they are requested each time. it's a very robust process. >> i'd like you to take a look at my legislation and see if there's anything that we could do without legislation to help you through the process if you believe there's room for improvement. lastly on bbc's, you've written a letter to us with your concerns. i and others are concerned about support for small businesses. we want to make sure we do everything to great resources. can help me understand what your concerns are and what we can do to make the bill better? >> first let me say i think bbc's are designed to be an engine for economic growth, particularly for small businesses and that's good for everybody. it's something the staff in the commission have been supportive of throughout the years frankly since they were set up. i appreciate by the way some the concerns i expressed a couple of years ago with the prior bill were addressed and happy to talk about it for the but i did recently submit a letter to you and to the chairman expressing

my concerns, certain aspects of the current bill, investor protection concerns that are significant concerned that i felt, must express, it's up to congress what to do. essentially in several areas but primarily increase in leverage as well as the reduction of rights, again i can oversupply, in preferred stockholders, kind of end up under the proposed bill allowing a bdc to invest 80% of assets in a financial institution. it used to be 30% and the core objective for the vcs usually to invest in operating companies and new operating companies -- ptcs -- that's one to give a boost to. these are retail investors who own the vast majority of bdc shares so that heightens would've investor concerns we have. >> thank you very much, mr. chairman and help you work with us to improve the legislation. >> the chair now recognizes the

gentleman from new jersey mr. garrett. >> thanks. chair white when you here once before i open with the statement on the market to rig. let me follow up now with, as far as the coverage that you get from there? does the small investor actually know that he has no coverage with this statement? quick example. you to go invested $2000 when it came out of college in the marketplace and over 30 years now the market has caught up, i've gotten dividend payments out. i've gotten capital gains get on with do so many over the years to pay taxes and do likewise. over the last 30 years my savings this is going up and up in valley. i had taken out a $2000 i initially invested. as i understand it may sipc coverage right now which says i have well over $2,006,000 in it, may sipc coverage is exactly zero.

is that correct? >> as i heard your scenario, that is correct because of what sipc is designed -- >> slaves your coverage even though my state is telling me i have like $5000. there's an indication on the bottom of it this is sipc coverage on a state when i go to broker-dealer is that the logo right there that doesn't have an obligation to inform me that i have zero worth of coverage on my brokerage statement? whose obligation is that? >> first of all your accounts data should be accurate, and was given rise to these concerns is a huge ponzi scheme with the account statements are -- >> but who should tell me i have zero coverage? >> the broker should tell you. but the broken question may be committing a massive ponzi scheme. you may not get -- >> it is the fiduciary duty of the investment adviser to tell me i zero coverage? >> i'm not sure i can give you a legal opinion but what i can

tell you is what sipc covers the securities and cash that the progress custody of. if, for example, into example when you put in your $2000 you invested in certain securities that appreciated, so the researchers enhance of the broker, they would be covered by sipc what instead which are broker did was essentially never engage in one of my trades, it doesn't protect against fraud which is what we're talking about i think. >> i'm a simple investor i think i have as much money. i find that something went wrong. in actuality if you entered the first question is i've zero coverage, there is obligation of someone to tell me this. at the point the wise thing for me to do with the what, move down the street to another brokerage account because in my cupboard would go back up? >> if you put that amount into a brokerage custody would be covered by the sipc. >> investors should be told the smart thing to do is when she withdraw, when she withdraw the

initial investment, the smart thing to do is to move to another company. >> keep in mind if you withdraw your 2000 but it appreciated the 7000 in the broker had the securities and then went under you would be protected of that 7000. >> not from sipc. >> you would if, in fact, you invested that 2000 at some point in securities and it was still with the broker. what you are not covered for is essentially these ponzi schemes that are reflected closely on your account statements. >> so depends on how the investments are made, in other words. the i as an investor now need to know when i get the statement by the investments are being done like in a made a situation over there being done some other way. it really depends -- made off. >> it's a huge problem, investors were not being made. hewitt a massive ponzi scheme. you were being defrauded from

beginning to end. >> the bottom line, me as a simple investor, and that describes me well in these things, i don't know how it's been done and i really don't know whether sipc will be there at the end of the day. i'd like to move on because of a bunch of other questions. regulation d. and the rule of 506 under the dodd-frank act, real quickly, you proposed some amendments to that entry question is what effect of those amendments on the marketplace. the risk analysis said only 2% or 33 billion of the capital raised under regulation d. has come under 506 of the jobs act which we did. that would tell me there's a suppression effect. can you withdraw those amendments so we can get the full effect of the jobs act and 506 the of dodd-frank? >> as you mentioned there hasn't been consensus on those amendments. i do think they are important, however. i still believe they are

important to give us good information, greater clarity and other markets are putting. we have a year and a half of operation now. we've got it in a divisional group look at those markets. i've inquired about because i've heard the concern, that the regulations proposed may be hampering those markets. the feedback i've gotten from our folks is they don't believe that's the case. that's not a definitive finding but clearly the 506 c. market has been used but not as much as one might of interstate answer but not as much as the fiv fived six of the market is being used. >> thank you. i yield back. >> the turn of recognizes the gentleman from new york, ms. velazquez. >> thank you, mr. chairman. chair white, recently it was reported that ubs was on -- puerto rico is retirement system and then placing the same bonds into mutual funds that were sold to customers on the island, something that would be

prevented by the investment company act of 1940. however, due to the high cost of air travel at the time the act was passed, puerto rico and other u.s. territories at the time, including hawaii, were exempted from the 1940 act. i have recently introduced legislation, h.r. 3610, to close this loophole and ensure that puerto rico and other u.s. territories have the same protections they do. do you believe this loophole should be closed? >> let me say i share your concern. i think when the exemption was put into law, it was many, many years ago when the thought was just the practical and financial difficulties of being able to sort of enforcing that law in the territories was just not there. today's a very different world so i share your concerns. i think the loophole should be closed. >> thank you. in the ongoing financial crisis in puerto rico, hedge funds are

playing a significant role. it is impossible, however, to fully understand the scope of their investments. some disclosure requirements are only available to regulators, while others do not cover that security. i recently introduced legislation, h.r. 3921, to close this loophole and increased disclosure requirements on hedge funds. do you believe that for the disclosure in this area will benefit investors and the public? >> i think, i would have to study it further, the precise parameters of the. i can see pros and cons frankly to that approach. clearly legislation and reporting are critical to increasing transparency and protecting investors in private funds, and this has been looked at very closely in connection with dodd-frank when we were given authority over private fund advisors. is a lot of information that is

produced by hedge funds and others, but the judgment was made then, you know, not to basically expose our expose more than was prescriptive to be exposed the actual holdings and strategies of private funds, with a hedge funds or not, because that could lead to front running and other kinds of actions with respect to that kind of disclosure. so there are pros and cons to the. i need to study it further. >> okay, thank you. and hope that we can work with your office, at least to hear some feedback regarding that legislation. another issue that has come to our attention and that i care about as ranking of the small business committee, is the small business on line lending industry that has grown rapidly in the past five years, and experts are expecting double-digit growth through 2020. last week i sent a letter requesting information on your

agency's involvement with small business online lending. if there's anything, any preliminary comments on my request? >> i've seen the letter. we will be responding to in due course. just in terms of what our space is with respect to online lending, we don't regulate the loans themselves. the lenders and the terms of the loans to borrowers. that's not in our space. however we deregulate online lenders when they sell securities to investors, that essentially funded these loans rather through notes for investment contracts. they may need to register the offerings. some platforms depend on how to do it, but have to register as broker-dealers. we have brought cases in the enforcement space on some of this, but our jurisdiction really relates to protecting investors if, in fact, there are

offerings that under the federal securities laws. >> thank you. i yield back. >> a gentlelady yield spread. the chair now recognizes the taliban from texas. >> thank you, mr. chairman. and thank you, chair white, for being here today. want to go back to a lot of questioning that the chairman was talking about, something of a great deal of interest in, and that is the fixed income market. can you tell me exactly what resources the sec is dedicated to the fixed income market? >> and i think we may have had this discussion at our last hearing. primarily, but it clearly is not confined to our trading and markets division, and it's not a segregated out as a separate you know, which i think we did talk about before, and i've had, i don't know, 15 to 20 trading market folks who primarily due with the fixed income markets. we could have the office of

fixed securities, deals exclusively with that area as well. and so come and i've had several conversations with steve, who is our director trading and markets, about the need for additional resources, perhaps a restructuring so that we make sure that the fixed-income markets are getting the attention that they deserve. certainly in his of you know, he's persuaded me, i think we are structured as we should be and resource as we should be although i will note in our budget request, i think it's for fiscal year 2016, we are operating under cr now. we sought an additional 15 positions in trading and markets and at least two of those will relate exclusively to a study assessment of the fixed income markets. >> that's in the future but to date that are how many people do not speak what i would say in trade and markets the last time i ask for that sort of number, and again it's not -- >> just for corporate bonds.

>> not counting the muni securities, about 16 was the last number i was given. it's a rough number if i may sey because it's not how it is structured. there are other people work in the space as well but don't devote the predominance of their time. >> back in august pricewaterhousecoopers released a study on what they called the brittleness of the grid in certain asset classes and the study's findings are a concern to me, highlighted serve as a likud had to measure but declined including difficulties in executing trades, reduction in market have become increasing market volatility and the bifurcation and liquidity. the study also notes pending future rules, regulations could have further impact on the market making activities as we exit historic period of monetary policy. are you aware of the price waterhouse study? have you read that and look at? >> the edge is a great a number of studies and i believe that

one as well. certainly our staff has. it's also something that really both in the trading and marketing and investment management area that we been very attuned and in dialogue with the market participants about those risks and those eventualities, particularly when interest rates go up. >> market liquidity is a pretty big deal, isn't it? >> it certainly is. >> the concern i have is we're not sure your agency is getting the attention to it because we do that from a lot of different market participants, at a liquidity issue is a real deal. so i would hope that as you move forward that, if you're doing studies in that area, that she would share some of the findings with this committee. i want to move to, in 2015 commissioner stein released a

statement supporting proposals to shorten the trade settlement cycle for certain security transactions. industry groups encouraged the commission and market participants to move forward on reducing this settlement cycle side it would improve investor protections and reduce systemic risk. additionally, a group issued a paper outlining the timelines and action required to move from the 30 the key to settlement cycle for transactions in the united states in the third quarter of 2016. do you agree with moving to an 11? >> the answer is yes. the direct answer and we responded to a letter i think it was to me, i think the letter was addressed to me, both the position i took on and also asking for vegas to support to help bring that about. my letter was quite supportive.

it's public. we can provide that and i think you would think i want to be sure of is that it didn't foreclose possibly down the road even a shorter settlement period. period. >> so why haven't you all acted on that? >> i mean, i think it's not timely to act on it but we will act timely. >> what is time at? >> essentially again, the letter reflects this, because i think they've gotten traction. we are allowing the industry coalition, if i can call it that, to get to the place where the systems can actually accommodate the key post to. so the regulation they need will be in place by the time that happens, the 2016. >> the gentleman's time has expired. the chair recognizes the gentleman from new york, ms. maloney. >> i thank the chairman. chair white come as i mentioned in my opening statement i'm interest in defense of august 24 in the market comes extreme

volatility that day meant that the sec's automatic trading halts for individual stocks were triggered nearly 1300 times. and i know the sec is said that it is collecting data as quickly as possible to analyze what happened and to determine if there are any changes to the agencies rules that are necessary. can you give us a sense of where this are limited review, which you have found in this review? >> yes. it's well along. i mean, and i'm expecting that we can hear some initial results from that review in the near term. and you're absolutely right, as you commented earlier, we had, we didn't invite the many stress test of august 24 but we had one. the markets to perform quite well but clearly the issues that came out of the. one of the significant ones was the market wide circuit breakers as you said were not triggered,

is given the amount of volatility of the time and so forth. but we did have a larger number of limit up, limited in trading pauses, particularly with eds. although interesting about all eds. it's a more complex issue which we are studying at in part were looking at is we have to limit up limit down rules in place which were put in place as a volatility moderator after the flash crash. is on a pilot basis as one of the things are very great interest in the data comes out of august 24 as to what modifications, if any, what calibrations should be made in a limit up/limit down rules. we are looking for a close at the opening of the markets as well because that's when the majority of all of this occurred and that was somewhat delayed openings, particularly on the new york stock exchange speed and will this information or analysis be available before the end of the year? >> i hope it will be. i don't want to commit to it but

i hope it would be. >> last december you outlined a comprehensive plan to update the regulatory regime for asset managers in order to account for the significant changes that this industry has undergone in recent years. the sec has now proposed to all the rules that you promised, enhanced disclosure and liquidity management roles you proposed in september. we still investing the third ruled yet which will require transition plans for winding down asset managers. can you give us an update on this third ruled and when can we expect this rule to be proposed? >> i think the next in the series, they could change but just in terms of the workflow will probably be the rule on derivatives, and then following that would be the transition rules and also stress testing. i think i categorized it as three but it sort of five separate areas. in terms of the transition plan rules which is essentially designed to have funds and

industry be able to do with disruptions in their business in an optimal way, that one not be this year i think i in terms of the proposal but i would hope they would be relatively early into the next year. >> in terms of the stress test, windy expect the sec to propose a stress test will for large asset managers come and exactly what are the challenges you can encounter in developing stress test, large asset managers? wises such a challenge? >> it is a challenge and it's also come as part of the, it's in the five and the staff is working on them all at the same time and working hard on it. they are not banks. one person can't just transfer stress testing for banks into this space. and so to come up with a meaningful test for very care for and funds with different kinds of assets, different kinds of stresses that matter is a real challenge.

it's a requirement under dodd-frank. >> lastly i'd like to ask about the sec's use of administrative proceedings. maginot dodd-frank expanded the sec's authority to try cases in an administrative for more decisions are made by law judges rather than always having to go to federal court, which is expensive and time-consuming. some critics have claimed the sec's administrative proceedings amount to an unfair quote home court advantage unquote, some claim they deprived the defendants of due process. and you speak to these issues? do you think the sec does get an unfair home court advantage when they tried in the form of an administered law judge? what protections are in place to ensure that defendants are still receiving their full due process? >> administrative proceedings and administered law judges have been used by the sec for many, many years as well as other

federal agencies are congress gave the sec as well as other federal agencies the ability to bring enforcement cases in either district court or administrative proceedings. with respect to the sec, we have a lot of expertise in our administrative law judges. they deal with technical issues. they are impartial and they have unique due process rights. not the same as the district court but for example, in unlike industry court if you're in an administrative proceeding then you would provide cakes and printed material which is exculpatory information. does not regard in district court. we turn over all of our unprivileged investigative help equip opposed actually for noticing, and minustah are rules of practice to provide additional rights for defendan defendants. >> the gentleman's time has expired. the turn of recognize that the judgment from missouri mr. luetkemeyer, chairman of her housing and insurance subcommittee. >> thank you, mr. chairman.

ms. white, thank you for being here today. i want to start off with regards to designation of the insurers, insurance companies as sifi. as we continue to discuss this issue with a lot of the insurance industry folks as well as those that have been designated, can you tell me the specific standards that you look at whenever you voted in favor of designating two of our domestic companies as sifis? >> we may have talked about this in march as well. i participated, i participated i think in the aig and the metlife cases, not the others. that's what i said, and the metlife designation as you know is in litigation so i'm somewhat limited as to what i can say.

but what i can say because the statutory criteria or in the statute and public, fsoc's guidance as to what it looks that is public, and then -- >> my question though is what standards did you look at that were different or more significant to you and what the insurance expert on fsoc said were not something in his eyes rose to the level of designated as a sifi? where is the alarm? >> i think, if i can get into the granularity of that, i think we get very detailed presentations and analyses from the staff it with a standard we are applying and looking for certain criteria. i wasn't satisfied that those were met in that instance. i must say, listening very carefully and respectfully and understanding the knowledge that the interest represented brings to bear on this spill but you still went against -- >> i made my independent

decision, yes. >> the other question that we always get is what the consumer get from the insurance industry folks as we need an offramp, some way, some sort of mechanism or a delineation of things for them to do to become designated. which is support something like that? >> it existed to a degree. it's important to know that because there's actually an annual review process of any company that is designated. i think what -- >> with all do respect that's not a delineation of things for them to do. that's just a list, all tha thas as reported weather and. it doesn't tell you what -- >> i can company is designated well received, and again will have received is a very detailed analysis for the basis of the decision of designation. in some cases, in many cases you may have a situation where it's kind of the core business model and how much leverage is used, and so there hasn't been a

delineation. it could be difficult in many cases to do it, but just bottom line for me i think the more clear we are at fsoc about what it is that gets you designated and de- designate is a good thing. >> there's a rubber stamp effect with regards to insurance sifis. we have the insurance expert on fsoc say no, it's not a problem coming and what else goes along with international designation versus what we think is good for our companies are in this country, it raises some questions and concerns. and so moving on -- >> all i would say is i don't think there's a rubberstamping it's an independent decision in my view, clooney. >> appreciates the. i would venture to disagree. also sifi designation seems to be headed down that same road. asset managers being designate as sifi. we're very concerned about that as well. fsoc has decided look at activities of products of asset managers. does that concern you at all?

