greatly increased the potential of biotech development in my trict in New Hampshire.

So for these reasons, I am very interested in hearing your tes mony. I am glad to have you here under the auspices of Scien and not some other committee on Capitol Hill as we talk about form in health care, and thank you, and I'll let you carry the da Thank you, Mr. Chairman.

Mr. VALENTINE. The gentleman from Massachusetts, Mr. Blu Would you care to make an opening statement?

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

I would like to thank Chairman Valentine and Ranking Memb Mr. Lewis for holding this hearing today on the effects of certa health care reform proposals on the effects they will have on inn vative therapies using cancer as a case study.

My district in Massachusetts is home to many biotechnology con panies and research institutes, so I have a special interest in ho pending health care legislation will affect the industry.

During a hearing that this subcommittee held in my district i Worcester, Massachusetts, less than three months ago, we hear nearly unanimous testimony that biotechnology companies are co cerned about President Clinton's Health Security Act as it is cu rently written. The provisions setting price controls on break through drugs were of particular concern to those who testified. I turns out that their fears were justified, as today's press releas from the Biotechnology Industry Organization points out.

Biotechnology research in cancers such as breast, ovarian, lung and prostate, has dropped off because many investors are scared o what effect the Health Security Act will have on future profit ability. Driving home the point even further is the fact that the American Stock Exchange Biotechnology Index lost 33 percent o its value between January and December of last year.

Clearly, this is not the direction the Federal Government should be pushing private business. We should be encouraging success in health care technology as a way to eventually decrease costs in health care as well as improve America's competitive standpoint.

The United States leads the world in the development of innova tive medical technologies, some of which are relatively new. In 1980, the sale of genetically derived products was zero. However, they are expected to reach $50 billion by the end of this century. The United States, however, is quickly losing ground in this industry to other nations in the Pacific Rim and in Europe. In fact, the Department of Commerce's Technology Administration predicts that the United States will soon lose its competitive advantage in key areas of biotechnology.

As this Nation's trade deficit exceeds $240 billion, we can ill afford to give up on industries where we hold a competitive advantage, and it seems to me that the Clinton administration is sending a mixed message by promoting high-technology products like the information superhighway and then restraining innovative medical technologies. I expect that the results of this hearing will give us a better idea as to how health care reform in general and the Health Security Act in particular will affect this vital industry. Thank you very much, Mr. Chairman.

Mr. VALENTINE. I thank the gentleman.

The chair is happy to recognize the distinguished lady from Virinia, Ms. Eshoo.

Ms. ESHOO. Thank you, Mr. Chairman, and good morning, every

ne.

I am very pleased to be here, and I would like to thank all the anelists for coming to Washington to enlighten us.

A special welcome to Derrel De Passe, Mr. Chairman, who is the irst woman to be named a corporate vice president in the 44-year istory of Varian and a great source of pride to us in the 14th Conressional District, and when she speaks I know that we are all oing to listen very hard because she has a great deal to say that we can learn from.

And a very special welcome to Dr. Curd from Genentech Corporaion, which is in a neighboring district, but I have had the pleasure f working closely with so many of the people there, and it is one f the jewels in the crown of the Bay Area in California.

I have believed for a long time that this industry is where hope eally resides in terms of breakthroughs for those that are waiting or the cures human beings really have the hopes and aspirations

or.

To shape a national health plan that would somehow dampen the nnovation and the creativeness that comes from this very imporant industry that continues to grow and grow, I think, would be eaded in the wrong direction.

So we need to learn from you. Certainly there has to be accountability that is brought to the process, but as my colleague, Mr. Swett, said earlier, this is science, and we need the guidance of scientists and those that have the technology experience to help shape his area so that we can continue to bank on the hopes that you provide in the breakthrough technologies that we are looking for, or the cures that humankind is hoping for now.

So a special welcome to all of you, and I look forward to hearing our testimony.

Thank you, Mr. Chairman, for holding this hearing.

