfortunately when youre sitting there in a peer review panel, you think the more established scientists, you know what theyre capable of. They tend to, in my opinion, get favors over the young investors because they dont have a proven track record. Were also cutting off our pipeline. Exactly. They do try to make efforts at nih to give special attention to young investigators. But theres still a lot of them who end up without support. Doctor, in your book, the entrepreneurial state, you discuss how u. S. And i quote has one of the most interventionist governments when it comes to innovation. If the government no longer played the rolled of mission centers, is there any other force in the United States capable of making what president kennedy called the national commit of scientific and technical manpower facilities to marshall of nations capabilities and talent toes solve our Biggest Challenges . Well, no. I think that the point is not do we need, you know, just a state, another private sector, a more private or more. Its always be very important dynamic public sprieft, if you want, interactions that have been fundamental to creating the kinds of innovations. The problem is today we have real crisis on both sides so we dont have that Mission Oriented or if you want we have less confidence for many agents even to talk about their commissions. They have to show their economic value. But also, you know, when we think about these sbir funds, for example, which you were just talking about, in some ways what they were able to do in the past were to act kind of like a public dc fund, which by the way is very common around the world. This knot about communist, its about how to get Capital Investments and innovation. But the problem is by not allowing them to talk about tlemz in a particular way, we havent allowed them to do what any normal Venture Capitalist will do which is to welcome failure, right . When you try to innovate, you will fail and fail and fail again. Michael jordan i think has one of the best quotes on that. But what the private Venture Capitalists have is they have the ability to reap some of the reward on the up side, which you were talking about before, to also cover ta downside investment, right . All the failures. So this lack of ability to admit, yes, we are kind of like a public Venture Capital fund has not allowed nih, but i would argue nih and bartha to think more concretely about how to create a resolving fund. And you see sth with, say, the recent guaranteed loans that were given to companies. Everyone knows the cylindra story. Why . Because it failed. It was a great story for anyone that wanted to bash government. Actually, everything behind the iphone that we know, you know, was picked, internet, gps, touch screen display, siri, they were all picked by different government institutions for financing. So if we admit that for each internet youll get 20 concords, for each tesla, youll get 20 cylindras. They have to get much more realistic about whether the tax system by its own, if you want, is actually bringing back enough money to do these experiments again and again. Let me ask you a question about china. The 2014 global r d forecast reported china was continuing to make double didnt increases in its annual r d budget. Projected that if this rate rate of Growth Continues through the end of the decade, china could surpass the u. S. In total r d spending by about 2022. Is china trying to emulate the r d model we utilize in the u. S. And is it trying to entice researchers and new technologies to leave the United States to come to china . Well, china i think has an incredible ability to adabt and learn in some ways the right lessons. Theyre spending 1. 7 trillion on these five new sectors which are broadly defined. Its very much milg Mission Oriented policy. If you look at these five areas, theyre all in that green direction. Theyre increasing massively their r d expenditures. But i think whats also interesting is those countries around the world that are able to a see that as an opportunity as opposed to a threat. So denmark, you know, small country, is the number one provider of High Tech Services to chinas green economy. And denmark is sort of punching its weight in terms of investment and innovation and they themselves have been able to engage in china in this interesting way that sees these chinese investments, again, as an opportunity. And i think what would be transformational for the u. S. Is to stop seeing china as a threat in terms of oh, god, theyre increasing their R D Investments more than we are and ask themselves how they can benefit from this massive increase in spending because theyre also potentially supplying a demand side, not just the kind of supply side push which in some ways weve all been talking about supply side pushes on innovation. Thats an important point which is all the big technological revolutions in the u. S. Required a demand side policy, right . So mass production would not have had the effect that it did in transforming productivity across the whole u. S. Economy without big thinking Mission Oriented demand side policies. And one way, i think, that china today is thinking about that is precisely using green as a new direction, also for the i. T. Revolution, right . So you not just spend on r d in high tech areas, but you would think how are you going to help the phi fusion and the employees of those innovations across the whole economy. Green becomes an interesting direction to think about how in this country we allow i. T. To get fully deployed. I think the data make it clear that so create real innovation, we need more investment in basic research. But right now, instead, congress is focused on lowering the fda standards for aprofessional so that companies can get their products on the market faster. The industry argues that patients just arent getting new drugs fast enough and its too hard for them to get drugs approv approved. I think this is a very sdrus game so i just want to ask a question about this. Doctor, can you tell us about the authority the fda also has to speed Innovative New drugs to market and in the fda is using that authority . Sure. There are a number of pathways that the fda has to provide patients with access to important new drugs treating serious or life threatening conditions or unmedical medical need. There are at leave phi different pathways that have the effect of trying to speed new cures to market. Last year, especially two 30s of the fda were approved vee kra one of these accelerated development or review pathways. So not only does the fda have these pathways in place, but it is using them liberally. If you look at the statistics, a lot of new drugs are being approved on the basis of stus studies in, you know, treating biomarkers or other surrogate end points. Most new drugs are approved on the basis of studies in six months or less despite the fact that theyre intended to be for chronic diseases and used for a lifetime. So i think the statistics and data dont support the industrys assertion that there is a very long and arduous process for a for testing, approving new drugs once its known that those drugs work. In fact, its quite the opposite. Thats very helpful. Lowering fda standards may make Drug Companies even more profitable, but it is not going to make them more innovation. So let me ask you another question about this. Some things put forward in congress would allow drugmakers to advertise and promost uses for their drugs that arent approved by these called off label drug uses, that have only initial Clinical Evidence that they my work, very small trial. As an expert, can you explain how innovation and safety would be affected if these proposals were passed into law . Yeah. These proposals are very dangerous for patientes and public health. What they would do is allow companies to get drugs approved on the basis of an extremely narrow limited indication and promote them widely for conditions where they might not be effective and they may be unsafe because there hasnt been any testing done in them. Patients want transformative innovations. They want treatments for their conditions, but they want treatments that work and treatments that are safety. If you dont allow if you dont provide companies with a requirement to do those kinds of tests by virtue of having the fda approve those conditions, Companies Wont do them. So youre not going to get that kind of testing that we need in order to guide physicians trying to prescribe these drugs, to guide patients who are looking for these drugs. We dont know how to use them and whether they will be working. Meanwhile, because these drugs are defensive, we would be dumping resources into these treatments that arent well known when what we could be doing is testing them first to make sure they work and then using them appropriately. That is a very supportful point. The fda is the Gold Standard around the world because it has protected americans safely anden sures that the drugs used are effective. We could disman the fda, but lower standards wouldnt produce any new cures and it certainly wouldnt keep us any safer. If were serious about finding new cures, congress should better fund the fda so that the fda can do its work. We need to make a real commitment of real dollars here. Thank you very much. Dr. Kesselheim, according to the data here, between july 2013 and june 2014, at least 1200 generic drugs more than doubled in price. Are you aware of this . Yes. There is one generic drug on the lot that could reverse the effects of heroine overdose or opiods in minutes. According to cdc, heroine related overdoss nearly group r