>> i think, and h to get fsoc hs not ruled out designation of asset managers, but i think the pivot, the products and activities that may, may raise potential systemic risks makes sense. >> do you believe asset management is important? >> asked raised that way, you know, i don't think that business model in general creates that. it doesn't mean, it's not confined to asset managers. securities lending is one of the activities. >> is the business model of asset managers, do you believe it could be systemically important? >> as a business model isn't agency model and, therefore, i think that ordinarily it would not be. >> interesting. i see my time is about up. i yield back. thank you, mr. chairman. >> veteran of recognize the gentleman from massachusetts, mr. capuano. >> thank you, mr. chairman. thank you, madam chair for being here. madam chair, in the last 20 years you know which issued the

sec is received the most comments of any? >> you are publicly to tell me political contributions. >> i'm not going to tell you anything. >> i don't know spent political contributions received over a million spent i think to thousand of those are unique. that's a lot of comments. >> that being the case, again i'm asking do you plan on addressing that issue in the foreseeable future? >> essentially, you know, i do know we had this conversation less time as well, very strong views on both sides of this issue. i think i have three fairly recent outstanding letters from members of this committee, two different letters and some number of the senate as well. i'll be responding to those. but as i've said before, our focus is on, and arbiter agenda focuses on congressional mandates. what i consider to be mission

critical, asset, disclosure effectiveness -- >> but -- >> obligate me conclude our avenues to raise these issues, and they are raise quite actively and the staff -- >> but they are not required by the sec. >> is not a mandatory disclosure rule spent the are some people that are good citizens like utopia what they're doing with our lot who are not. >> and companies are voluntarily making -- >> i applaud those who have done a voluntarily. no regulation is done because everybody is doing it voluntarily. all regulations done at every group because there's always a handful of people who are not good players. all regulations including sec regulations are targeted because there's always a handful of bad ones. that gives some voluntary compliance, that's good and i plot the. nonetheless, you have any that are not. you say, and appreciate that you

clarified your trying to focus on congressional mandated ones. your disclosure effectiveness review generate i think 64 comment letter to 64 versus 1.2 million. as i understand of the 64, 10 of them related to corporate political disclosures. spin we will undoubtedly get more comment letters as this proceeds but least a couple of those letters come. .com or submit on political contributions in connection with that initiative. also urge us to focus first on our congressional mandates. >> clearly i think america has spoken in every capacity they can to you and your organization that they want to prioritize this. it's not that difficult. it's not that difficult. and the fact you refuse to do this kind of, raises lots of questions. you also see what to focus on congressional mandated ones. what about dodd-frank section

956 a. >> the incentive compensation rules, it's a joint will making with our fellow regulars and we are very active. there's been a proposal some time ago before it even got to the commission. >> 2011. >> correct. we are all working on a very great actively as we speak. >> 2011, 2015, almost 2016 and you think that's active? >> i'm describing their current state of affairs. we are working on a great actively. fcc is -- >> when do you think you might have a final response speak with we are working very hard to come together on that in the very near future spent the very near -- is your definition the same as mine? >> i don't know. but it is at the very near future. >> madam chair, those are two issues, one of which is congressional mandated. and by the way, nine months after passage. your predecessor had a proposal in 2011. they went back.

in 2014 the other regulators have come up with a conclusion in the sec is holding about. >> action all the regulars are working on this jointly and wherwe're covering sort of the entire swath of different kinds of registrants. quite complicated but it's all of us working on this together. >> first of all it is not complicated to simply require political spinning to be disclosed. that's relatively simple. if you understand can do it, let me know about how to forget that we. it is relatively simple. as far as the competition i want to be clear. it only applies to compass with assets over $1 billion. that's all it does but it doesn't say how much. hey, anybody can any amount you want, we seem to want to make sure the incentives don't encourage companies to endanger this economy again. that's all it is. >> absolutely, absolutely. although high to bring that about so it will be effective is

not so easy. >> i understand that the something is always better than nothing and my time has run out. thank you, mr. chairman. >> the gentleman's time has expired. mr. huizenga. >> i never could find you. >> i know. new construction. we are about a mile away. a couple of things. actually the seat you occupy today yesterday was filled by the minister of mines for rwanda, and we had a hearing on minerals, 1502. he was a company by the ambassador, matilda. very concerned about the effects of conflict minerals in 1500 you get what is having a central africa. and as you may recall it's not just a drc, the democratic republic of congo. this kind of the countries covered by this. as he put it, it's not a

conflict minerals boycott around an african boycott, the way that 1502 has been implemented. you said so yourself, i will spare you the whole regurgitation of your own speech october of 2013, but you said quote but as the chair of the sec i must question as a policy of using the federal securities laws and sec powers of mandatory disclosure to accomplish these goals, referencing the goals of which i think we all share, certainly you and i do share, of making sure that the laudable goals of reducing conflict, keeping extortion out of the marketplace and those kinds of things is very true. there was a letter that we have asked for along with chairman hensarling, chairman royce and the subcommittee chairman garrett sin chew on february 25. your response letter state at the time the of july of 2010 through march, built of

march 2015 issue, that -- the sec and over 20,000 hours and possibly $2.7 million on this particular provision, which i think we agree, the sec has little or no experience with. the hearing brought to questions to mind for me. first and foremost is 1502 achieving the objectives that i think many of us agree on up helping the people of central africa. giving them a better life and a better opportunity. i will tell you that the minister does not believe that is the case. they are investing more money into compliance them with their entire budget is for going out and exploring new mining possibilities. the "washington post" had said that, they did a story on the conflict minerals rolled sank is

well-intentioned but wha quote t off a chain of events that has propelled millions of congolese might into deeper poverty. is sec the right agency to pursue and enforce these rules in light of all of the other important investor reduction and actions that do fall under their mandate. my friend, i see us left, but my colleague from massachusetts was just reading up about 956 a. that has been come has been waiting action since 2011. resource extraction, ceo pay ratio, disclosure will come all these other things that have had time and attention but i'm not doing anything to make sure that investors are protected. i'm really struggling with how this is an important element to you when we are seen come and understand your being mandated to do these things. we are seeing faster action on those family are on 95 956 theyr some of the other areas we need

to regulation so please help me understand. >> first, that rule was proposed if wright-patterson some of those -- >> i fully -- >> i'm just saying earliest under no, but i believe, i believe that content also a deadline were some others may or may not but that's just a fact. look, to some degree, kind of in both directions, you know, i sometimes get across purposes because of my corrected me and it's what you do believe we have to carry them out. ended up in the most cost effectively as we can get in terms of sort of what's in the queue wind come you can do some prioritize but also what i did when he first got it was, we have a lot in the queue, was to try to get separate work streams going. so, for example, 956 will make it is not fun by the corporation finance division -- is not done -- that's separate work streams. as they readied we proceed, given as well as we can. some of the time and dollars

only because we have to be true to the statutory prescription and to do as well as we can spend my last remaining five seconds, we've seen the sec budget increased 35% since 2010, 64% since 2005, 300% since 2000. and i think, i hope you're hearing from me and my other colleagues on both sides of the aisle is we need to have priorities. we may not be having to increase budget if we would focus in on what your core mandate is and that's what i want to encourage you to do today. >> the gentleman's time has expired. feature no recognize the gentleman from missouri, mr. clay. >> thank you, mr. chairman. and thank you, madam chair, for attending today. in fairness to the sec budget, it does not contribute to the deficit of this country, is that

correct speak with that's correct. we are deficit neutral. >> and let's stay on budget. the house and senate appropriations committee marks for the sbc in fy '16 budget -- sec -- ignoring yours and the president's request for substantial increases, please describe what would be the effect of the sec of level funded in fy '16. what initiatives which are not be able to pursue? >> i think a number of initiatives. i think we're talking about budget come in terms of budget increases over time. we have to look at what's happened to our space is our responsibility, both the new spaces like crowd fund and other areas but also the complexity of the markets and how much they agree. so what you see under budget come and i do try to do this very carefully, is to prioritize in our core mission. we have a lot of core missions

because that's the nature of the sec. there are a number of things we could not proceed with come under the current cr, for example, we are essentially in a hiring freeze which means just as we need to expand to cover crowdfunding, for example, we can't get those skilled personnel that are so important to our initiative. it will hurt enforcement, her exams, hurt our it development enhancements which is so critical to his being an effective regulator. >> how does your budget to compare to the industry you are regulating? hasn't kept pace with the growth in the financial services industry? >> i mean, we are outmatched, no question about it. one metric i think that makes the point for dramatic what is that it's been reported that six of our largest registrants spend about $10 billion a year on technology. our entire budget is

1.5 billion. >> at this time come at you mentioned crowdfunding. you expect to need additional resources to oversee those? >> yes. we have to build up that entire regime as well as municipal advisors and others. >> thank you, madam chair. and it is time i would like to yield the remainder of my time to the gentleman from massachusetts. >> thank you. thank the gentleman from missouri. madam chair, thank you for being here. i know that the ranking member spoke earlier in the hearing about the waivers. i know you made some comments recently regarding that. the idea though, the basic idea here is that we would reward good behavior with the title or label, well seasoned investor and a lot of them off the shelf registration and yet we would

withdraw that can withdraw the privilege if we had a felony conviction or securities fraud on the part of these companies. and so what we've seen here repeatedly, i must say from the sec, is that even though they are convicted of felonies, even though they are convicted of securities fraud, we let them have that privilege. we don't discourage bad behavior. and so i'm just asking you to try to explain that because i read your statement but it's compounding to me. >> and again i tried to lay this out to try to be as clear as one could be. but first of all i think we're all about trying to punish bad behavior, and particularly financial institutions and senior executives who have committed wrongdoing to editing

a record enforcement is quite aggressive and quite impressive. i think in terms of wixie, that was part of offering reform. had a somewhat different more streamlined set of procedures if i can call it that for well known season, not just financial institutions, manufacturing countries, et cetera. it also provides more information real-time to investors. that's kind of the wixie pushing. if a company is indicted or commit securities fraud or some other trigger for being disqualified as wixie come again this is covered by regulation or statute with respect to all disqualifications, then we also have covered by statute or regulation is a procedure for granting a waiver, putting the burden on the party seeking the waiver. and in terms of the wixie, which are looking most closely at his going forward, and this entity, can you rely on their

disclosures going forward, reliability the disclosure. so if the trigger happens to be -- >> my time is expired. is what i'm saying is, i conviction for fraud, a conviction for a felony, that's reason to be less -- that hurts the reliability of these companies and they should have that title withdrawn from them. ..

>> a little more time isn't met with a big objection from us, so thank you for that. i want to follow up on the chairman's question in regard to corporate bond liquidity and its relationship to the volcker rule. we think there's a great tie-in to economic growth and job creation through the corporate bond market, and i think you indicated today and in your last testimony that you don't see a correlation between the volcker rule and the lack of liquidity in the corporate bond market. is that correct? >> that has been the conclusion of each of our joint agencies, including ours, quarterly reports to this committee. in terms of not being able,

certainly, to determine that it is, i think is a better way to say it perhaps. >> you agree there is a -- >> i agree there is a concern, yes. we try to give in each quarterly report exactly when with we're seeing, and sometimes it's quite strong, and sometimes it's somewhat more volatile. but clearly, close eye on it and concern. >> if not the volcker rule, then what? be what is causing the lack of liquidity? be you have to ask the question, it has to be a concern for you. what's causing it? >> again, i think you have to look at whatever particular market we're talking about at a particular point in time and what is liquidity. sometimes it's quite robust at that time, so that's why in those reports we do both here's what we're seeing in the primary markets, in the secondary markets and try to analyze what is having an impact on that. everybody keeping a close eye on the diminution of liquidity

which is a concern to everybody. but ferreting out impacts is not easy. >> right. there's great liquidity, but you hit a bump in the road and all of a sudden liquidity vanishes, i think that's a cause for concern. you can say sometimes there's great liquidity, that's true, but we care more about those little bumps than liquidity vanishes. i think a lot of us would argue that the liquidity issue has arisen with volcker and basel and all the rules and regulations that have come to pass. and i don't know if you don't want to share your personal opinion because it might be contrary to the position of fsoc. i get that -- >> no, it's not that. i really do, you know, bore into this with our own taffe too because one thing we do for every single rulemaking we do is try to judge those impacts. >> i would agree there's people on the outside per the questions by the chairman have some significant disagreement. i want to go to -- i only have a little bit of time left.

i want to make just a quick comment in regard to the corporate political spending. obviously, i get a lot of letters as well. i know that people rally folks up around the country whether they're on the right or the left to send me letters. i'm sure you get the same and you know where those letters come from, there's a political agenda. but for a corporate political spending disclosure, would that protect investors? if you did a rule to that effect? would that be material to investors make? >> you know, that may be some degree in the eye of the beholder, but if you're clearly looking at what's material to investors, under a particular company it could be level of spending or something unique about a company. if it's material now, it has to be disclosed. what is being sought is a mandatory disclosure rule across the boards. >> this isn't material in regard to investment decisions that are made. this is politics.

politics are coming at play, and they're trying to send a whole bunch of letters to you to we can find -- so we can find out how corporations may give politically, and they can rally protests and sit-ins. and we know how the game works, but i would encourage you the push back and keep a sound, steady course. want to quickly pivot. we had the director of investment management in to the committee. i don't know if you watched that testimony, but we talked to him about the systemic risk of asset managers and how fsoc had actually used your team and his team to get insight. and i didn't feel very confident that the expertise within the sec has been tapped by fsoc. and it gives me concern that we have fsoc making decisions that are contrary to those experts in the field, say at the sec with asset managers, also as was brought up, many woodall --

mr. woodall brought it against metlife and others, and those that don't have that expertise are voting to designate, and and i know my time is up -- >> the staff is providing extensive expertise to fsoc in terms of, for example, the stilts that went out inñr december -- estimation that went out in -- >> i didn't feel very confident. >> time of the yesman has expired -- gentleman has expired. chairman now recognizes the gentleman from massachusetts, mr. lynch. >> thank you, mr. chairman. and thank you again, madam chair, for being here. i'd like to revisit a topic that ms. maloney from know raised earlier todayç and that is goig back to the august 24th problems in the market. i realize that at that time the markets, our markets, u.s. markets were responding to a selloff of chinese stocks earlier in the day. however, you know, according to

"the wall street journal" there were dozens of exchange-traded funds that traded at sharp discounts to their net asset value or their component be value. and leading to outside, i don't want sized losses for investors. and i know your opinion was that the markets work very well, but there are some retail investors here who are very upset. do we have any sense of how much money retail investors lost on the 24th of august? >> i mean, there, you know, not as a net-net figure, i think, because -- and particularly if you're trying to tie it -- in ballpark? >> we'd have to get back to you with whatever we could do on that. >> yeah. >> but with respect to etfs themselves, i mean, clearly, you worry about retail investors in whatever spaces they're in, and one of the interesting things, and i think it'll come out in our initial results when they're made public is that, you know, why some etfs with only of the same characteristics didn't have

that phenomena occur and others did. >> right. >> clearly, we're looking very closely at it. >> reclaiming my time -- >> sorry. >> i know we have a couple of indicia here, the vanguard consumer staples etf and the $5.8 billion vanguard etf both plunged 32% within the opening minuteses of trading. and yet if you look at the component stocks within those baskets, they were only down about 9%. so what was also troubling at the same time the vix, the cboe volatility index went dark, so for that first half hour it didn't come on until 10:00, and people didn't know how much fear was in the market or what direction things were going in, so that was a problem. and this is all in a time when the dow experienced its largest point drop in history. and so a couple of questions i have. again, i ask you, you know, how

much was the loss to retail investors? and i appreciate if you can get back to me on that. but given the fact that the whole idea of etfs was to respond to the flash crash and the lack of liquidity so people could actually trade. we have examples of i think there were 37, in the first 37 minutes there were, i think, 1300 stops instituted on individual stocks. >> i think that number covers the etfs as well. >> yeah. yeah. i just -- how can we prevent problem? because we're going to have selloffs in china again at some point. >> again, not coming on the cause or causes of, you know, august 24th, but the thing which you're referencing now, at least primarily i think is the limit up, limit down mechanism put in

after the flash crash, and that's precisely what we're studying based on that data that was generated on august 24th and how to recalibrate that to make it more effective. >> why -- [inaudible conversations] >> why the delta in the component stocks versus the etf bes? why -- >> that's exactly what we're looking at. in other words, but it's not as simple as analysis because you'll have the other etfs with the same characteristics that didn't experience those trading pauses. so why is that? and that's one of the things we're analyzing as well. as i say, this will be an ongoing study, but i'm hoping in the pretty near future we'll be able to share some results that will answer some of the questions. >> do you know if in the beginning -- and you were talking about the opening, that was the real problem. do you have any correlation at least evidence that high frequency traders jumped on this in the early opening? >> i mean, that -- again, we

should wait for the initial results because we're analyzing everything, but that doesn't pop out. >> okay. all right. i thank you and i yield back. >> gentleman yields back. the chair now recognizes the gentleman from pennsylvania, mr. fitzpatrick. >> thank you, chair, for the recognition and, madam chair, thanks for your testimony here today. when members of congress, when we listen to our constituents, we learn a lot about the economy, about what's holding it back, the problems with job growth in the country. four, five, six years ago what i used to hear there my constituents, high health care costs, high taxes, a lot of uncertainty in the tax cold. i have to say over the course of the last two years or so, the focus has shifted dramatically and almost exchoosively to the cost -- exclusively to the cost of regulation. last week i was back home in pennsylvania be, i met with a constituent whose clients are banks, and he talked about this one particular new start-up about 10, 12 years old.

i think they're less than 50 employees in the bank, he said eight of them were compliance individuals complying with regulation. i have to say, you know, as much as we pay attention, i was shocked at numbers. and those banks would tell us, you know, these are individuals that are not able to be processing loans, meeting with customers. last night i met with a constituent not in the financial services industry, different industry, but the same issue. he was emphatic at the cost of regulation and what it was doing to his particular industry. and in my community of bucks county, pennsylvania, we have a lot of high-tech, biotechnology firms, start-ups, investors taking big risks for them. about three years ago one of my constituents, a representative from a pharmaceutical company that employs many constituents named jeff hatfield, he testified before our committee on markets, and what he was testifying on was the cost of regulatory compliance, the negative impact on research,

hiring and potential growth. specifically, one remedy that he cited was the filing status classification 12b2 to encourage growth but also protect investors. as i'm sure you're aware, biotech companies may research new therapies for years at a great cost without seeing an actual profit despite a lot of market valuation. they're still required to comply with all the regulatory requirements. he was talking about 12b2. i think he also testified about 404b which is a section of sarbanes-oxley that requires an awful lot of sort of external audits of internal controls. the sec, i'm sure, is looking at this. what are your thoughts on what jeff hatfield testified before the committee and whether or not this cost is really dragging down innovation and hiring in the communities? >> i mean, it's -- what we do at the sec, i mean, is really quite vigorous cost benefit analysis, and that's of all of our rules. i mean, and, you know, i think

one of the great success stories at the sec, frankly, is our dira unit, you know? our economists who actually perform that work and a lot of other work at the sec, a lot of studies to try to calibrate both the baseline, where are we now in terms of what are we trying to accomplish with the regulation, what's the benefit of that, where's the market now, and then if we impose this regulation in this form, what is its cost going to be? and you clearly look at size of company when you do tattoo. you look at different industries when you look at that to. i can't tell you that there's not some costs imposed, obviously, but what i can say is that the sec really does, you know, a very thorough analysis in terms of cost benefit. >> a lot of the pharmaceutical and biotech, they don't have a lot of employees. they're highly compensated employees, and they may have a lot of market value, but they're not going to have any revenue for ten years. it could take a billion dollars in research to get a therapy to

market with no profit in that time, so what does the sec cost benefit analysis say about those companies which are very important to my district? they can't grow, they're spending money hiring external auditors and not intended to be impacting firms like these. >> i mean, i don't know how to answer that other than to say, you know, that our economists, you know, try to look at it not just as here are the compliance costs, but what does it do to, you know, competition, what does it do to, you know, the other economic impacts besides just -- and i don't mean to minimize it, but besides just the compliance costs. but again, obviously, what's driving that analysis in the first place is a need, a perceived need, certainly, for some regulation to protect the investors, the markets, facilitate capital formation. but, you know, we should be doing as deep a dive as we can no matter what the industry is, no matter the complexity or uniqueness. and i appreciate that this is

pharmaceutical, r&d works in particular. >> thank you. yield back. >> the chair now recognizes the gentleman from georgia, mr. scott, for five minutes. >> thank you very much. over here, chairlady. chair lady, are you aware when we wrote dodd-frank that in section 913 we gave exclusive responsibility to the securities and exchange commission if there came a time when we needed to put together best standard for judiciary? you're aware of that, respect you? >> i'm certainly aware that 913 gives the sec authority to proceed. doesn't mandate it, yes. >> let me ask you this. why are you allowing the labor department to take over your territory that we put in dodd-frank that was approved by the house, approved by the senate and signed by the president of the united states? >> well, i don't view it -- and i've heard the comments

before -- i don't view it that way. i think that, again, we are separate agencies. they do have responsibility and statutory authority in the erisa space. even as we it here now, brokers have to -- >> let me respond to that, please. i was here. i helped write section 913. there was a reason why the securities and exchange commission came to set and let us do this. because they were the regulatory agency. now, you mentioned erisa. not once, not one time did the labor department come over and say, oh, hold on, let us handle the retirement. no. there was no discussion of that. that is just happening now. this is a critical issue. and if there ever was a time for the securities and exchange commission to stand up and do its duty so that all of the american people can receive the

proper financial advice to make those critical decisions, do you realize what the labor department is doing? do you realize what the position that it's putting fen rah and you in as far as complying these complexities? and if you allow and sit back and disavow the authority we put into 913, that would be a very, very serious indictment on the securities and exchange commission. so what i'm asking you, and this is why, when you allow and you pass a rule that says that instead of a commission base that now you have to pay up front fee for service, out of pocket before a financial investor can even talk to you about it, that has a clear

disproportionate impact on the lower income, the middle income and especially african-american investors and other minorities. because they're not going to -- they don't have that much. and when you get to what they basically do, even if you get to the annuities which is what they really utilize, but you have three different ones. you have the fixed annuity, the variable annuity, the index annuity. that in and of itself is enough to run most people away. and then if they go through that, then they've got to sign a contract. now, i tell you, ms. white, i want to ask for you to get more aggressive here. and because you are going to be placed in the middle, finra is going to place in the middle. and if they have this unworkable, best interest contract exemption, it would result in low and middle income

people being pushed from these less expensive commission-based accounts to the more costly fee-based, up front, out-of-pocket accounts. how do you see finra managing this conflicting compliance obligation? because under current regulations, finra must find costs to be a pivotal issue when assessing and making the difference between what is best here. our financial system is come mention and complicated. and you are going to push out lower and middle income people from being able to invest with their retirement. i have great respect for you, and i want you to make it plain. seize your authority back on

this fiduciary issue. the labor department should have said if we got a retirement, it's written in the dodd-frank that the sec has its responsibility. the respectful thing for them to do is at least come to you and finra and say let's work many and harmonize -- and harmonize something to address this. this is not their bailiwick alone. and i'm speaking for an awful lot of very, very important people, the low income, the middle income and most african-americans. they need you to stand up on this. >> time of the gentleman has expired. the chair now recognizes the gentleman from georgia, mr. westmoreland. >> thank you, mr. chairman. thank you, chair white, for being here. chair, you realize that some of the things that we're responsible for is trying to

help our constituents solve problems, and i've got one that i would very much like for you to address on his behalf. do you know what a naked option stress analysis is or an nosa? >> i do now, i believe. [laughter] i think your staff indicated you had this issue with a constituent. >> yes. >> i knew before, but i know now. >> you and i both know more about it than what we used to. and my constituent is very, very aware of it, and he has been quite successful in his career. and it's, the nosa is a propitch waral gore rum to mitigate risks from negative options trading. and when it's triggered, the account holder must post an nosa

margin to cover potential losses. and my constituent has contacted me, and we have been over and over and over with the sec and merrill lynch and others trying to find out what triggered this call. and he has been unable to get that resolved. and even though he has asked merrill lynch on several occasions to give him that, they said that that is a resource that they have trademarked. now, do you think it's necessary -- i mean, do you think it's okay that a company like merrill lynch could patent something to use op their investors -- on their investors and not be able to tell them what that is? >> is this on? >> microphone. >> sorry. is it on?