[The prepared statement of Ms. Johnson follows:]

I'd like to thank the Chairman today for holding this hearing on what I view is critical issue for all Americans. The impact of health care reform will have far eaching consequences in lives of all Americans. The impact of health care reform n the biomedical technology industry ia a cross cutting issue which touches on this Nation's health, both physical and economic. The future of this industry has particuar significance for minorities and women who have historically been underrepresented in clinical trials and innovative treatments. I look forward to earing from our witnesses on how these proposals will impact our basic research ase and commercialization activities. Thank you.

[The prepared statement of Mr. Grams follows:]

MR. CHAIRMAN, I WANT TO THANK YOU FOR HOLDING THIS MORNING'S
HEARING REGARDING HEALTH CARE REFORM. I BELIEVE MANY OF OUR
COLLEAGUES WOULD AGREE WE NEED TO ADDRESS THE PROBLEMS WITHIN OUR
CURRENT SYSTEM, HOWEVER, THERE IS MUCH DISAGREEMENT AS TO WHAT
APPROACH TO TAKE.

UNLIKE THE PRESIDENT, I DO NOT BELIEVE THERE IS A HEALTH CARE
CRISIS. IN FACT, THE VAST MAJORITY OF MY CONSTITUENTS IN MY HOME
STATE OF MINNESOTA ARE RELUCTANT TO SCRAP OUR CURRENT SYSTEM IN
FAVOR OF A GOVERNMENT RUN SYSTEM. I SHARE THAT CONCERN AND HAVE
COSPONSORED LEGISLATION THAT PRESERVES INDIVIDUAL CHOICE AND
MAINTAINS A PRIVATE SECTOR SYSTEM.

TODAY'S HEARING WILL FOCUS ON THE POTENTIAL IMPACT OF THE HEALTH
SECURITY ACT ON RESEARCH AND DEVELOPMENT. MANY OF YOU ARE
FAMILIAR WITH A NUMBER OF MINNESOTA HEALTH CARE COMPANIES LOCATED
ALONG "MEDICAL ALLEY. HAVING MET WITH A NUMBER OF THESE
COMPANIES, I AM VERY CONCERNED THAT THE PRESIDENT'S PRESCRIPTION
TO CONTROL HEALTH CARE COSTS WILL VIRTUALLY UNDERMINE PROGRESS IN
MEDICAL R&D. ULTIMATELY, THIS COULD RESULT IN EVEN HIGHER
INCREASES, AS INDIVIDUALS ARE NOT CURED AND TECHNOLOGIES THAT
ENABLE THE DISABLED TO LEAD AUTONOMOUS AND PRODUCTIVE LIVES ARE
NOT DEVELOPED.

MR. CHAIRMAN, I HOPE THAT WE WILL BE ABLE TO ADDRESS SOME OF
THESE CONCERNS DURING TODAY'S HEARING, AND IN THE FUTURE. AGAIN,

I WELCOME OUR DISTINGUISHED PANELISTS AND LOOK FORWARD TO HEARING
THEIR TESTIMONY. THANK YOU.

PAPER

Mr. VALENTINE. Thank you.

Unless there is some objection, the chair will rule that it will not be inappropriate for cameras and still photographers to function luring this hearing.

I would say again welcome to the members of this panel. Your prepared statements will appear in the record as presented to us. We would appreciate it very much, if you can, if you would summa-ize, and we will begin with Mr. Feldbaum.

STATEMENTS

OF CARL FELDBAUM, PRESIDENT, BIOTECHNOLOGY INDUSTRY ORGANIZATION; DERREL DE PASSE, VICE PRESIDENT, WORLDWIDE GOVERNMENT RELATIONS, VARIAN ASSOCIATES; THOMAS D. BROWN, ASSOCIATE PROFESSOR, DEPARTMENT OF MEDICINE, HEMATOLOGY, ONCOLOGY, DUKE UNIVERSITY MEDICAL CENTER, AND MEMBER, DUKE COMPREHENSIVE CANCER CENTER; MELANIE WAGNER-JOHNSON, PATIENT/CANCER SURVIVOR, BETHLEHEM, PENNSYLVANIA; AND JOHN CURD, CLINICAL DIRECTOR, GENENTECH INC.