okay, sorry. i don't want to speak about the specifics until i know all the specifics, but clearly there are, you know, a number of obligations with respect to this. you know, disclosure obligations, suitability obligations. what i would suggest on this is that i, you know, and it sounds like you've been talking to the sec. i don't know who at the sec, but if i could have, you know, one of my senior staff people follow up with your staff member, let's see if we can get to the bottom of it. >> well, i appreciate that, chair white. and i've got a pretty good file here that we'll get to your staff before you go, but it would certainly be something good, because this gentleman has jumped through all the hoops and done everything, he and his wife both, to get an answer and been unable to do that. so any help that you could give us as far as getting an answer or a conclusion to this, it'd be

much appreciated by me and mr. and mrs. denny. so thank you very much. i yield back. >> gentleman yields back. chair now recognizes the gentleman from texas, mr. green, ranking member of our oversight investigation subcommittee. >> thank you, mr. chairman. and thank you, madam chair, for appearing today. madam chair, i'd like to get some things for the record. these are things that are of common knowledge to a certain extent. it is true that you're a member of fsoc, correct? >> yes. >> and as a member of fsoc, you have voting privileges. >> yes. >> and as a member of fsoc which is a newly-formed institution as a result of dodd-frank, you have the ability to look at the entire financial system looking for risk that may be out there that can hurt the system, is that correct? >> yes. >> simple terms. now, in doing this, madam chair, would it be fair to say that be

we had had fsoc prior to 2008, we would have been more likely to see the concerns that aig posed than less likely to see them? is it fair to see that there's a greater likelihood we would have seen some of these concerns with aig? >> you know, it's always hard to judge that, obviously. you see what you see, but this is a he can nhl that's enormousty -- mechanism that's enormously important to seeing risks as early as possible because you've got all of the relevant financial regulators or, you know, a good component of the financial regulators from different strata in a room together talking about what they're seeing. and there's no real substitute for sort of identifying a problem early than that, i think. >> well,s this is why i ask in terms of more likely or less likely. more likely to have seen it or less likely. >> i mean, certainly in theory it should be more likely. >> all right.

and in reviewing entities such as aig which had this london office that was doing some things that we didn't find quite acceptable after the fact, in reviewing these things do you spend an inordinate amount of time looking at entities that don't come under the $50 billion threshold as a trigger for designation as a sifi? do you spend a lot of time before you cast that vote? >> you spend a lot of time before you cast the vote, a lot of time. >> and do you have an office to help you with research, ofr to help you with the research? people who provide expertise to the treasury, and the treasury can share its -- >> and, certainly, ofr does research on various issues. the fsoc staff and the staffs of the member agencies also do a lot of work. >> thank you. and when you cast your vote, are you, are you told how to vote?

does someone say to you, you have to vote a certain way on these issues? >> no. >> is it your opinion that you've been a pretty independent person serving on this, this fsoc. >> >> yes. >> and as an independent person, you put your time in, and you study things. you come to final conclusions. >> yes. and i study it with not only the fsoc staff, but our staff. >> now, i just looked at some of the information on some of the very large companies in this country. a good many of them have triggers that bring them under the auspices of fsoc and the sifi designation. if you had to study every one of them to ascertain whether or not it should be a sifi, would it take a lot of time to do this? >> no question. >> do you have the personnel such that you could study all of these mega corporations that are

$50 billion and above, do you have the personnel to look at them with the kind of detail that you need if you did not have the trigger to bring some of them under an umbrella? >> well, i mean, obviously, the resources are finite. i mean, you try to prioritize the ones that pose potentially, potentially a systemic risk. >> and do you find that it's beneficial to have a trigger whether it's at 50 billion or some other amount, is it beneficial to have a trigger? >> that's a little hard to judge because, obviously, what we're presented with are, you know, those that have met that trigger. so you don't know what hasn't met that trigger, i guess, to some degree. but logically, yes. >> and without that trigger, would you find yourself having to answer a good many more

metlife questions and a good many more questions that relate to entities that you're trying to sift through and ascertain whether or not they're sifis? >> i think it would depend on what substitute methodology you had. >> thank you very much. i yield back. >> time of the yesman has expired. -- gentleman has expired. the chair now recognizes the gentleman from california, mr. royce. >> guest: thank you, mr. chairman, very much. and, chair white, thank you. if we look back to the collapse of lehman brothers, one of the, one of the lessons was the need to quickly understand the relationship of corporate entities to one another. and so out of the ashes of lehman's downfall came the financial stability board's concept -- and this was actually at the direction of the g20 -- this concept of legal entity identifiers or leis as we call them where each entity has to

register that unique 20-digit code. and that makes their identity very clear when you're trying to unravel something in realtime in terms of all their financial transactions. so last month this committee passed out legislation which i authored requiring the office of financial research to provide an annual update on the progress of adoption of these leis here in the united states. now, the global adoption, i think, is at 400,000. 400,000 leis now in 180 countries. so if the ofr were to conduct its report today, i'm afraid that the sec would lag behind a bit in terms of the adoption in other countries as we move towards more transparency this, obviously, is part of our mission. and i think, i think the commission did mandate the use of leis in its security-based

swap rules. it didn't require it in other rules, so i guess i'd ask should we expect that the sec is going to require greater use of this important risk management tool in the future? and is there anything holding you back in that regard? >> there's nothing holding us back. obviously, if it's appropriate to the space, you want to make sure, you know, it fits, right? but i think, look, i think lei's an enormously important tool. the sec has been a very strong proponent in those global efforts that you mentioned, and we frankly look for, we're looking for, you know, opportunities to use it more. i guess that's the way i would answer your question. >> but to get to that point, you might promulgate more rules in that direction in order to increase the adoption where appropriate? >> essentially as we are adopting whatever rules as we go forward, we would look for that opportunity. >> right, right. let me ask another question,

chair white, and that goes to the financial services committee's focus here under the chairman. what we have been trying to do under the chairman's leadership is to take a strong interest in housing finance reform and see how we can move forward the concept of bringing more private sector credit risk sharing into the gses. we'd like to get as many positive things done as we possibly can in this quarter. so real estate investment trusts are a logical investor in these transactions. we've of seen the communication from the fhfa that say that it does not perceive any drawbacks from greater involvement by reach in credit risk transfers. this might be an area that sooner rather than later we can move forward additional steps to get more private capital. could you work with us to clarify that all of these risk transfer deals are viewed as

good assets that do not undermine investor protections? >> certainly be happy to work with you on that and have the staff -- i think the staff may be working with you on that, but i'll make sure that you are. >> i think that would be helpful. i think it's very clear that, you know, as the federal housing finance agency says at the end of the day, there's a clear benefit in getting the credit risk transfers to, you know, to get more private capital back in here for this part of this equation and that they can do this according to them, according to us. we certainly see the benefit to this. and when you're looking at a significant source of private capital like this, it just doesn't make sense just because of regulatory hurdles to prevent that capital from being deployed. so we'd appreciate that assistance. >> gentleman yield back? >> thank you, mr. chairman. >> gentleman yields back.

the chair now recognizes the gentleman from washington. >> thank you very much, mr. chair. and, madam chair, thank you so very much for being here. i want to ask you about the volcker rule which i consider to be fairly important. of course, the rule is final, but it's not yet being enforced and is at the end of the day, i guess, rather a bit of an experiment. so i want to, i want to pick your brain a little bit about it as we await the time when it's actually implemented. so what are you seeing in terms of market behavior in anticipation of the effective date? how do you see the market changing, how do you see companies adapting to it? and do you yet perceive any change in the risk being taken, in the risk to the financial system? just talk generally about those kinds of things, is that -- >> yeah. it's, you know, again, it's a little hard to judge at this

juncture, you know, with certainly any definitiveness on that. we're basically just about now going into the exam for compliance period, actually. and all the agencies are, and we're coordinating well. we'll learn more from that, but before that period actually kicked in, we were obviously, you know, talking to those subject to the rule to see if they, you know, were they able to provide the metrics they needed to to comply, and really a very, you know, at least initial positive read on that. i mean, obviously -- >> what does "positive read" mean? >> well, meaning that they should be able to comply, you know n a timely way. now, you know, obviously there are exemptions in the volcker rule, and there are prohibitions in the volcker rule. and compliance is really at the trading desk level. and so there's a lot to look at in terms of is this market making, is this, you know, is this something that's prohibited.

so, you know, i think we have of to see what comes out of, certainly, this first wave of exams to see if it working, is there good compliance, and then in terms of judging its effects, i think that's down the road a bit. >> but where you sit here today based on what you know and 2007 that it is limited, are -- and given that it is limited, are you confident that it will, in fact, reduce risk to the financial system? >> that is certainly the objective which is, you know, basically to not have these institutions that are connected elsewhere engage in, you know, proprietary transactions. but, you know, again, i'm a person who sort of waits on the data. but i think, you know, that is certainly the purpose. >> it is the purpose. are you confident that it will achieve the purpose many large part? >> i have to see the data, i'm afraid on that, okay? [laughter] >> all right. subject to. you're also currently reviewing a change in definition for accredited investors. your predecessor was pretty clear that it, it very much

needed to be changed and updated. so i'd like to ask you what the status of your review of the definition of accredited investor is, just a general timeline for you think where that work will end up, what you personally think the direction needs to be. >> i mean, i -- i'm sorry. >> sure, no. >> the, first, you know, clearly, you know, for a while it needed a real deep dive look in terms of all the various criteria that needed to be considered not just net worth and income levels, but including them. our staff has, you know, been studying that quite intensively for some time x they really are coming to a conclusion of their work, and the next step, i mean, really quite in the last phases of that. and the next step which i think will be relatively soon -- i know you want me to define that next, but relatively soon to basically, you know, put out publicly what those, you know,

those findings are and what the analysis is. >> this relatively soon, something like 90-120 days? >> i would think so. >> and do you personally believe that there is a definitive need to update? >> i do believe there's a definitive need to update. i can say that much, yes. >> so can you give an example of the kind of change -- >> well, i don't want to get -- again, we'll have to decide this, so i don't want to get ahead of this. we're a five-person commission also. but clearly what we're looking at beyond the traditional tests of net worth and income, you know, are other kinds of sophistication, experience, qualifications that certainly many, many would argue should entitle you to be an accredited investor. and i think one wants to be sophisticated about and realistic about what those other criteria are that would meet, you know, any investor protection concerns, frankly. so we're looking quite broadly.

>> thank you. with that i yield back the balance of my time, mr. chair. >> gentleman yields back. chair now recognizes the gentleman from virginia, mr. hurt. >> thank you, mr. chairman. and i thank the chair for appearing before us today. in your testimony you touched on equity market structure. i wanted to highlight one of the things that you said. you said that you all had been proceeding since your last visit here with an ongoing assessment of the u.s. equity market structure to insure that our markets remain the deepest and fairest in the world and optimally serve investors and companies of all sizes seeking to raise capital. i wanted to turn your attention to the national market system plans, nms plans, that were created in 1975 as an amendment to the securities and exchange act 40 years ago and, obviously, a lot of things have changed since that time. the u.s. equity exchanges at that time were not-for-profit.

they were member, member-owned. today, of course, they're publicly traded, and they are for-profit. so a lot has changed in the last 40 years. when you talk about plans for the collection, dissemination of market data, i think we would all agree that if you want to insure the deepest and fairest markets in the world and optimally serve our investors, you have to have accurate market data, and that's got to be collected and disseminated in a fair and accurate way n. the aftermath of the nasdaq/sip outage in august 20 and, i think there were some -- 2013, i think there were some concerns that were raised about the governance of these nms plans. we know that the nms plan participants are exclusively representatives of the exchanges and finra with no industry representation. and that leads, it has been argued, to two separate problems. one is, is that you don't have a broad-based representation on,

among these participants in providing the best sort of leadership and vision for what needs to take place in making sure that these sips are the best that they can be. and then secondly and perhaps more, of greater concern is the conflict of interest issue, and that is, has, of course, to do with the fact that because of the way the revenue is shared, that these, that there is a disincentive to invest in the sips to make them as good as they should be. be and also the secondary issue relating to conflict of interest has to do with fact that these exchanges have their own data feeds that compete with the sips information. so i was wondering if you could talk a little bit about where you are, what you think should be, can be done, should be done as it relates to reforming the governance of these nms plans. >> yeah. i think that, i mean, and this

is one of the reasons that i, frankly, sort of identified this very deep, comprehensive review of nms and equity market structure even before i was confirmed as one of the highest priorities. and we've proceeded on that really on, in a sense, on two parallel tracks. one, there's some things that, you know, clearly would optimize the markets we're proceeding on in terms of specific rule making and the other is the more comprehensive review that takes into account -- and we've, obviously, spent a lot of time dealing specifically also with sip governance and single point of failure and enormously important that the sip provide its information be, you know, quickly to the, you know, with the consolidated information. and we're, and i think you can see from our work on the market structure advisory committee and the subcommittees that we just formed that we're looking very much at that issue, those issues as well as just kind of the whole role of the, you know, exchanges in the equity market

system. so we're not, you know, we haven't concluded on those things but very much -- >>, but can you, as you sit here today, can you explain to me why, you know, what resistance there is or why we should continue to have these participants that are exclusively from the sros without including anybody from industry? >> i think, i'm not sure i can, you know, provide that answer other than to say one of the things we need to make sure that as we are making the changes, the system, you know, continues to function. and i'm not suggesting putting a representative from the industry on there. it didn't continue to function, but we're flying to sort of on the -- trying to sort of optimize every aspect as we go. i actually, i could probably provide you some further information on that. >> well, i'd appreciate it. be and i do think that the conflict of interest issue is something -- >> yes, i understand. >> -- is obviously that goes to the fundamental fairness issue that i think we all want to see in our markets.

thank you. i yield back. >> gentleman yields back. the chair now recognizes the gentleman from california, mr. sherman. >> thank you. well, i bring up fasb's $2 trillion addition to liabilities on the balance sheets each time you're here. i want to commend you for stepping forward and say, yes, fasb gets their authority from the sec, and you take your responsibility to delegate that authority. they didn't follow the administrative procedure act, they didn't listen to anybody in the construction field, they didn't do any cost benefit analysis, and we're going to see a decline in construction employment as a result of this new rule. so i'll just ask ask you, do you take responsibility for all that? >> well, we have had this discussion before and, again, the sec has ultimate

responsibility for accounting standards. we've obviously for many, many years recognized the private sector, therefore, fasb is the standard setter, and the sec has the power -- >> and the sec hasn't required them to follow the administrative procedure act? >> you know, i can't -- >> sec has, has done nothing with regard to their processes or their outcomes. >> well, i can't say they have, i mean, i understand you're point from your point of view they haven't fold their due process -- followed their due process procedures. i certainly haven't received that information from any other quarter in terms of the process that they followed. >> you haven't received that information from whom? >> among others, i mean, obviously, people comment on their process publicly all the time as well as, you know, our staff and the chief to the cant's -- accountant's office. >> the people who comment live in this world i used to live in of accounting. they barely know, they barely heard of the administrative procedure act.

it is foreign to that world to let carpenters and pipe fitters come before the agency and say, please, don't ruin my family and my job. and so they refuse to listen to any of those people. >> you know, again, information that's coming to me is that fasb, you know, comments were received on this proposal, obviously, several times and that they were responsive to some and not to others. >> they wouldn't -- that's why i'm using the word "listen" rather than the word "invite" people to send e-mails that will be thrown away. they wouldn't listen to anyone. they didn't do a cost benefit analysis. we're going to see a decline in construction jobs. there is no benefit from this -- >> of course, the accounting standard is meant, obviously, to convey the economic be reality of the transaction, and i know we've had this conversation before, but it was actually in 2005 that the sec staff actually

recommended the fasb, you know, undertake -- >> right. with no cost benefit analysis, never discussed it with anybody who showers after work rather than before work. >> and, again, in terms of where cost benefit analysis comes in or doesn't for an accounting standard because of the purpose -- i know you're a cpa and, obviously, a very good one, but it's really to convey the reality of the -- >> look -- >> transition period, cog cognit of -- >> right. the transition -- they don't convey economic reality in their discussions which is why they have no defense for fasb number two which also distorts the american economy by penalizing companies that engage in research. every -- and i will ask your chief accountant to look at this, because it's proof that they don't always do it on the basis of economic reality. every accounting theorist for decades said that you capitalize

research. they don't, because it's not convenient. and to come here and say, well, they just reflect accounting theory and economic reality is a misstatement of what they do, and i know i've brought up with your people fasb number two, and they basically say, look, we don't want to listen to reality, we don't care, we want to do what's convenient. and this approach, if the same people that tell you that accounting theory -- and it doesn't -- requires leases to be capitalized, let them cite you any, to any accounting theory that says research should be written off and not capitalized. the accountant, you have empowered, you take responsibility for, they give you some talking points. these decisions are as important as any reached in congress.

they affect hundreds of thousands of lives. and the proceed your and the outcome -- the procedure and the outcome is not something that your agency can be proud of. i yield back. >> time of the gentleman has expired. chair now recognizes the gentleman from south carolina, mr. mulvaney. >> i thank the chairman. thank you, chair white, for coming in today. a couple of minor deals, and i'm going to talk more than i ordinarily do just so we can have -- you understand where we are on a couple different things. thank you very much, by the way, for offering the proposed regs on crowd funding. the last time you and i spoke in march, you had gave us your best efforts to get them done by the end of the year, and we appreciate that. i understand they were published the end of last month, the end of october, and they're out now for review. when can we expect those to be implemented on the jobs act, the crowd funding portion of that? >> essentially, i think they become effective in, i want to

say it's in 2016. they're final rules now. >> right. >> so it's a matter of the effective date. i think it may be october, but it may be earlier. >> okay. so october of next year -- >> yes. it could be may. i'll have to give you the exact date. >> that's fine. the only thing, one of the questions i had, i used to run a small business. there are almost 700 pages which i suppose on one hand is to be expected given what we're doing here which is going to out to the retail public, small investors for the first time, so there's a lot of protections that need to be built in. one of my questions though on this is how do y'all, have y'all talked about how you're going to handle de minimis violations? we've got small mom and pop organizations now having to deal with 700 pages full of regs. have y'all given this much thought on how you reconcile those two things? >> look, the answer is we're not out there to get people on this. we want this marketplace to work, obviously, we want

investors protected in the marketplace. one of the things that i've done since i've been here on kind of these new marketplaces we're setting up whether it's lifting the ban on general solicitation or crowd funding is to have an interdivisional working group kind of all over it, you know, when it begins as opposed to sort of looking at it, you know, a year from now which means as part of that it's not just enforcement or examination, although it includes that clearly, but it's also trading in markets and people that can, you know, give guy dance and -- guidance and help people conform to the regulations as we go. so, hopefully, that will be helpful. the effective date, i happen to have it here. once in a while i bring a piece of paper. may 16, 2016. >> beautiful. thank you for that. lastly, y'all changed some of the, the signs of the investments for the small retail investors, you took it down to $2,000. very briefly, could you tell us your thinking on that? >> we did take -- again, what we were doing in the crowd funding

space was to try to, you know, we got comments from kind of both directions, you know, which was this is just not going to be workable. there's not enough be, you know, capital. you're sort of shutting people out of the markets too. we're really concerned about fraud and people losing money. so that was one of the adjustments we made in respect to, you know, comments we got. really in direct response. >> thank you. i encourage you to keep an open mind. if things work out as we had hoped we would when we passed the bill, maybe we could review the limits. i want to switch gear toss the small business credibility act that ms. waters mention inside her comments. just to let you know where we're coming from on a couple of different things, i've sort of participated in this bill. we're talking about bdcs. we got your letter from early november. we have gone through it, and we're very excited about working with you to get the sec okay with it. i think you know that we've worked with you folks over the last 18 months to do exactly that.

you raised a couple things in your letter that we think are probably not be entirely accurate, specifically dealing with preferred stock. in fact be, we actually think that the bill does exactly what you say you want it to do. look forward to sitting down with you on that. there are other places where we think that maybe your concerns are a little bit misplaced. you have concerns u for example, about leverage and the impact of that on a retail investor, and we thought we had mitt datedded that by -- mitigated that by having the cooling-off period in order to give folks time to get out of the investment if they were uncomfortable with that. so we think we've addressed some other thingsings. regarding the one year, i know you objected in your, in your letter to only having one year to write the rules. keep in mind that grows a little bit, chair white, out of you are experience. as happy as i am that we now do have the jobs act crowd funding, they're almost three years late, so we're trying to hold your feet to the fire as we do as congress. secondly, we do think a lot of

the changes contained in the bill are not going to require very dramatic changes in the rulemaking. it could be as simple as changing ratios or changing numbers and so forth. so we hope when you guys sit down to do the rules, you'll see maybe it will be easier to write these rules than you anticipated in your letter. finally, and this is the big one, i hope that when you first looked at it back -- i can't remember, it was october, you didn't have a problem with it, with a couple of different sections, specifically section 60 of the bill. when you said in your view these provisions do not raise significant investor protection concerns. in the most recent letter, you say the exact opposite about the same section. so we do hope that when we do sit down, we won't have a circumstance where the goalposts move -- >> it was based on experience in between. but happy to work with you and your staff. >> thank you very much. >> time of the gentleman has expired. chair now recognizes the gentleman from minnesota, mr. ellison.

>> thank you, mr. chair. chair white, conflicted investment advice costs investors a lot of money. some have said $17 billion a year. and i'm very concerned that workers who, you know, sold iras with high fees and hidden commissions, the damage to their refiermt security. and i'm very supportive of the department of labor's decision to move forward with the rulemaking to protect workers. the sec and dol have different jurisdictions, statutes, missions, mandates. the sec does not have the authority over insurance. i would prefer the sec follow the lead of the department of labor in protecting the retirement accounts of workers. so i wonder, you know, can you respond to that? i'd like to know what your thoughts are on this issue. do you see there being be a looming retirement crisis? and what role would a best interests of the consumer standard be and what value would that be in terms of moving

forward in this space? >> well, i mean, i think my own personal conclusion is i think i certainly have conveyed before that we should subject brokers and investment advisers to uniform fiduciary duty based on the section 913 recitation of best interests of the client irrespective of your own financial interests. and that, obviously, applies to those classes of registrants. in terms of what the department of labor is doing, you know, i've said before they're a separate agency, they have separate statutory authority, and they are, you know, they're proceeding. obviously, coordination is important. we do that with all kinds of agencies when there's some overlap. from our point of view, my point of view -- and, again, it's up to the entire commission as to whether and what the parameters would be of our uniform fiduciary duty role -- it would be done under section 9 and of dodd-frank be which provides only parameters to our duty that takes some specific cognizance

of the broker mold, i think -- model, i think. and that's one of the things we would obviously have to be considering as we proceed under that authority which is different than labor's authority. >> thanks. also when you were here in march, i urged you to finalize the ceo/median worker pay ratio rule. glad to see that the sec has finalized that rule. congratulations and thank you. the gap between ceo and worker pay has grown substantially, as you know, from 20 to 1 back around 1980 to now 300 to 1 which is really remarkable. now, most people come at this from a moral standpoint, and they say it's not right, and it's not fair. and i agree that they are right. but i want to ask you about something a little different. is it good for the economy at large? and so i'd like to direct your attention to the graphic that i have. of you know, many argue that paying ceos in stock options encourages them to prioritize

their personal short-term benefit over long-term need of workers and investors in the firm. many have called to eliminate the loophole in section 162m, and because stock options are considered performance-based under section 162m, the deductibility is unlimited. do you have any thoughts about this? >> well, i speak as the, you know, the chair of the sec here. i mean, i think one of the things that, you know, i mean, that we've been very active in is disclosure of executive compensation x., indeed, we talked earlier about the 956 under dodd-frank act that we and fellow regulators are working very hard on which is basically incentive to make sure that excessive risks aren't taken. i think i have to leave, you know, to others the broader issues, because that's really not in our remeant, as they say. >> yeah. do you agree -- i'm sure you're

well aware when people talk about the disparity between ceo and median pay, a lot of times the argument is, is this right or not. leaving that argument aside, do you have an opinion as to how a very wide disparity, going to 300 to 1 like now nowadays, hows that impact the proper functioning of markets, of retirement, of consumer demand? do you have any views on that? >> well, again, you know, i think where we operate in that space, if we do, in particular would be in the 956 space which is, basically, to try to insure that the incentive compensation of, you know, of executives -- oversimplifying a little bit -- and financial institutions is not done in such a way as to encourage excessive risk taking. .. be

>> i wouldn't, no. >> in that light, over the last five years, you've spent thousands of man hours and millions of dollars to defend rule-making that don't really address prices from our perspective, don't fit into the scope of mission whether you're dealing with conflict minerals issue or the resource extraction

of that ceo pay disclosure rules that we just discussed. how do you relate your role in these issues? it seems to me to be a diversion, whether, in terms of scope of mission. is this an interest of yours, something you feel compelled to carry? why would you move away from what clearly is your scope of mission? you are wanting to increase your budget by 25%, i didn't have right now to go to 1,000,000,000.88. that's his and significant amounts of money and since the expansion of your footprint. it's an extension of your role and expansion, but bureaucratic entrenchment of your agency. as we look at the federal government today, people are concerned. they see the overreach, the footprint of the federal government. they see the impact. look at our economy.

very slow economic growth, 2%. do you appreciate the fact that maybe this death by a thousand cuts in terms of over regulatory involvement, the engagement of so many of these unrated efforts are having an adverse effect may be well intended, well-designed by those who share those concerns, but killing the goose that laid the egg, and trying to protect everything, you're hurting the overall cost. >> first, i very much believe in furthering our mission. i think of talked about that at some length and it has several aspects to it. i think what you may be alluding to, at least primarily, are some of the congressional mandates that the sec was charged by congress, this congress, to carry out. what i said earlier is i do

believe when i had the congressional mandate that means i carry it out. we try as hard as we can to carry it out in as cost effective way and consistent with our mission. >> do you feel that fits into your scope of mission speak with as part of the mission given to us by congress. congress. >> you stated earlier to protect investors, maintain efficient markets, facilitate capital formation. disease extra additional -- do these extra additional forays into the nation's because we can't talk about them as a group. we've done a number of the mandates that you may put in that category but that we have, certainly see some investor advantage. but again if the congressional mandate i think we would have an obligation to carry it out in the best way we can. >> in closing, if there are excessive disclosure requirements that hurt our capital markets, if that's true, would you buy into that that

there could be? >> part of what are trying to do with the disclosure effectiveness review is to make the disclosures more meaningful for investors. and, obviously, not to great fortuitous -- >> we hear from the market continually, the excessive burden of these disclosures, the increase compliance calls that make more difficult to raise capital. all these things have combined effect to slow our markets and impact our economy. would you agree that reality is that the excessive burdens are really having an adverse affect? >> is one of the reasons we do that very deep cost-benefit analysis i was describing before. we want to look at not burdening but you know, enhancing. >> i've just got a few seconds left. kind of respect and asked look

at the results today. that's all about results. can you say with all your good judgment, all the disclosures come all these requirements, all these mandates, all these compliance issues have been healthy as it relates to expand our economy, or is it had on as an adverse affect? >> i don't think i his study. i think we have to be focused on as these will go out looking into exactly that. >> thank you. >> time done. now recognize the gentleman from florida, mr. murphy. >> kremlin. thank you, chair white, for being here. my first question i think was already someone asked much of the from massachusetts, mr. capuano, on the shareholder funds for political activities. just to dive into that although bit more, as far as timing for a response from that, where do you think we stand in what the timing that you think we can

expect hear back from you? >> on the latter? as i said i think i have three relatively recently, some from members of this committee, another one from different members of this committee, and i'm expecting to respond to them fairly shortly. as i've also said, we are focused our mandate to rule makings and mission-critical initiatives that i described. >> just to make sure my understanding is 1.2 million comments put in that is a record i guess. just to make sure you feel that that is sufficient to move forward? >> there have been a lot of comments on this and very strong views on both sides, about 2000 unique comment letters. there's clearly intent interest on both sides of this issue. one of the things i mentioned before is i watched what was happening in terms of companies, shareholder petitions being filed this to our regulations that's made possible.

and the number of companies increasingly appalled to are making those disclosures as recent survey out in the last two or three day showing those numbers are up. >> thank you. as it relates to dol and moving forward on fiduciary duty. can you elaborate more on the distinct responsibilities between sec and how you plan on moving forward with his? >> essentially two separate agencies, to separate totally regimes. the department of labor has responsible for the very important erisa space and has been since 1974 i think. and again i think i mentioned this earlier but actual even as it exists now, brokers, for example, the our registrants for in the erisa space are part of the erisa space are subject to different ul rules and different rules under the security laws and regulations. i think each agency is to judge for itself how it is perceived

with respect to the sec we do have a mandate to proceed with a uniform fiduciary duty but we have authority by dodd-frank to do that. i personally after lots and lots of study made the judgment i think we should proceed with analyzing rulemaking, consistent with section 913. but a lot of analysis to do on a. economic and otherwise. and its complex and not a quick exercise. i think department of labor's initial proposal was in 2009. >> one of the concerns of both sides of the aisle is duplication and multiple, multiple agencies ethics same exact thing. i know you can be is with secretary perez adult literature having these conversations of staying in the lincoln who is doing what. i think we all want to get the bad actors out at the same time don't want duplication.

we want taxpayer money spent as widely as possible. have you had that conversation? >> what we have done, and i think before i was here but really from 2009 forward and then i am familiar with more recent contacts is to provide a staff of the sec, not a commission i also participated in the meetings with secretary perez to provide technical assistance and expertise from our space to them, our economist met with him on a number of issues. and i think as you do, frankly anytime the overlap with any other agency, take the capc on swaps and security based swaps, you check your authority, somewhat different sometimes. you try to be as consistent as you can because it's not good for market participants into two sets of rules that have to comply with but often there are different obligation to so there's the perfect consistency but it's very important as you go forward on anything that

overlaps but to talk and try to do what you can to conform. >> real quick can you talk briefly about what you think the sec's rule is in cybersecurity? to me that's what the biggest threats. >> it is one of the biggest threats and risks we all have. false. the sec assorted repairs specific as to jurisdiction. one was in november last to our regulation with a security compliance and integrity that essentially is a rulemaking with respect to the critical market infrastructures to raise the bar on the resiliency of your systems and reporting to us and others when action have been. part of that is cyber. we do with the brokers, investment advisors and their risks. we put a disclosure guidance. we stay active in this space was again. we bring enforcement cases when people don't do what they're supposed to under our rules. >> time done. now recognize the gentlelady from missouri, it's right there.

>> thank you china, and welcome, chair white. i feel welcome from your first 10 years growing up with the world champion royals spent i'm a yankees fan. >> i know, i know. i'm a cardinals fan. in following up on some the questions that been asked about the dol fiduciary rulemaking, i do want to associate myself with my friend, the gentleman from georgia, mr. scott. in the sec's absolute purview on anything having to do with uniformed fiduciary role and following up on what the chairman said, you talked about, the last annual meeting about is a full out focus. what does full out a few? when can we expect a rulemaking? >> again, i want to make clear at the outset this is my view. it will be ultimately up to the commission decision.

they are very good actively working on this but its complex, not quick, but we are working toward, you know, in the very short-term most of the details about the proposal would be. now that doesn't suggest into much you will see a proposal. this is a long, complex exercise, it has evolved the full commission. >> it does and i do see your look at the shorter term rather than the longer-term and, obviously, you need to come back before this committee and senate banking to get to talk about alternative remedies to uniformed fiduciary get that would address any confusion, including supplying of titles and enhancing disclosure, all of these things are things that help are a part of his ongoing analysis. david within your division of investment measures data for the analysis still had to be done. what is the scope of that

analysis and what you anticipate is the timeline for completing it? >> i mean again, i cannot overstate the complexity and importance of getting this right. and part of that code is very deep economic analysis of our economist will do as we are perceiving with this. so in terms of impacts, in terms of, for example, i think i said this before, it would end up at the end of the day with the rule that impose that duty, but we deprive retail investors reliable recent price, but we would have succeeded. so our economist still have a lot of work to do as we proceed. >> you're right. we have to get it right and i think the deal will proposal is 1000 pages wrong. -- the dol proposal.

>> i think, i mean, it would have impact i think an investor advisors as well as broker-dealer. what we did with the dol proposal is essentially as i mentioned before provided technical assistance to them which included from our staff and its our staff, providing how it might impact on investors and how it might, what the lay of the land is not in terms of how brokers operate, how investor advisors operator it depends on, and the department of labor is taking comments about impacts but it depends on how that -- >> tens of thousands of comments. edifact i received a letter from secretary perez saying they were going to make no changes, even prior to the public comment period opening up and dissatisfied. i know you said you're taking technical or provided technical assistance. in that quote before then making you talk about particularly galore in which i care deeply about in terms of customer, cost

of those products. i think that's absolutely. tdo you have any concerns that some u.s. investors could potentially suffer based on the new fiduciary definition that the dol is proposing? >> i don't want to comment on thaonthe specific other than toy the department of labor, our technical assistance was included, you know, that concern as you proceed any rulemaking. >> i look at a couple examples on how the dol rule i think conflicts with security law. i understand the will fiduciary duty rules will require financial advisors to provide projections on investment returns as part of protecting investment costs under the best interest contract extension. does this conflict with investment advisers act of 1940, especially its anti-fraud provision? >> i think, i would have analyze

that but my focus on investment management division specifically but what it indicated earlier is even now we have different rules in the every so space, different statutory authority that apply to our brokers, registrants that the federal securities law requires. i'm happy to get back on that. >> if you take a look at that and also with indulgent of it should become take a look at dol, their definition and term on recommendation. it differs completely from the definition used by finra. i'm concerned that some of these differences and really reiterate the sec's purview through 913. we would love you to move as quickly as possible. thank you, mr. chairman. >> the chair that recognizes the gentleman from colorado, mr. tipton. >> thank you, mr. chairman. chair white, thanks for time for being here today.

you stated the sec should be respected and noticed your particular expertise in terms of dealing with a variety of issues. with that in mind, i believe it's important we consider the federal reserve's work on mapping transactions within the capital markets and may view this as early stage to be able to have the federal reserve regulate much of the capital markets under the complex transaction. are you committed to making sure that the sec maintained its position as the regulatory body? >> yes. i think one must recognize though that after dodd-frank there was some reassignments of some things. and so weakened doing more things in consultation with the federal reserve by statute. not saying that's bad, but the short answer to your question is yes. >> great. if the fed does continue this

policy, with security products and firms regulated and banks, what type of an impact will that have? >> it's hard to answer that in a vacuum. i do think them we discussed in connection with asset managers. doing stress testing as required to under dodd-frank. one has to recognize that managers are different than banks. that means that whoever you regulate, however you stress test him if we did optimally it will be different. >> i think that's part of the concern we are seeing in some of what's being formulated. were going to see this seems to be attracted on to be able to try the risk complete this could impact some of the work that apparently are trying to do in terms of being able to have some capital formation access to capital because that some of the big issues that we think i'm our communities simply for small businesses to be able to actually come to be able to reach out to do believe it's important the fsoc help decide

to review activities to products and asset management industry for systemic risks speak was doing think it's important? i think it's a focus that makes sense. and it really goes beyond asset management. i think it's, i think i cited before the example of securities lending is one of those activities. that's not just asset managers. fsoc is charged with looking for systemic risks and addressing them in the system. they of certain authorities to do with them but i think the pivot at least for the time being, you know, from a firm focus to products and activities makes sense. the sec staff has been quite active in the december request for comment on those risk. i see their work is complemented to ours but we obviously are the primary record of the asset management industry for 75 years and we are proceeding with the regime of regulations that we think is important to do and

makes sense to do. that's completely independent from fsoc. what did it is complementary. >> appreciate your answer on that but onecomment you just made in terms of going through and seeking comment. one of the concerns in my district and maybe nationwide our small businesses. you have the government business forum on small business capital formation and the response from this forum comes out, and what even are some of the more specific issues small businesses are talking about right now? >> we cabinet meeting tomorrow by the way, our annual forum is tomorrow morning, for the day. i think if you look over the years, there's a number of the -- i'm not suggesting all of them that we have proceeded with. clearly there was a lot of interest in crowdfunding, a lot of interest in a+. one of the things we did by the

way we did crowdfunding is we also propose to amend our rule 147 and rule 504 which would is addressed precisely at those small in state businesses that want more facility to raise capital. and so, that goes beyond the jobs act, something not mandated. something very excited about. >> great. i do think it is worthy to note pepperdine university did conduct a study that said 53% of the respondents, small businesses, believe for business financing of vibrant is restricting growth opportunities and 46% believe it is restricting their ability to be able to hire new employees. i would encourage you guys are holding those forums not only to listen but to actually hear what are having to say because these impacts, cost-benefit analysis that you been speaking to our having a real impact.