Mr. FELDBAUM. Good morning, Mr. Chairman. Thank you very much. It is a pleasure to be here.

My name is Carl Feldbaum. I am the president of the Biotechnology Industry Organization, which is an association of over 500 biotechnology companies, universities, and State biotechnology centers. Most of them are doing research in the most deadly and intractable diseases: AIDS, Alzheimer's; and a great many cancers: breast cancer, renal cancer, prostate cancer, cervical cancer, mela

noma.

Cancer is not a "we versus they" proposition. We know that; we all know that personally. Today in Philadelphia, my father is going through the last stages of a new experimental biotech therapy for advanced melanoma. It touches all of our lives.

What I have seen in the industry in the one year that I have been a part of it, I can just relate to you in an anecdotal form. When I first came on board last February, I had the opportunity to go around the country and visit biotech companies in Massachusetts; in Montgomery County, Maryland; in California; in New Jer

sey.

What I found speaking to CEO's and talking to scientists, walking up and down the labs, finding out what they were doing, seeing the excitement, the CEO's were in an expansive state of mind. They were hiring new Ph.D.'s, they were leasing more equipment, they had designs for new labs. When I returned in September and October of last year and when I visit now, there is a totally different state of mind. There is a sea change in the attitude, and I can tell you that predominantly it is attributable to uncertainty about what is going to happen with health care reform and in particular with the price control, the de facto price control, provisions in the President's health care plan.

The story is different now. They have put aside, they have postponed, designing new labs, purchasing new equipment, hiring.

L

Most people don't understand that biotech companies are into research and development. Over 90 percent of the com I represent do not have products on the market yet. This most highly research and development intensive industry history of civilian industry; 58 percent of the companies, ac to Ernst and Young-and this is from six months ago-58 p of the biotech companies have less than two years in cash raise cash through venture capital, public offerings, which th 1993 were largely closed to them. So that was the pictu months ago. It has frankly grown increasingly desperate.

At first there was just a cloud of uncertainty about wha President's health care reform plan would do, but when the actually came down, some described it as a knife at the he the biotech industry. It targeted-it was an industrial policy geted at breakthrough drugs. The potential here is to kill this before it lays golden eggs.

These are risk-taking entrepreneurial ventures, and frankl are headed in absolutely the wrong direction. The policy-the visions in the bill have an anti-innovation bias, and they are ing a real and present danger. This is not Chicken Little saying sky is falling. For biotechnology, 40 percent of the sky finand has already fallen, 40 percent has already fallen and the avail ity of cash to the industry to conduct research and developme down.

The real tragedy, the real problem, in this is having a clear present effect on research now. This is not prospective, this is speculation, on my part.

In December, we did a survey on companies, 60 companies in biotech industry doing AIDS research. Today we released a sur that we have conducted over the last 8 weeks on cancer; 44 pero of the companies, the biotech companies, who responded said th cancer research has already been delayed or curtailed; 41 perc said the dominant reason for the cuts was a decline in investm due to investor uncertainty over the Clinton administration's p posals for de facto price controls on new breakthrough drugs; percent predicted their cancer research faced further reductio should the administration's proposals become law. This is what am told by our own members.

One investor told me, "Look. Biotechnology is a risky venture begin with. The science is new. It is a powerful technology, and is extraordinarily promising, but it takes a lot of time and is e tremely costly. When I am looking to place an investment, I ha to keep my eye on the bottom line."

Now we would like to think of our investors as having a broa humanitarian streak. We would like to think that. Frankly, as on of them told me, "We go through the science, the research and de velopment process and then say your company is a terrific manage through the FDA process, and you get approval, and now you ar telling me at the end of the line when the science works and your clinical trials work, you get-and there is the equivalent of a hang man to set your price?" He said, "T'd rather invest in Boston Chick en. I'll go for fast food franchises. Why should I put my money into an industry that is fraught with so many uncertainties?"