mr. chairman, with your consent i like to be able to also submit a question for the record with regards to 10-k filings on a lot of our mining industries and be able to get a response from that. >> without objection. the gentleman's time has expired. the chair to recognize the gentleman texas, mr. williams. >> thank you, chair white, for being you. you talk about your support for small business. i'm a small business owner. used for the international financial reporting standards it as you know the ifrs does not allow the use of last and first out of county. my concern is if we transition from the current u.s. method of gaap account to ifrs, total on u.s. businesses is likely account will be unsustainable and, frankly, cause most of them to go out of business. i think anothe think the numbere recaptured and the range of $100 billion. you have public steady considering whether to further corporate ifrs into the is financial reporting system is a priority of yours.

asked on you here i believe you told my colleague mr. barr your objective is to get a single set global standards. while fasb and i fasb have made attempts in the past attempted agreement, those efforts have always been unsuccessful. i saw it comes up with you made yesterday that chief accountant james urged supplemental use of global rules for u.s. companies. yes or no, do you have any comments on how it would work what do you agree with that, that it should be supplemental? >> i think he said he made a recommendation last december about that. and certainly i'm quite interested in it just to be clear what i said that is, i think the commission, if we can, should speak again on this issue, speak again, i'm not saying what that would be. and so i think in terms of sort of one high quality global standards, i think as a goal i certainly favor that.

that does and all the details along the way, doesn't for a moment suggest what the position may be for further application. they apply to foreign private issuers. that's different. >> also said there's virtual little or no support among u.s. companies for wholesale exchange. are you still considering ifrs as a high party outdoors because i don't think i ever stated that as a priority of mine. i would like it to commission to say where we are. >> is your inclination based on a desire to one standard worldwide reporting system because you play the ifrs standards are preferable to gaap? >> again, what i at least intended to convey, i think it's, obviously the sec sometime before i came in by regulation has allowed foreign prizes issuers to use ifrs without reconciliation. but plainly the convergence projectprojects have gone with d

and not going where they have not gone. there are differences in the system spent in the case of last in first out, ifrs does not use -- the u.s. tax code pages of -- the sec remaking tax policy. are you aware of this potential impact? >> i'm aware of the impact but i do want to apply for the moment i don't think it ought to be done, period, but is cut implications. >> do you think you should be effectively setting tax policy? >> no speed you have a position on the use of the lifo method? >> i don't. obviously it's a benefit under that mac is the one that applies. >> you realize what a destruction we to small businesses speak with i'm quite aware of the complexities. all i want to be clear as i think some of the positions that you're indicating, i have concluded on any of that. my only priority is to get the

commission to say where it is on some of those issues, not suggesting for a moment where that would be. >> have you consulted with the treasury about this potentiality? if so, is the treasury comfortable speak with the after as i have been consulting with treasury on this because it's not right at all to consult with him on a. not because it's not an important issue if we were to reject. >> lifo is important, accounting method for a county business for the recapture of $100 billion, as i said earlier to devastate small business of the it could cost jobs. so i appreciate your following through on that. >> absolutely. >> thank you, mr. chairman. i yield my time back. >> now recognize the gentleman from maine. >> thank you, mr. chair. i know you've missed your opportunity to go to maine this summer but i know mixture is nutty and you will make it. >> i'm coming.

>> i appreciate it. chair, the state of maine has the oldest average age in the country. in the second district which i represent which is western central is likely the oldest district in the country. in addition to that coast to coast there are 40 million americans that live in rural areas. now, in the parts of me and i'm sure other parts of the country when you were living in those areas we often don't have internet connectivity. we have power outages all the time. in addition to that we have 41% of our seniors in this country regardless of whether the that don't use the internet. so i know your mission in part is to make sure our investors receive all the information they can to make sure they're protected in decisions they're able to make. one of your own studies in 2012, chair white indicated 71 -- regardless of age.

right now there is a proposed rule in your shop that you and i talked about back in august. in this rule if i'm not mistaken a mutual fund company can simply send a letter to a senior any other investor saying, you know, you are no longer going to receive the quarterly statements for your portfolio holdings of whatever it may become endless you fill out this form and sent back to saying that you want to continue receive those reports in paper form. now, what happens if the mail doesn't go through our what happens if your on vacation in florida, you live up in maine and nobody gets lost in a snow bank? what happens if you change locations? you in between addresses or you are, some other reason your way from home. this is not fair, it's just not

right. i think what it comes, with all due respect when it comes to the mission of the sec that i know you're responsible for upholding, that makes a lot of sense to make sure that our investors have the option of receiving their paper financial reports, and less they opt out. otherwise it's much too confusing. if someone decides to opt out instead of opt in, that's all fine. so i'm hopeful you'll commit to me today that you will retain the option because that is with all due respect, part of your mission spent i can't commit because web an open come into general. we talked about this to some degree, i know we get on the phone is not the proposal, although again we have a number of comments in the same vein as yours, which we are weighing very seriously, but in the proposal we have tried, the staff has tried to build income is not just sort of one letter that gets lost in the mail,

which i understand is a risk, don't get me wrong, but also periodically again would be solicited on the issue. some of the problems that have been identified in terms of sort of receipt in choice, proposals tries to address what i fully take your comment about switching the presumption basically. >> my mom who i love dearly is 87. she can barely use a cell phone. and speed but again should have the option not to receive it. she could get paper, i fully take the concern spent thank you very much. i have a short amount of time. thank you very much. our financial service industry is the envy of the work that gets all of options to investors saving for the retard or the kids education and also is the backbone, the liquidity to our economy that allows us to grow and raise capital, hire more workers per i'm concerned, i

believe also about asset managers and pension fund managers and mutual funds being designated as sifis pick a particular i know there's been a movement to fsoc and summit of the folks who can the folks who come before us that you start to look at activities instead of asset size. i would like to ask if i can right now what activities are a concern of yours? we managed a couple of different pension funds, mutual funds and his performance is better than mine. then my clients would go to his and they are not on our balance sheet anyway. to help a trust department down the street. if something happens to me though systemic risk. >> i think that's why you have seen the pivot to -- for example, you know, you know, wen with this in our separate primary regulator space, is liquidity risk management kind of issues just to make sure in n the open and fund are entitled to get you may right away, those

kinds of risks. i mentioned before securities lending which asset managers and others, people but under the fcc'sec's jurisdiction may justd those opposing a risk. it really is, there are no answers. it's just asking questions. it's good to ask those questions. >> i will submit to you, chair white, that there is no risk and asset manager business model to the economy, please look at the very carefully and make sure your position on the international regulatory bodies, that you make sure that we stand up for american asset management when it comes to any regulatory issues with respect or industry. thank you very much. had a wonderful the escaping. >> the gentleman from arkansas. >> thank you, mr. chairman. thank you, madam chair for been back before the committee and congratulations on a good gao auditor i know that makes every management team smile when you get that. but also congratulation on clearing up some of your 50

front burners. maybe you're down to 40 or so not like to start out by talk about equity market structure. i thought that was a very thoughtful piece last july i think in 2014 about their suggestions on equity market structure challenges that we have seen over the course of the past few years including some of the references to this summer. you have no form an equity market structure advisory committee, and a couple of comments about that unconcerned about i'd like to get results. understand the kind of subcommittees meet in private without any transparency on their policy recommendations. i'd like your thoughts on that. and i was, i noted the overall membership in the committee did not include nasdaq, didn't include the new stock exchange, did include a big retail broker. i come from a retail broker space so i'm always concerned about best execution, the promise that we picked you as a

regulator to achieve that execution. so i'm concerned that those entities are not involved in your market structure advisory committee. could you respond speak was happy to respond. first, the commission and all five of us on the commission with a very lengthy process of vetting and trying very hard to diversify from points of view, expertise, the 17 person committee which is what it is i charter. and so that is an exchange, representative on the committee. are actually as it turns out two other representatives who were formally actually that private listing exchanges as well. it is a representative who represents the retail brokerage point of view, although we still keep looking at that. and we clearly had request from others to join one of the things

we've done anakin keep looking at because she really wanted that diversity of perspectives come is to structure that committee so that we get input from others from every constituency whether its retail broker or its nasdaq or new york stock exchange pics of each of the meetings in effect is a roundtable where we have nasdaq index pocket change and so forth. the subcommittees, that's something that the other advisory committees used great effectiveness to get things done but they don't decide anything and they are also able to open a lease parts of their meetings if they choose publicly. >> let me urge you to open those meetings or parts of those meetings. urge you to make sure you get full confidence of those who want to participate in this process and particularly you can see you included exchanges but not have the two leading exchanges, nasdaq and the new york stock exchange not represented strikes me as shortsighted. let me switch gears.

generally in your experience under have an enforcement and legal background and i've got an investment management background. do you believe retirement fund managers have the principal obligation of maximizing long-term returns for their beneficiaries? >> i mean, i don't, you know, i mean, maybe just because of that legal background and just on the sec's jurisdiction. i think you want to serve the best interest of the client is what you want to do. that's what fiduciary duty is all about spin you have full discretion over an account and you're an investment manager, you've got to act in their best economic interest, wouldn't you say? >> yes. >> that caused me concern about a recent decision by the department of labor not a dish or standard but secretary perez has recently encouraged and is given guidance to institutional managers that environmental,

social and governance issues are equal to economic return issues. we live in a world of underperforming defined benefit plans that are not fully funded and yet we have direction from the guy who's in charge of erisa to look at other things besides economic performance. want to take the response at the? >> do i want to or would you like to give? >> it's so much fun to do it. >> i do want to comment on the specific comment. i will say that what you come is a little out of my, what i think what you guys would undo these are the best interest of decline. you can have a client who says look, i care about this, this and this that you invest -- >> we are not fully funded in economic return or how we achieve that. i think the department of labor is way off track. last question. you've got some vacancies on the commission. would you commit to this

committee that you wouldn't bring controversial or element of if you don't have fully, a fully functioning commission as a bipartisan numbers on it? >> anything can be controversial. >> true, but i mean any big major issue follow on that we're working on. we are concerned you're going to not have a fully functioning commission with bipartisan appointees and we would like your commitment you'd be cautious about what you try to bring through the commission without fully confirm bipartisan appointees. >> i do think right now there are four of us. i guess when it comes when republicans into democrats, and we are moving forward with our agenda. i think we can. but i will say, you know, i sort take everything into account. i do think we should proceed. i don't know obviously how fast confirmation, something for which i assume they will, occur.

but you sort of friedrich and as you go along. >> i yield back. >> thank you, mr. french. >> thank you, mr. chairman. thank you, chair white, for being with us today. want to touch on some other folks have been talk about the bond market, corporate bond market. want to ask a question about that. has the fsoc come again which were a board member, ever conducted in the analysis of the systemic, the systemic risk that could result from a lack of liquidity in the corporate bond market due to regular to initiatives like the volcker rule and basel iii? >> i don't think it's raised that way. the for five of us report quarterly to this committee to the kind of assess the least interest of the volcker rule. >> passion of the children reached out to you at the beginning of the for a status update on a number of initiatives that are designed to facilitate capital formation and ensure the capital markets remain the leader rather than

focusing on politically divisive issues. for example, the chairman asked the status of potential sec efforts to modernize the rules governing transfer agent. this topic is of interest to me because of the rules have not been updated since the 1980s. i also think it is a rare occurrence when you bipartisan support within the sec given the former commissioner gallagher and current commissioner aguilar comp test in june of this year in february 2015 used it in a response letter that the sec staff is considering recommendations. i would like to follow-up with the chairman's request for a status update as of today. >> we are actually quite actively focused on the transfer agent issues. i do want to get sort of ahead of what we're going to do i give a specific date, but i think you will see something coming out quite soon. i don't want to say -- in the next couple of months.

>> in what form speak what i do want to say that until it comes out because that's one of the things w we're having to balance with that is because we have not updated it for 40 years, you need some data to inform yourselves, you become in terms of some of the things that you may propose. there may be other things that you can keep up as a direction you think you're going in as part of that so that's really what we're trying to balance, to be a pin point as it can also make sure we get the input we need but by whatever form we put this out in. >> you have it made a determination speak with we have not, although we're thinking about maybe some combination. >> they said a lengthy delay in updating the commission transfer agent was with him that for market investors and issuers.

there are critical reforms were part immediate action that we can propose no. would you propose no. we do a great? >> yes. .org i agree, i asked them to do this. in other words, to come back with areas of agreement. i do agree with that. >> you have questioned whether sec disclosure powers are best used to meet, to address societal ills, noting quote other mandates which commissions mandatory disclosure powers. be more direct at exerting societal pressure on companies to change behavior rather than to disclose financial information that primarily informed investment decisions. that is not set the goals of such mandates are not laudable. indeed, most are seeking to improve safety in mind to work or to end horrible human rights atrocities in a democratic republic of the congo are objectives which as a citizen i wholeheartedly share. but as the chair of the sec i must question as a policy matter

using the federal securities laws and fcc's powers to come push these goals, closed quote. what is the cost to investors and it is an over emphasis on mandatory disclosure requirements that seem to be targeting things so silent bills rather than when they be considered quote material closed quote by a company? >> it's hard to say what the cost is obviously. investors can see things different. i think i went on in that speech to say there's a congressional mandate even as described in the prior remarks, i do consider that our obligation to carry out. >> last april u.s. court of appeals sound the sec's conflict of minerals violated the first amendment because it required companies to shame themselves. is it unreadable to assume that pay ratio will also violate the first amendment? >> we study the precise issue we believe it important to the first amendment. >> this week the commission

proclaimed the regime has been hijacked by social activist. do you agree that the disclosure rules are meant to serve investors, not special interest speak with i certainly agree our disclosure team is meant to serve investors but again i think if they're mandated disclosure rules we have an obligation to carry them out. it's the law. >> can you explain how it serves investors over special interest? >> is in the release. want to pay ratio role does, it's mandatory for making is to provide investors another data point in judging a ceos compensation. that's the finding in the release. >> yield back. thank you. >> thank you, mr. rothfuss. it looks like it's just us. >> okay. >> a couple things, madam chairwoman. first off you've always been very kind to me. your staff has been terrific, and because of that i'm going to

yield myself as much time myself as much of as my consent becaue i've got a lot of questions. you already hit the clock on me, okay. i'm going to ask you almost for a narrative answer on this. pretend no one is watching or listening. being someone who was both i think intellectually and emotionally vested in crowdfunding come in the jobs act, let's use jobs act and the crowdfunding portion. almost four years, almost four years beyond when the rules should have been done, something, from the iq you have around you and yourself, should not have been very complicated. i beg you, could you walk me through what happened? >> three years i think. >> three plus. let's call it three.

book, your staff and others were very kind to let see some of the letters that come from certain uniform groups and other groups that disparaged by funny. but help me understand because as this is supposed to be about resources, was this a resource issue, a political issue, intellectual capital issue? why so long? >> clearly, i have already described how our need for resources will across the board, but this is one where, and i think, i believe i testified to this in march when i was here, we knew this rulemaking was going to be very complicated going into it because statute is quite prescriptive in some areas your funding portals which are enormous important to investment protection is a complicated piece of that as well. and then so we did our proposal.

i sort of really tried to light a fire under the proposal. we got it out pretty quickly after i got here i think. and then the comments came in. we were trying to end again we have to work within the statute when it's prescriptive. we tried to make speedy the statute had some deadlines, to. >> i'm not, i'm just saying we do need to observe those. some places give us a discretion. some places don't. the goal is to make it workable and to safeguard invested in the new marketplace. that proved to be very, very difficult. >> what i was asking you, and my question, maybe i need to do this in writing because some of this is uncomfortable, is the power of certain activist groups to delay something at the same time both the right and left it behind these microphones to talk about the desperate need for economic growth in the new economy and the future that brings us to some the things we don't our constituents were doing for them to grow the economy takes three years spent

allocated own perspective. we're talking the context of crowdfunding. this was pure on the merits get a workable, get it to protect investor. no politics, no activist. >> a dozen, two dozen states actually did their own and produce their own rules that under up and running. >> yes, but also did not have the same statutory framework we hahave to work with it is not a federal. i mentioned it earlier, one of the important exciting things the same day we did these cry funds are these amendments because that is really quite solicitous of the state crowdfunding statutes. it's a proposal at this point but i mean, i think that's a good thing. >> is done robustly but it's an interconnectivity their that can be very helpful. this is one of those just because i was walking up to grab to me i thought i heard something in the previous question i think with

mr. luetkemeyer. and it sound like the regulatory or additional records for scrutiny when an investment organization will pledge their holdings up for shorts or a vote on the book. did i pick up something they're? >> i don't think so. i mean, i don't think so. >> all right. last one that is also important to us. we accept your commission, the board right now, you are short one republican. there is a certain nervousness out there that in the waning days of the administration, the independence of the sec, this, more just a request for your greatest prudence as rules are being brought for a vote of herself and her fellow commissioners, that you are shorthanded and something that

would be controversial have a cascade effect, policy wise be dealt in the light that there is a void. >> again, i think literally and otherwise i'm extraordinarily independent. we tried to do these will make you on the merits obviously. i think we've had an illusion to the votes we have had. that's the sort of part of the landscape i think at this point in time. i think we need to move forward with the agenda but i certainly will be sensitive to all things spin because i have no one else waiting and going to get myself a couple extra moments, for the sec and georgina, how much interest and focus is there shall we say on the new economy -- and your team. as we see silicon valley is spending lots of resources to find ways to provide financial service type products, but a partisan crowdfunding platforms or other types of platforms. do you have someone on your team

that actually know is specializing in trying to say this is our future, this is coming at this? >> what to do things, yes, the edge do that. one of the things over the last several years is to make sure we have, i'm going to call it the market expertise but really the point of view that would encompass the new products, the new innovation. >> this is one of the things in our life that maybe bipartisan. arthur some things we can do is policymakers to provide the tools or statutory mechanics to allow you to embrace and bond with those ideas that are good and do it as fast as possible so we are not slowing down what many believe is the future of for economic growth speak with what really helps us do that outside expertise genius, you know, make sure we have in house when we can. we do try to do that. >> chairman white, thank you so kindly for your patience and the

time you gave us today. >> thank you. >> i'd like to thank her witness and without objection all members while five legislative days or which to submit additional written questions for the witness, which will be forwarded to the witness for her response. i ask our witness to please respond promptly, which again has been pretty good on many of the things we've century. without objection all members while five legislative days in which to submit extremist materials to the chair for inclusion in the record. and with that this hearing is adjourned. [inaudible conversations]

>> today the brookings institution hosts a discussion on what's next for france and europe following recent terrorist attacks. foreign policy experts will also discuss why france seems to be a prime target and now the international community shall respond. our live coverage of the discussion begins at 2:30 p.m. eastern on c-span. >> c-span is the best access to congress with live coverage of the house on c-span, and the the senate on c-span2. over thanksgiving watch our conversation with six freshmen members of congress. congressman buddy carter republican from georgia and only pharmacist serving in congress.

>> fda commissioner nominate dr. robert califf appear before the senate health, education, labor and pensions committee for his confirmation hearing last week. dr. califf is go with the fda deputy commissioner for medical products and tobacco. this is about two hours.

>> good morning. today we are, the help committee will come to order. debate with reagan the nomination of dr. robert califf to service commission of food and drug. dr. califf, welcome. congratulations on your nomination. welcome to you and your family members. we are glad that have been able to come up, some of them from columbia, south carolina, and i enjoyed having the opportunity to meet with you in my office. if you're confirmed to lead the food and drug administration as its commission to be in charge of securing the ages response for the safety and effectiveness of our nation's medical products and protecting our countries food supply. this is a huge job. the fda affects nearly every single american almost every day, and regulates about a quarter of all of our consumer

spending in the united states over $4 trillion annually. is responsive for product areas as diverse as prescription drugs, humans and animals and medical devices, biologics, cosmetics and over-the-counter medication, food and tobacco. it's a vital mission and we all want to make sure that the right person is leading it. the president has nominated you to do that job. like every full-time nominate you have been through an exhaustive process to make sure you don't have any conflicts of interest or other problems in your background. you will permit me, i had the privilege of coming before this committee about 24 or five years ago and sit in the chair where you sit. it's not always a pleasant experience. one of the democratic senators sent to me, governor alexander, my family is sitting where yours is, sent to me, i've heard some very disturbing things about you. but it don't think i will bring them up this morning.

and the senator leaned over and said howard, i think you just did. and then he held me up for three months. i don't expect that will be happening with you because, like every full-time nominate, you've been through an exhaustive process to make sure of the conflicts of interest as i said it before the presidential nomination it was the extensive vetting process by the white house and the fbi. use a bit of paperwork office of government ethics. that has been carefully reviewed. including or financial information. they found several recusals which you have committed to do so they wouldn't get any remaining conflict of interest that would prevent you from doing her job in the opinion of the office of government ethics. the form use of it is public and includes every source of income over $200 an asset worth more than $1000 a potential conflict of the office of government ethics determined would require a recusal. i'm going through this so people will know that nominees such as

yourself do this. you've answered 37 pages of questions from our committee, including some confidential questions or financial information. you responded to written follow-up questions. your responses include over 3000 pages of articles and lectures in my staff reviewed and that any member of the committee may review. you were nominate on septembe september 17. our committee staff has spent too much carefully rethink everything you submitted, and my staff tell told me that they hat found anything that would call into doubt your ability to lead the fda fairly and impartially. you coming with impressive qualifications, a leading cardiologist, professor of one of the nation's top medical schools, an expert on clinical research and even recognized as an author of medical publications here. ..

partner in innovation and not a barrier. i look forward to hearing your testimony on these important issues. senator murray. >> thank you very much, mr. chairman. thank you to our colleagues for being here today. dr. , kalif, i want to express y appreciation for your accepting this nomination and continuing to offerer expertise in service of families and communities nationwide. as the chairman said the fda commissioner has a critical role to play in supporting health and well-being in our country, whether you're in a grocery store or the medicine cabinet or the emergency room, families depend on the fda to maintain the highest stanfords of product safety. as we talk about the future of the fda and the many health challenges our country faces i think it's important to note that valuable efforts have been made in recent years to

strengthen the fda and improve its services for patients and families. last year the fda approved 51 new drugs and biologic. its highest number in 20 years. the agency consistently approved drugs more quickly than advanced regulatory agency and other countries while maintaining the high standards of safety and effectiveness. the fda also head strides towards implementing the food safety modernizeddation act, helping to brick the nation's food safety system into the 21st century. the fda faces significant challenges moving forward. there are several areas in particular where i hope to see continued progress. as someone who has seen personally the challenges that patients and families face due to chronic illness, i'm very interested in making sure we are encouraging development of safe, effective treatments and cures for our most challenging unmet medical needs. so-called super bugs are another

growing threat. we have seen in my state and across the country, where medical devices known as -- have been linked to tragic youth breaks of antibiotic resist stand infections. we have to find ways to prevent these infections and responsible more quickly and effectively when any risk arises, especially as technology continues to involve. we need to do more to make sure that after products reach the market, the fda has effective tools it needs to monitor their safety, taking full advantage of information technology. we need to ensure that fda continues to strengthen its generic drug and biosimilar program, and i also believe there's much more we can do to bring patients' visits into the process of developing new treatments and cures and ensure their priorities are consistently reflected in the fda's work. in addition, our country faces urgent public health challenges that deserve our attention. to name a few we need to move

forward on making sure families have access to nutritional information and ensuring our food supply is both safe and healthy. we need to put all the agency tools to work to stop tobacco companies from targeting our children and must do more to tackle widespread illnesses sun as heart disease and diabetes that threatens so many people, and like so many of my colleagues here today i've heard time and again from families that the cost of prescription drugs is a significant financial burden. i believe the next fda commissioner has an important roll to play in ensuring all patients and families have access to the prescription drugs they need. another critical priority is ensuring the fda always puts science over politics. as some here will remember, several of my colleague and i fought a very long and hard to ensure that medical expertise, not ideology, govern decisionmaking on the sale of plan b over the counter. women and families have to be

able to trust the fda not to play politics with their health. as congress and the administration work together to address these and many other health challenges in which the fda plays a significant role we need to recognize our efforts will not be successful without additional support for the fda. must make sure the fda has the resources and authority it needs to hire top experts in a highly competitive field, and manage its growing work load as navigates our increasingly global supply chain. mean of these are issues that-under committee is current live debating as we negotiate bipartisan legislation to advance medical innovation for patients and families. after careful consideration and review, i am confident dr. califf would contribute expertise to improve health and well-being across the country. he is a strong nominee for the

fda commissioner. dr. califf has an impressive history of leadership and management experience in particular at duke. he would bring to this n new role a regard or advancing medical breakthroughs of challenging illnesses clinical trials and has a long standing commitment to transparency and relationships with industries and working to ensure academic integrity. dr. califf has made clear he will continue to uphold the values and prioritize a strong, independent fda as commissioner. i've approached this nomination focused on the best interests of families and communities in washington state and across the country and ma making sure the fda puts them first in all its work, from drug and device approval to ensuring that child's peanut butter sandwich is safe to eat. i believe dr. califf would be a valuable partner and encourage my colleagues to join me in supporting his nomination and i

look forward to working with all of to you strengthen health and well-being for the families and communities we serve. thank you, mr. chairman. >> thank you, senator murray. senator burr. >> thank you. dr. califf, welcome. thank you for sharing your family with us, your parents are here, your bride is here, your children are here, and your granddaughter is here. welcome, brook. hope you get extra credit at school for being here. dr. robert califf is a north carolinian whose career has been distinguished by his unwaiverring commitment to patients. as a respect it clinician, researcher and adviser, so i'm particularly pleased to have the opportunity to introduce you here today. dr. califf has been nominated to serve as the next commissioner of food and drugs admission and my colleagues and i look forward to hearing from you today.

dr. califf is currently the dep the excision of medical products and to back for the fda since february. in this role, he is responsible for overseeing and directing the centers for drug evaluation and research, the centers for biologics evaluation and research, the centers for devices and radiological health. the centers for tobacco product. the office of special medical programs within the agency. prior to this his work at the fda he was a professor of medicines' skies chancellor for christian contractual and translational research at duke university in durham, north carolina. during highs time at duke he held a number of positions including the director of translational medicine institute, the director of the clinical research institute. he worked to move the promising field of translational science forward as the director of clinical trials. he is distinguish as a

researcher and an author with over 1200 peer review publications in biomedical science. a graduate of duke university, school of medicine. he received his residency training and primary carry at the university of california san francisco, and completed a residency in cardiology at duke university. dr. califf is a great father, great husband, great grand-dad, great doctor. he is a great man. and i think that stands out the most in his qualifications. how well the fda fulfills its mission touches the lives of americans each and every day. from the life-saving treatments patients receive to the safety of the food we feed our family is. the challenges facing the next commissioner are great. but also the opportunities are as well. dr. califf, congratulations on your nomination to serve as

commissioner of the food and drug administration. i urge my colleagues to thoroughly get your questions answered, and expeditiously move this nomination so a permanent commissioner of the fda can get to work on some very serious problems within our system. i thank the chair. i welcome dr. califf. >> senator scott, as a point of clarification. >> thank you, senator, chairman alexander. senator burr referred to dr. califf as if he were from north carolina. the fact of the matter is, sir, while he could -- he had to go to duke, he is actually from south carolina. and understanding the generational responsibilities of southerners, you realize his parents were also from south carolina. therefore we know he is a southerner but from south carolina. the north is a yankee, called north carolina.

i just want to make sure that point was made clear, you didn't insult his parents on the front row who are from south carolina, in the low country. thank you very much. >> i welcome his parents and congratulate them on his able to outperform the requirements for south carolina education. >> mr. chairman. >> okay -- >> mr. chairman. >> senator. >> why they're doing border wars i want to welcome dr. califf because fda is in my state. i think heed be imminently qualified and go forward in supporting his nomination. i'm glad you're the son of south carolina who lived in north carolina but you're our guy, too, and i ask unanimous consent been be entered in the record. >> it will be. now, dr. califf, you seek the interest the committee has in the work you're about to do. virtually every memberrer here.

each will have five minutes to have a conversation with you. i'll give you five minutes to answer questions but we want to tick closely to five minutes. you have answered a number of questions to the committee staff, and if any senator has additional questions there will be a few days after the hearing that they can ask them, and we hope you will respond promptly to them. so, we'll begin a period of -- a round of questions, five minutes in length. around the country and here in congress people are talk become high cost of pharmaceutical a drugs. and what we can do to make the drugs affordable. do you -- oh, excuse me. i got so excited i didn't give you a chance to make your comments. if you'll -- dr. califf, we look

forward to your comments. >> mr. chairman, ranking member murray and also for burr and senator mick cull -- mikulski, thank you for your kind comments i. i thank you for inviting me here. i'm honored to be accompanied by my family today, as you've noticed. sitting behind my miss dad, world war ii veteran and we'll visit the monument this afternoon. my mom, an activist teacher and a and my wife of 42 years and high school sweet hard, lidda. my three children and granddaughter, brook, are here with us. the support of my family have been essential to my career success, sustaining my moral compass. i'm honor ted have been nominated by president obama to lead the fda. thank you for all of your willingness to share with me your perspectives on ways the agency can better serve the american people. my primary goal will debe to

build on the little lent work force, focus on the completion of priority projects, and continue to develop the science base we need to give consumers confidence that their food and medical products are safe, and give patients and clinicians an accurate understanding of the benefits and risks of medical products. amid revolution in biology and science technology we most strengthen the fda's vital work. protecting americans and encouraging innovation. it would be an honor to 'lead this outstanding work force in this remarkable time. i've dedicated my career to advancing the public health as a physician, leader, teacher, and researcher. but like each of you, my understanding of our health system was shaped by more than our professional life. our daughter was born with serious congenital heart disease requiring open heart surgery as an infant. i still remember the

inspirational work of her doctors, nors and healthcare team, and the uncertainties of that experience. including the discovery that one of our daughter's cardiologists affect his medical credentials. we experienced first hand as a family how important it is to find a critical balance between innovation and safeguarding patients. when i started in cardiology, heart attack was the leading cause of death in america, and our understanding of it was limited. it was agonizes that one in six patient is saw with a heart attack died during the first hospitalization. the intensely permanent experience dealing with catastrophic illness and permanently witnessing the death of many people, drove to us relentlessly invent and develop effective treatment. i had the privilege to serve as a leader of global networks of doctors and nurses, researchers and computer scientists and statisticians who joined force to develop drugs and live-saving

technologies, including stints s and tee dib brill lators. they have cut he risk from ham deers in more than half and highlight the importance of bringing advances to patients as fast safely possible. indeed it's not enough to develop new treatments. we must prove they're safe and effective and deploy enemy a stickic way that reaches all americans and eventually the global population. our initial quality registry. -- have become global standards including adoption of our cms's quality measures to improve the public health by advancing evidence-based therapy and reducing medical errors. a successful fda is a critical factor for better public health in this changing world emthe fda must be prepared to set policies that channel innovative technology for safe and effect at the use. and the betts way to make the price egg for different sectors in today's health care ecosystem

to collaborate. i've led efforts to help academic researchers collaborate with industries in a man are that retain their independence and primary role in caring for patients and have had the pleasure of jointly leading projects with patients, community leaders to the great benefit of research and public health. my first priority as commission we're be to strengthen and better support fda's talented and dedicated work force. while fda scientists make decisions every day about hundreds of products, as technology advances these decisions are becoming more complex. it's essential we keep pace. my next priority as commissioner is working with you to fulfill the ambitious agenda we set together. the food safety modernizeddation sackett will help assure americans their food is safe. the rule for tobacco rungs will help us continue to reduce to be back co related death. my third and final priority

would be to further develop science base that inform's fdas decisionmaking, me real professional love. my taking advantage of advances in biomedicine we can build the right instruction that will unlock evidence about 'productions. finally we can't forget that health and disease fail to recognize national boundaries. in concert with our global colleagues we must continue to develop systems for monitoring the safety and quality of products produced outside our borders. the fda is poised to leverage the acceleration of bioinned knowledge to a new era and if confirmed i would be honored to lead the agency in this exciting time. thank you for allowing me to testify before you today. and i'm happy to take your questions. >> thank you, dr. califf. we'll now begin the round. dr. califf, around the country and congress there's talk about

the high cost of pharmaceutical drugs. do you believe in terms of drugs it's accurate to say that the fda statutory mission is to promptly and efficiently make sure that drugs are safe and effective? >> as you know, senator alexander, that irour primary mission and we can have an impact on the cost of drugs by performing that function effectively. >> let me talk about that a little bit. do you agree that it it's not your job to set the price of drugs? i. >> it is not our drug to set prices. >> let's talk about generic treatments. if generic treatments can move more rapidly through the fda process in a safe and effective way, that would be one way to create more competition and presumably lower the cost of drugs. despite getting about a billion dollars in new funds over the last three years, generic

manufacturers estimate that the fda's median approval time for generic drugs has gone from 30 months in 2011 to 48 months in 2014. is that accurate? or based on your knowledge? or can you explain how the fda, with availability of a billion new dollars, could have actually presided over a situation where the approval of generic drugs has gone from 30 months in 2011 to 48 months in 2014, especially since a more rapid approval, if safe and effective, might have had some effect of lowering drug prices. >> senator alexander, bear with me. i appreciate the question. bear with me while i explain which is. first of all, as you point out. 88% of american prescriptions now are generic so we have made tremendous progress but we can do even better. you also know that we're well ahead of the generic drug user

fee act goals set but we can still do better, and i'm all in favor of that. but explaining the backlog is important. we started with a huge backlog. thousands of applications that were waiting until the user fees came in. the easy ones, the ones that were good, were well-written, went through quickly. the new ones that are pertinent to getting the first generic on the market or putting a fast lane and they're going through quickly. we have this baglock of applications requiring back and forth because we want generic drugs to be just as safe and effective as the innovative drugs and when the applications are not complete or questions about manufacturing, those get held up, and so i'm confident you'll see over the next several years as that backlog is cleared the new applications are going through quickly. >> thank you, dr. califf. this question will require a short answer. will you take a look, if you're confirmed, at the fda's policy

of issuing nonguidance documents instead of rulemaking? i've talked to sean donovonn, the director of the budget, and the administration omb hads' pretty strong policies and firm views on the difference between rulemaking, which involves consultation, and is legally binding, and guidances, which are not legally binding. will you take a look at that? there's a bipartisan concern that agencies of the federal government, including fda, are issuing guidances as if they were legally binding. >> senator, i will commit to working with you on that and taking a careful look at it. >> i'd like for my remaining time ask you to comment on a management issue at fda. we hear that even when products are similar, experiences of an mix can'ts varies -- applicants varies quite a bit. regulated parties ought to be treated in consistent and

predictable ways. why do you think that even with similar products the experience of some applicants is so different and what could you do to make sure that regulated parties are treated in consistent and predictable ways? >> senator, alexander i appreciate the question. having spent several decades on the other side of the fence working on new therapy is can appreciate people's concerns. the primary reason is that each individual medical product is different. clinical trials can have nuance that are -- nuances that are critical but we are committed at the fda and dr. woodcock, i'm working closely with her and we'll do everything we took produce a more even template across the fda so the standards are the same but you can't take a cookie cutter and develop a drug or a device. you have to treat each one differently.

>> thank you. senator murray. >> thank you, mr. chairman. -- califf in contrast to some of our previous fda nominees who have come from the public health sector, you are a physician and a researcher with a specialty in large clinical trials and as a result throughout your career you have partnered with pharmaceutical and other industry companies and i want to ask you questions about that. during your past clinical trial and consulting work you have done, how have you ensured industry views have not biased your work and what do you plan to do to ensure you are able to lead the fda without any undo undo influence. >> thank you, senator murray. it's parent to did this good two parts. the clinical tiles that were done at duke during my opportunity 'er and still being done, if funds by industry -- many of our clinical trials were funds by foundations. one of the largest nih grandees. when funds by industry we have a contract which i believe your

staff has a copy of that guarantees the independent right to publish, the guarantees access to the database and the majority of cases, we actually have the database. we're running the trial. and we publish the papers with input from the companies but they have absolutely no right to change what we say. we have the final right of publication. these trials are also done usually with international steering committees representing many countries, providing that independent voice that's really needed. so, yes, industry funds the trials they need to have their product ease valuated but we have an independent voice, guaranteed by contract, and i believe you'll find that 100% of the studies i have been involved in have been published so they're in the public record for people to view. >> that do you see as the appropriate role of industry in working with the agency on key challenges like trials and surveillance? >> i think it's critical here to separate the role of industry

for individual applications versus what we call the precompetitive space. that is how do we understand how to streamline the christian cal kyle process and share information as medical rungs are rolled out to the public to make sure we understand the risks that it me a only be seen in the post market. it's fda's role to independently judge that application. i think the american public completely depends on having confidence that the fda is independent in those reviews and judgments about individual products but in the precompetitive space we have to work together. industry funds 70% of clinical research global limit nih is a minority funder but we're working closely with the nih right now and we'll bring into what i think will be a

dramatically lower cost but much more effective clinical research system. >> very much appreciate that. i do want to turn to an issue i've raised a number of times this year know. that parents across the country, including in my home state in seattle, got serious antibiotic resistant infections from equipment and as i have investigated this issue further it seems to me we need to make significant improvements in how fda monitors medical devices on the market to identify safety issues more quickly and prevent the tragedies we have seen with this. what steps would you take to improve the post market surveillance system for devices and better protect patients? >> thank you for bringing that up. let me say as a cardiologist and someone with administrative responsibilities, the procedure you're referring to what first developed it was in the ewe nighted kingdom and those doctors came to duke and we were

one of the first places to do it so i have first hand experience on the important of that procedure, particularly in people who are critically ill. i think we need to really work on our post market surveillance in devices and i hope you'll help us with this. the sentinel system you helped with, industry has, took but really developed by the fda, biant woodcock is a model in drugs. we have 170 million americans claims data so when there's a problem with a drug we can look almost in real-time. we need the same system on the device side. we have plans to do that. but we're going to have to work together with you to figure out how to fund it and how to fold it in with that sentinel system. imagine these scopes if there was such a system we would have seen the problem early. we could see it independently of industry and act on it much more rapidly. >> i very much appreciate that. this is something i'm very

concerned about as we move forward. so i look forward to talking to you more about that. >> thank you, senator measure rhythm the next for senators are burr, whitehouse, isaacson and warren. senator burr. >> thank you, mr. chairman. dr. califf, the animal rule was finalized on october 27th of this year after significant and in my opinion, inexcusable delay, given the importance of the rule. i'm pleased that the rule has been finalized as it will provide more certainty for those working to develop medical countermeasures to protect american people in the vent of a public health emergency, whether it's natural, or the result of manmade attack on our country. if confirmed how would countermeasures bell prioritizes and how would you ensure the fda is advancing the development and review of these products towards the goal of a timely approval? >> senator, thank you for the question. i'm amazed at the attention and

intensity you al have today given then fact that we're all worried about the issue that you're bringing up. it can be either manmade or something that is totally unanticipated. for example, with an infection. we're committed to working on this itch was pleased to be able to get the guidance out from the animal rule which you requested, but it's going to take a concerted effort not just by the fda but as happened with the ebola crisis which we all just witness, when the federal agencies work together, a lot can be done to way -- quell a cries and deal withthings. want to refer to the brilliant work that's been done in the outside community, academia, and within the fda, for those not thinking about it the animal rule basically says in cases where we constant do human studies but there's an emergency, what's the way in which we can extrapolate from animal studies to the benefit of humans in these catastrophic situations? we're committed we'll be there

24 by seven if needed. >> thank you for getting that rule out. there have been reports that the tobacco beaming rule did not change the grandfather date for newly regulated tobacco products. this means that many noncombustible tobacco products which may have a public health benefit compared to the more traditional forms of tobacco, would not be available to consumers for at least some period of time despite their potential benefits compared to a more traditional tobacco product. as commissioner, how would you improve the performance of the fda's center for tobacco products with respect to the timely and predictable review of tobacco products? >> this was a new creation. it started with zero employees. it's knew in the multihundreds. there were no rules by which the tobacco applications could come in, so that's have had to be

developed. let me just say that you bring up a general issue of weighing the overall health risks of tobacco products, whether graded from most serious to less serious. there is a pathway for doing that. we're committed to reviewing them in the time frames that have been agreed to, and we have funding to carry out that activity. so we're committed to getting it done. >> thank you for that commitment. i often hear from constituent in north carolina about the importance of laboratory developed tests. for researchers it mean the next step in creating precise therapies for providers ldts help to determine accurate diagnosis and the means for more targeted treatments and therapies on behalf of patients. at someone who has been on the frond lines of research and treating patients, under your leadership, how would the agency collaborate with labs, other existing government structures

such, -- and the full range of stakeholders to sheen that's right laboratory developed tests is carried out in a workable way that moves promising tests forward without inappropriate leaguer to burdens or delays for patients and their practitioners. >> as an academic for over 30 years i've aware authorize importance of laboratory teeth. it's where home brews are made to make the test better. it's an important activity. on the other hand this has become a big industry with major implications for patients, especially with presomethings medicine where you have a test and it tells you what therapy to give that can be either really good or really bad. depending on whether it's right. so we're committed to work with a whole ecosystem, which is complicate so there is a standard for tests, so they'll have analytical validity and clinical veileddity and there's a hearing going on the house right now about this issue that

involves jeff suran from fda and pat conway from cms. so there will be a lot more to say about this. >> mr. chairman i have additional questions, would ask nance consent the questions be aloud to be set in writing to dr. califf and i would conclude by saying this. not question. the fda hat over 150 outstanding gyppeddance documents in limbo at the -- guidance documents in limbo at the agency. some of these guidances remain in draft form, and others have yet to be issued. my hope is that you will take that very seriously because without guidance, don't know how the downstream effects are ever going to be felt of investment and development if in fact they don't have the guidance how to move forward. i thank the chair. >> thank you senators burr. senator whitehouse. >> dr., good morning, welcome. >> good morning. >> there are increasingly products emerging on the market

that combine a pharmaceutical component, drug, and a delivery component, a device. the fda has basically broken into one path for pharmaceuticals, a drug path, and another path for devices. i've spoken to the people who lead both the drug side and the device side, about this question of the drug device combined products. and both have said the same thing, which is that my pathway is not suitable for that. if we're going to do that, we need to create a new pathway for that drug device combination. could you let me know, a., what your thoughts are about that pathway for the drug device combination products, and what you think a reasonable time frame would be for fda to have such a proposal ready for us to

consider. >> as a cardiologist i live and breath this kind of work because often we give life saving drugs systematically in acute situations, but it would stand to reason in many okay is if you could deliver them through a catheter you could use a lower dose. that's the best example to think about here. he you have a drunk given in full doses system click you don't want to through the whole thing as if it were a totally new dose, but you can't assume you know the risks and benefits of the lower dose. and so we do need -- there's a strong view at the fda that we need another pathway that will give the fda the flexibility that requires the data needed to assure the public that the proposed treatment is safe and effective. >> you agree we need that other path center you said that was the opinion at the fda; is that your opinion as well? >> yes. >> and the time frame for design

that pathway? >> i feel like within the next year the fda's opinion can be -- adjudicated back and for with. we are happy to engage and discuss with you. >> great. i think there is probably going to be legislative action that is going to be required to do this, both of your sides of the house think it can't be done under the existing regulatory authority that it would require congress to act. do you agree with that? >> i think we need some help to get the right balance here. >> great. the last thing i'll mention is that i hope that as you go forward with your responsibilities in the space of apps and communications technology, that are adapted to measure health effects nat you'll recognize that in many respects this is a very valuable and robust industry that could

well be overregulated if the fda's authority over those sorts of devices is extended too far. what do you see as the boundary between informational apps that the fda should and should not regulate? >> well, i had the privilege of going mike old home, american heart association meeting last week and we had a whole session on this issue, and i won't show the brand but i'm wearing my own device here with a number of apps on it. it's like a whole different world than what existed six month ago. there's a good statement that try -- tri-lateral statement from the fda, fcc and office of national coordinator that states a full intention to regulate based on risk, and exactly where to draw that boundary is a matter we need to keep talking and thinking about. for example, a health clearly stated in the document, health

related app, where monitoring my heart rate, and i'm healthy and i want to exercise more, that's not something we want to be bothering with but if this was attached to my internal defibrillator -- i don't have one but if i did that would be something we would need to regulate because misfiringfirine defibrillator could kill you. so we have to deal with that spectrum and find that middle ground where there will be adjudication as we learn how these work. >> you had he be looking at regulating technology that could actually have a direct physical effect on huh human body as opposed to just getting information that causes you to think that, oh, gosh, my heart is better so i'm not going to run as much. now you need to regulate that because the individual is making a different decision based on the information. >> that's right. also, just like to add we're going to learn as we go through this because there may be cases where, for example, heart failure patients using the same

app may be making more life and death decisions. so what -- >> my time expired, there's so men us i don't want to trespass on other people's time. so my forks the chairman. >> thank you, very curious, senator whitehouse, senator isaacson. >> following up on the first statement regarding guidance letters, the fda has two opportunities, one is issue guidance letters the other is rulemaking. there's standing shat differents. under rulemake yawing have to do cost benefit analysisy. fda continues over and over again to try to implement policy loud guidance letters. recently talk about regulating laboratories and bringing them under the fda. guidance letters don't have the rulemaking period on or the comment period to be open. fda continues to try to regulate parties more up a through guidance letters than through rulemaking which cuts out the

open comment period. i have to questions to ask. one, why is fda grown so reliant on nonbinding guidance documents as the rulemake -- for rulemake can and do you think that's a problem? >> senator, i appreciate your concern with this, and one thing that's below really evident to me in my time at the fda so far is that everybody wants to know what the fda is thinking. and so i think there's a tremendous value and guidance documents to let people know what the fda is thinking, and the demand for these is actually quite high. but there are other situations where you need the full force of rulemaking. i understand there is a difference. i will have to work with you and look forward to do it when things come up where you're concerned so we can discuss and it work through it. >> well, specifically to that offer, let me ask you the following question. will you commit to require fda staff to go through rulemaking when it intends to legally bind parties or change they're

behavior i a burdensome way? >> well, senator, i believe the statement about guidance documents says they're not legally binding. they're a statement about fda's thinking and people would be wise when they see a guidance to consider that thinking, but personally in developing drugs with companies i've often taken a different path from the fda. i'm certainly committed to work with you to try to deal with this tension you're feeling. >> well, there's thinking as a subjective thingful rulemaking is objective. when you talk about the costs of compliance with things you ought to have the rulemaking procedure in my. rather than a guidance letter which could affect some rather than others. and november 26th this first anniversary of the sun screen innovation act which was designed to expedite the approval of ingredients in sun screen. as there are sun screens available in europe for years and some cases decades that are

still not available in the united states because fda has refused to make decisions on some of those ingredients. it's been a year since we passed the expedited rule and still the fda hasn't done it. will you commit to work with us to try to bring the ingredients forward and do the proper due diligence to get the products to market. >> sir, look forward to working with you on this, i have family history of melanoma and the number of moles that probably should be looked at more frequently than they are with lydia sitting behind me. she other would remind me. part of what we need work on is actually developing the evidence. we have asked the companies involved for specific information which i believe they can develop, and we're very open to moving as quickly as we can if we have the right evidence. i point to what happened with people who have had melanoma with the amazing new north carolina because the patients with melanoma worked closely with the companies to get the clinical trials done so the

effective treatments are expedite expect the ineffective ones don't get out there, and i think preventing melanomas in the same category. we have to do better. it's a rapidly growing cause of death and i want two, with you personally on this issue. >> certain stages of the diagnosis is a death sentence for which there is no cure and i'veed a melanoma and survived two of them, but next march or april is spring break and kid will be hit thing beaches and a lat of georgia's beaches, getting sun and having fun if hope they'll also have the best sun screen ingredients available to prevent melanoma from developing. my last comment and it's a long question. the fda has sent mixed signals with toe pregnant women with regard to seafood. you're in the process of making a determination on seafood to make recommendations what was good to be eating and not eating and using results from enough report that seem to have been

aban doped. will you expedite the decisionmaking process on seafood for pregnant women and the recommendation the fda makes. >> i look understand to working on that. >> thank you, mr. chairman. >> thank you, senator warren. >> thank you, mr. chairman. dr. califf, it's no secret that during your time another duke university you received significant financial support from the farm suit industry for you personally and for your research and i now it's command practitioner to investigators but it naturally rateses questions about your relationship with the drug industry. and one particular concern with industry funding of the academic work is that drug companies may be able to exert influence over the conduct of those studies. so let me ask, for the clinical trials you conducted or oversaw, while at duke, can you detail for us exactly what input pharmaceutical sponsors had, did and did not have, in the design

of the trials, the analysis of the data, and the publication of the results? >> well, i'm grad to do so. when industry fundses a clinical trial, whether devices or drugs, done through our institute, the design of the trial is something that is done jointly and very publicly because it's done to try to get an indication from the fda. so it actually involves industry, academia, now patients, involved in the design of the trial, and the fda. it's very public process. the protest has to -- protocol has to be submitted to the fda before the trial starts so design is something done jointly. the final say comed from the steering committee, which is the academic leadership. the database is really the critical factor here and contracts require we have access to database or have the database on site.

that's been iron clad. i would say 70% of the studies i wanted to do we couldn't do because the company was unwilling to grant the right. so, we had to walk away if that was not done. so that leads to publication. publications are in the purview of the steering committee and the authors from the steering committee. industry has a right to make suggest but no right to censor and no right to change any of the writing done unless it's agreed to by the authors. in the same holds for our public presentations which are in the fields that i work in are very important because evidence moves very quickly. and it has a large input. so, keeping that economic independence we think is a critical part of the effort. >> good. if i can, i just want to underline this because it is so important. i want to make sure i got this right from your question. i hear you to be saying there is no instance during your career or any instance involving duke researcher at the duke clinical

research institute during the time you were supervising it in which a pharmaceutical company provided any input into the analysis or the publication of the clinical trials they paid to conduc >> let -- >> is that right? >> let me clarify one more time. by input, they can make suggestions. that's perfectly allowable in our contract. >> on the analysis and the publication? >> on the publication, and on the analysis. this is another -- i'm exterior get into details here but the way we do our analyses, because the company has to submit the data to the fda. is typically we'll have an analysis done by the company and analysis done by our statisticians. then we compare the results to see if they match up and resolve any discrepancies. but in no case did we allow the toy do the analysis and we just were recipients of what they said the answer was. >> all right. i know we're pressed on time. i'll follow up with questions for the record on this so that

we can get a detailed written account of any such instances. and i also requested copies of the contracts that the pharmaceutical industry sponsors sign with the duke clinical research institute in order to get a better understanding of what is happening here, and i look forward to reviewing them before this committee moves forward with your nomination. these agreements typically spell out in detail the relationship between the researchers and the funders, and so i think it will help us better understand what is happening here. in the little built of time i have left, can i just make one other point? and that is your financial relationship with the industry also raises questions about what your priorities will be if you're confirmed for the job. many in the pharmaceutical and device industry spend a lot of time and money arguing the fda is just too off, we should lower the fda's standards on safety, and effectiveness, and unfortunately, they have a lot of friend in congress.

decider califf do you agree with these arguments and recent efforts by some lawmakers to lower the standards for fda approval of drugs and devices? >> i think if you look at my record you'll find i've never been a proponent of lowering standards. if anything i've argued for raising standards with better studies that show the full gamut of risk and ben photo their the time a treatment might be used. that doesn't mean we couldn't potentially be quicker or something else, but in no case would we argue to lower the standard. americans depend on safe drugses and devices and that are also effective. a device or drug that is safe and not effective actually can harm someone because then they don't use what is effective. i think i've been staunch in that regard. >> thank you, dr. califf. we could abolish the fda tomorrow and we see a lot of new product ons the market but if they're not safe and effective, then no one is any better off. thank you, mr. chairman. >> thank you. the next for senators are senator roberts, senator baldwin, senator cat di, senator

mikulski. senator roberts. >> thank you, mr. chairman. one of the committees in the -- thank you for coming by to my office. made a very nice visit. my wife is from south carolina and i learned a long time ago you can take the girl out of the south about not to the south out of the girl. one of your responsibilities is to make sure the fda is committing its resources to doing the most important work, for example, the fda has been in some cases a little hesitant to implement key food safety goals while putting resources toward proposals for regulating sugar, salt, and caffeine. i would refer you to the new dietary guidelines that indicate now that salt intake and increased salt intake is okay and caffeine, six cups of coffee -- this is my third one -- so i think have three to go. sugar, however, no. they have proposed to expand -- the fda has proposed to expand

its jurisdiction by regulating laboratory developed tests on e-cig rates and cigar ford their first time. i just want to make sure that the fda's use of resources to make sure the agency stays focused on accomplishing its core objectives as directed by congress. that's just a comment. you don't have to respond. food safety modern nication act. fisma. a wonderful acronym. wear two hats here. charge of the ag committee and a member of this distinguished committee and concerned about potential overlap with the new fisma regulations and the requirements that farmers and ranchers with which they already have to comply. we need to make sure the fda is working with the department of agriculture to ensure these new regs and requirements were harmonized with those already on the books. will you commit to work towards that if confirm. >> yes, be glad to work with you on that. >> thank you, sir. i want to follow up on the very

concise comments with regard to draft guidance. i'm al-apprehensive of the use of guidances as they lack transparency and can escape the important cost benefit analysis other scrutiny. what are your authorities about setting a maximum period for which draft guidance can be left outstandings without being finalized or revised or when commentators successed concern, shouldn't be agency be required to publicly respond to concerns or at least how the concern has been addressed when a guidance is finalized or if the agency has rejected the concern? >> senator roberts, i'm kind of a big advocate of transparency, so i do appreciate what you're bringing up. it's been noticeable to me the issues that you raise. it's also noticeable as i mentioned earlier that every time we get people an opportunity to interact with the fda they same seem to want to do it more and our user fee situations, for example.

the number of meetings requested always greatly exceeds the number that we have. so, the credit cat thing to me -- critical thing is getting whatever the correct format is moved along as quick aly as we can through the process so that people understand what the fda is really thinking and in the case where it really needed to be a role they understand what the rule is and how to implement it. so, to get to the details here i need to come by and spend more time with you to completely understand how you see it, but would be glad to do so. >> i appreciate that. my final question, where is duke ranked with n basketball? >> i think duke is under found or five. >> i think they're number five would you be interested in knowing who is number four? >> i think that might be that school in the midwest we often bet up on when it comes to

tournament time, but -- >> itself is the university of kansas. i just want to point that out. i might add that south carolina is number one, but we'll take care of that. i'm -- >> you mean north carolina is number one. >> yes. >> unc. >> i would rather have kansas number one thankfully than unc. that's a different story. >> i have no further questions, mr. chairman. >> thank you, senator robertsor your illuminating inquiry there. senator baldwin. >> thank you, mr. chairman. ranking member. so, pleased to have you here today and pleased to have an opportunity to meet with you prior to this. we all agree that it's critical for the products that are approved by the fda to be of the highest safety and efficacy standards, and the that the public must also have meaningful

access to accurate information about treatments so they can make the best healthcare decisions. i share some of my colleagues' concerns with the ever-increasing drug prices. there's been a little bit of dialogue about that already. and i think that we can do more and should do more to improve drug accessibility, affordability and transparency. so i want to start with transparency. dr. califf, the public still lacks comprehensive access to information about medical products. for example, companies do not consistently report clinical trial outcome tore drugs in the the public database as a number of recent studied noted, and generics are not yet able to initiate a change in their patient labeling if they learn of new safety information

because the fda has not yet finalized the generic labeling rule. so, in your new role, should you receive -- when you receive confirmation -- how would you improve access to accurate information on drugs for patients forks doctors, researchers, and how would you ensure that the fda maintains patient safety once these medicine actually reach patients. >> well, i'll try to be as quick as i can with this. that's a very important question you're asking. first, i'll just point out again that every study i was involved in has been published and i think that's a mandate. when you ask someone to participate in a human experiment the informed consent actually says you're doing it to create general knowledge. and so i think we have an obligation, even if we don't like the study, the result or whatever, we need to publish it. secondly, just before i left duke i was the co author of a

paper point thought track record of clinical trials.gov reporting and one interesting side issue there is that industries actually doing better than nih funded investigators. so, we have work to do there. but i'm pleased to say working with the nih they have the a policy you won't get yours next grant unless you put your results in clinical trials.gov. very good working with kathy hudson and francis collins on making this happen. the third element, the surveillance system, and the equipment. this is really needed. we're now dealing with generic drugs that have been on the market for 40 years ask still learning about them. and so we can't have a system where depends on the anyone saidor company to figure all this out and somehow make it public. i give jeff suran and janet woodcock credit. we had a meeting with other federal agencies and there's general agreement that we need to have a national evaluation

system which is publicly really a public good and the companies can develop the best products but we need to work toward this. >> i want to switch gears given the role of the fda in food labeling. we had a chance to speak about one of wisconsin's trucks. the number one grower of cranberries cranberries and a members of the committee represent state with a robust cropberry industry also. i'm concerned that recent fda proposal to update food nutrition labels, specific live we add sugar information, may cause some confusion for customers and others by categorizing cranberry products which are clearly highly nutritious -- nutrient dense fruits, that need added sugar

for palatability, as somehow comparable to foods they shouldn't be compared with. example, should you be comparing cranberry juice to other fruit juices or 0 soda pop? should you be comparing dried cranberries to race sins or candy? and so as commissioner, how would you ensure that these and other fda food policies appropriately account for the unique health benefits of food like cranberries and ensure that consumers are going to have the type of information, comprehensive and accurate, that will allow them to make healthy and knew trish -- >> senators balled win i appreciate that. cranberry juice that frequently been in our refrigerator at home. may have something to do with health benefits. but the good example of the balancing act the fda has to do. we have this terrible epidemic of obesity and diabetes and so

huge amounts of sugar are not good for you. i don't think there's disagreement about that. we halves to plea serve nutritious foods that need a little sugar to make it better. i talked with senator warren and with you at bit about the fact that we need to really work on the cognitive psychology of labeling so that when we do take action, and put information out there, it's interpretable and actually helps people make good decisions. it's up to people to make their own depressions but if we don't present it in a way that's clear to them it could lead to wrong decision. >> thank you. >> temperature, senator baldwin. the next senators are senator cassidy, franken, kirk, and bennett. senator cassidy. >> enjoyed our meeting thank you for coming by. several questions. first, going back to drug pricing. clearly we have seen companies kind of abuse the social

contract which gives you a reasonable rate of return for a drug marketing, and they've gone way beyond reasonable. i've been told in the case of turing that an approval of a generic would take several years because clinical trials would be required to prove that the generic competitor was the equivalent to that which turing now has as a full force provider. this is a -- we know this is a 60-year-old drug so it comes to mind because i'm reading now on a compounding component would make the same drug available -- of course compound it, the doc has to write the prescription but in a sense compounding is doing what generic can't do. so i guess my question is, if we know -- i presume we know the compounded drugs being sold for a dollar a pill as opposed to

$750 from at turing. if it is a dollar -- why can't we do this in the compounding space but not generic space? why does this take so long to work through the generic? this is cognitive dissidence. >> i know you're a doc and you understand this. and let me just point out, is a mentioned earlier, every drug is a little bit different, and the whole goal with generics in most cases is not to have to do major clinical trials. it's really just showing you actually have something that is equivalent and i believe you spent a lot of time with dr. woodcock on this recently. a lot we can tell about the mow electric molecular structure. when it comes to compounding, as you well know, we're working

hard on the standards for compounding because we had some disasters with compounding that have required -- >> the disasters were related to infection control, fungi entering an injectable, this is an oral drug, and i presume -- knowing there's liability involved and premise would not be selling i were notice bioequivalent. >> i have to get back with you on that because i don't know the details on that drug. i'd be glad to do that. >> now these folks established the business model works -- if have a fellow paying $566 a prescription. it's now $5,500 a prescription. tote exploitation of the system that has been a pretty good social contract and now is breaking down because of these folks' frankly greed. if we're going to somehow circumvent that we have to come up with more efficient way to do the generics and just to make the editorial comment it's clearly working with compounding

that seems almost like it should work as well with generics. >> well, again, have get to back with are youon speak ticked. i had a pharmacy compounding system at duke hospital and i'm aware over the complexity of compounding. it's not as simple as it may sound. so i'd have to really look at the specifics and get back with you. >> that's fair. secondly, which is related, going to the chinese -- the drugs manufactured in india and china, i gather that the fda recently sent out a warning that said investigators went, looked, observed holes in the walls and roof which allowed pigeon access near production equipment in multiple manufacturing areas. there's evidence or at least suspicion that somebody was hiding audit trails, et cetera, and so on the -- so i will just

say, cognitive distense. allowing folks to import even when good manufacturing procedures are not being followed, and yet it seems like we're putting road blocks up for those producing domestically who could give us some relive from the exploit tatetive pricing practices, knowing you're the new man on the job i don't expectow to comment on that beyond making the observation. >> i understand what you're saying and i did have the privilege as an academic to do work in china and india and it goes to be a focus, a large part of our food and drugs and device supplies are coming from india and china. so, we certainly don't want to disadvantage americans in that regard either. >> if we found those gmp were not being followed with ill we shut down those components of the supply chain. >> we can't shut down something in india or china -- >> but -- >> import addition.

>> the ability for that to be used -- >> we do that. >> gotcha which. i yield back. >> thank you. senator franken. >> thank you, mr. chairman, and i note that you and senator baldwin and now senator cassidy all talked about what we're hearing when we go back to our states about pharmaceutical collses and that's something we really have to deal with. and the exploitation of positions that companies have gotten. dr. califf i want to talk about probably the basic question that you face which is the delicate balance that the fda plays in making sure that products get to people who need them quickly but

statement making sure they're safe. that's what you deal with every day. i tried to promote this balance in legislation i have introduced with senator burr, the fda device accountability ability of 2015. given you experience as on outside adviser and now internal leader at fda, how can fda use the tools at it disposal to strike this balance? >> well, when it comes to costs, we do have some tools we can use to help out. the first we already discussed which is doing everything we can to do a good job with the generic drugs situation. we're at 88% now, and that is a good thing. but we now also have biologics which biosimilars are now coming up and we have over 50 applications in the works.

and we're going to need to do a good job with that, too because that's a big expense, and we want to mike sure that people have access when it's appropriate and safe and effective so the criteria are stringent there. one other that is very important to me which people wouldn't normally think about but it's going to come up more and more, is that if we really fix our evidence generation system, streamline christian cal trials, get -- clinical trials, get the data we need. people wouldn't expend money on expensive drugs when they're not needed. we need to have better information for people and several senators brought that up today and we can do that in a fairly dramatic way. finally, we do keep track of shortages. we prevent over -- one year it was over 200 shortages so there's a constant surveillance going on as a requirement that people notify us when there's going to be a shortage problem,

but the new area we have 0 work on is when someone gets a monopoly, which is what safe of you've have revved to, is understanding who the competitors are and making sure they're degree right things to be able to compete and get their products on the market. those are the things we have gone through that we can clearly do, fully within the fda. >> okay. quickly i want to turn to different issue which is making sure that products continue to be safe once they've hit the market, been approve for the market. you messenger post-market surveillance. does the fda have adequate authorities here to do -- what you need to do the this adequately or need additional ones from congress? >> i'd have to get back you on the specifics of what you might be thinking. the thing we clearly need is a better system for post market.

sentinel on the drug side is revolutionary and fantastic. on the device side we're doing belter and better but we have plan that it hope we can really enact. i believe when we find a problem, for the most part, we can deal with it. but we have to have good data in -- and quickly in order to identify the problem. >> i want to talk about generic drug labeling and the generic drug labeling rule. this has to do with the rulemaking you're doing on a generic drug manufacturer's and require them to update their warning labels and providing safety information. this came out of the supreme court decision. what is the current plan for finalizing the fda's generic

drug labeling rule? >> thank you for asking. that's a very important issue is a said. we need to make sure that if there are problems with generic drugs that come up later -- and they do -- with better surveillance systems, there's a way of making sure the labels are up to date and consistent across similar products. so, as you know, we got a lot of comments on the proposed rule. they're under consideration. i can't talk about decisionmaking. we're in the middle of it. but it's a very high priority to get this finished. >> thank you, mr. chairman. >> thank you, senator franken. the next senators are senator hatch, senator bennett, senator scott. if he return. and then senator sanders. senator hatch. >> thank you, mr. chairman. i'm very pleased to be able to support your nomination.

i'm very impressed with what you have been able to do, not only with your life but all the work you have done there at duke and elsewhere. to be honest with you deserve a lot of predatory going to add great deal to the fda. let me just say this. i'm very concerned about data exclusivity. as you know when we did hatch waxman we made sure to was enough data exclusivity time so that they could recoup the moneys and the costs because the average cost what i've been told for a pharmaceutical drug is about a billion dollars and up to 15 years or more because of the pace another fda. for biological drug, about the same. the average cost is $2 billion to tom um with a piologial therapy that is approval by the fda. i'm very concerned about it because if we reduce that data exclusivity time with regard to

bio, you're talking about having to charge a lot more and you're talking about our industry subsidizing other countries all over the world. and paying really so they can have these therapies, biotherapies, really at our expense. and statement, in order tree coup the amount of money it costs to go through fda, the cost of these therapies is typically rising. -- continually rising. i just want to know if you feel that we can move ahead to quicker on these matters and make it so that these companies have a chance to recoup their moneys they've investment. >> senator hatch, i do understand your concern that we want to make sure that if someone invests in the development of a drug there's a return on investment. otherwise people won't invest in

our kind of society -- >> also understand that the more it costs, the more difficult it is to recoup the funds, and the longer length it takes to recoup them as well without charging even more than we do now. >> well, as you know, the fda does not set length of data exclusivity, but what we can do that you bring up is the cost of development is largely driven these days now by the cost of christian clinical trials and we think we can do trials that are bigger and include more patients and more represent different for a much lower cost so i hope you work with us on that. >> i'll work with you. that an important issue and becomes a major issue with regard to our trade promotion authority bill and also the transpacific partnership. >> appreciate that. >> if we don't allow enough data

exclusivity time we're not going to develop these therapies, especially in biobecause biois one of four or five places, four or five techniques, where we can actually find treatments and cures if. if we find the cure that over time will save us trend of dollars. so i'm very concern about this system working very well. >> i've been fortunate to be a leader in the development of several biology cal therapies that have made a difference so i appreciate what you're saying. >> also, hatch waxman, it was like 18 years to get a generic through. today it's -- it was very, very difficult. now it's kind of automatic because -- >> we're doing better and 88% of prescriptions are generic.

so it's been a tremendous success. >> one issue that is significantly affects many entities in my home state is the fda's october 2014 proposed guidance on the regulation about ets, laboratory develop testsful there's been a robust conversation on this proposed guidance between stakeholders and members of congress and the fda ever since the announcement. does the fda intend to issue final guidance or allow for further comments and feedback on the next steps. >> as you may know this is an ecosystem issue where we want to have universities continue to innovate but also want to assurances they're getting a accurate test results for analytical and clinical validity. so we're leaving a lot of information, ongoing feedback. just had two days at the fda of all the stakeholders talking

about next generation sequencing so we're still collecting feedback and want to find something that stimulates innovation but also assures finishing. >> mr. chairman, may i ask just one other question that would not -- just requires a yes or no answer. >> sure. >> thank you. do you believe as prior commissioners have, everyone told me this -- the dietary supplement health and education act provides adequate authority to regulate the dietary supplement industry and protect consumers from unsafe products? >> we're fully aware of our authorities and you're going to see a lot of action where the authorities are pertinent. >> do you agree you have enough authority. >> we're very well aware of our authorities and plan to use them as congress has directed. >> all right. thank you. >> thank you senator hatch. senator bennett. >> thank you, mr. chairman. and thank you, dr. califf, for your willingness to serve. we're delighted you're here today in my view the fda is an

extremely successful in implementing the breakthrough therapy pathway which led to the approval of 32 life saving drugs and over 100 more in the pipeline. when i was first work only this bill with senator hatch and senator burr, colorado startups were saying to me that all the venture capital was moving to asia and moving to europe because of the regulatory uncertainty at the fda, and all of us want to keep jobs here and we want to give patients safe and effective drugs as soon as possible. it looks to me like the break through pathway pave by chiving both. what have we learned about regulation? can this proof be modeled in other places at the fda, including at the device center? >> thank you for you comment and my would sons from colorado are listening carefully, i'm sure, to your thoughts on this. but breakthrough -- >> barbara mick cull si i ski

is -- mikulski is not here so would gladly move the fda to colorado. >> so the con set of of breakthrough is where things look really promising early on, going to make a dramatic difference and there's an unmet need for a life-threatening condition. the fda works close live with the industry to move thinks along as quickly as possible and there have been a series of cancer issues in particular that have just delighted the cancer community and people who otherwise would die. my mom back here has multiple my loma, she is now -- multiple my loma. now on their third or fourth chemotherapy treatment and it's been a tremendous success to have a community working with the fda and academia. we don't need this for common problem where there's already effective treatment. we want to make sure we don't rush things to the market that aren't safe. so the real key is having the criteria to identify where this kind of activity is needed.

>> i want to say that at least from my perspective, fashionable to criticize the agencies. this is a place where i think the fda has really gotten it right. how about on the medical device side of the equation? >> as you know there have been issues with medical devices moving to other parts of the world but they're beginning to come back and one reason is the early device research program that been developed by cdrh together with the community. that is working with the big centers that can do the early device work, bringing those things back. there's also an issue with devices that you know about, which is often a device that useful in a very unusual disease and it's a very niche activity where there's not an adequate market, and we do have a program for that. it's successful. a topic that we need to think about and discuss more to define ongoing criteria. >> i should also say that the cancer community was vitally

important in get that piece of legislation passioned to begin with so it's nice to see the early drugs have been drugs that fight cancer. i wonder if you do -- switching gears -- take a few minutes to discuss with the committee how we should think about investment in life science innovation. as a global economic priority to keep us competitive with other nations. this is a time when we're seeing diminishing resources in this country applied to basic science and can you help us understand. >> it's the case almost everyone is concerned about living longer and being more functional and the way we do that is through public health and also through medical products and in the case of tobacco, reducing it hopefully, and as we go about that, the development of new medical products does require

investment because it's appropriate there's a law that says you have to show your safe and effective before you come on the market, and this requires time to do the development and it requires that you really show that you're not producing an inferior product before you come on the market. it's a critical issue. so we have to invest, and on this note in our work with the nih, we're very focused on the use of biomarkers, but also not using them inappropriately when they're not going to work, and this is really hard work. to set the conditions that would excite investors to put money into biomedical science. ultimately the united states is saving the world through investment in the nih and i want to put in a plug for continuing the nih investment. i not for the sciences in the nily we wouldn't have the basic science. >> thank you for your testimony. thank you, mr. chairman. >> thank you, senator bennett.

senator mikulski left the hearing, and senator sanders is going next and he has been waiting patiently and has extracurricular activities. senator sanders. >> thank you, mr. chairman, and thank you. thank you very meche for being with us. as you know you and i chatted a while back and i told you that i would not support your nomination because i believed you were not strong enough on the most important issue that the american people are concerned about with regard to prescription drugs. and that is, as you know, in our country we pay by far the highest prices in the world for prescription drugs. as i understand it, about one out of five americans cannot afford to fill the prescription their doctors are writing for them. mr. chairman, with your permission, i would put into the record a comparison of drug prices in the united states and canada, which show that on major and important drugs, the prices in canada are far, far less

expensive than they are in the united states. that's true all over the world. my concern, mr. chairman, is that while last year the top four drug companies in this country, pfizer, johnson & johnson, nor vatter temperatures and roach, made $57 billion in profit in one year. i heard concerns that drug companies are not doing well. they're doing quite well. and yet you have millions of americans who cannot afford the high cost of prescription drugs. so while all of us agree that clearly we aren't great new products on the market to save livessers for millions of people doesn't matter what the products are. they cannot afford them. we need in my view an fda commissioner who is going to be aggressive, and understands that very simple principle. i'm not clear and what i heard today confirms i don't think you get that. here are some of the questions i would like to ask and make the point. it's not a coincidence that last

year, the pharmaceutical industry spent $250 million on lobbying and campaign contributions and employs some 1400 lobbyists. do you think, dr. califf, that has any effect on the fact we pay buy far the highest prices in the world for prescription drug. >> the ideal situation would be if the moment within into railroad r & d and that was made available. >> why do we pay the highest prices in the world by far. >> aisle knock at expert on the price of drugs about i'm certainly sensitive to the fact that in a field like cartow vascular medicine, my specialty, we need have to drugs available because they save lives -- >> bus dotters and oncologists everywhere hasn't their parents can't afford the drugs. let me ask you this simple question. as head of the fda, you will

oversee the import addition of food products, vegetables, fish, from all over they would world. we can import lettuce, of the mate to, vegetable from farms all over the world but somehow we cannot reimport from canada brand name prescription drugs, manufactured by the largest drug companies of the world. can you explain to me, and do you support the re-imposer addition of brand name prescription drugs from major companies in canada and other major industrialized countries. yes, no? >> as you're awire from our previous discussion we have major concern about re-importation. the system it would take to make sure the drugsard -- >> in other words, you think we can bring in fish products and vegetables from farms all over the world but we cannot brick from across the canadaian border brand name drugs? you don't think we have the capability of doing that. >> we have the capability. it would add additional cost and systems would have -- >> well, this is why precisely

through american people are paying by for a the highest prices in in the world for prescription droll. it is beyond my come preparation you're saying we he can bridge in vegetables and fish from all over the world but cannot bring in brand name drugs, manufactured by the largest pharmaceutical companies in the world, from a country like canada? i just do not accept that. let me ask you another question. the reason -- one reason we pay the highest price nets world is i can walk into a drug store and they can tell me the medicine i use, the price is doubled bus we have no regulation. drew believe that -- will you support the right of medicare to negotiate drug prices which is now currently not allowed by law? some medicare negotiate drug praises so we can lower the price on medicine? ...

a i believe we need a commissioner and i know that's not the only responsibility but i believe we need a commission is going to stand up to the pharmaceutical industry and protect the american consumers. i have to say to you, with regret, that i think you're not that person. >> thank you.

senator murkowski also stepped aside. thank you for being here. >> thank you, senator alexander. dr. califf, welcome. senator sanders has just broached very briefly to issue a fish. he said we can bring additional all around the world but how much is just to you that perhaps bringing in fish from all around when it is mislabeled, misnamed is not something that we want to do. and i would ask you again to look at the issue that we have raised repeatedly before the fda, regarding the pollock nomenclature. as you know this is something where we contend that you do have the regular, regulatory authority to change the acceptable market name so that we can put some limitations and parameters on what we're seeing from the large volume of russian

harvested pawlik that is sold to u.s. consumers as alaska pollock. i have repeatedly raised this and would ask that you would work to expedite this change and remove the blockade that has been created within the fda's bureaucracy regarding this nomenclature spent i've enjoyed my visit with you and i heard clearly what you said then. and as you know we are still open for comments and thinking about this one will work with you to come to a resolution on this issue. >> i do want to work with you. again come i think this is something that can easily be resolved and that's what w we're working to do here is to address it through the regulatory route as opposed to the legislative, which we will do if we have to but i think that this is one we can fix working together. the last question that i have

for you also relates to seafood. and this is regarding some concerns that we are hearing that the forthcoming fda seafood advice to pregnant women on seafood consumption may not be entirely based on science. this is something, of course, that is gravely concerning. back in 2014 there was a statement that was released on a draft seafood advice that spells out pretty clearly, science that tells us to limiting or avoiding fish during pregnancy and early childhood can mean missing out on important nutrients that have a positive impact on growth and development as well as your general health. now, the concern is, is that the fda has revised that advice in a way that ignores this net effect

report. so the question to you this morning is, what is the status of the fda seafood advice for pregnant women? and i guess what i'd like to hear from you specifically is, is whether or not we met advice is released, whether that final seafood advice to pregnant women and nursing mothers will be based in science, namely using the net effects report? >> i can assure you it will be based on science, and i think the recommendation will be something that will be very good for american people. >> by would it not be based on the net effects report? >> well, you know, we are having to balance a lot of input will and considerations. >> and wouldn't an input and consideration be based on the science that went into that report? >> it will be based on all the

scientific facts that would've brought to bear that accumulate over time. these will all be considered. i think you will be happy with the recommendation when it comes out. >> well, i appreciate that assurance. it doesn't necessarily get me to where i would like to be, which is a recognition that you will utilize that net effects report, the report that very clearly outlines why it is important for the nutritional needs of not only the mother but developing children as well. >> i mean, i'm very thinly with a concept. the detail on clinton to come back to you ought to make sure. >> can you tell me when we might anticipate this report? >> as you know i can't give exact dates or timelines, but this is a fairly straightforward issue and it's a high priority

and we've had discussions about it recently. so it's going to move along. >> i would agree it is high priority, it is important, it is overdue and certainly the science is overwhelming in its support for the recommendations, good, sound recommendations based in science that pregnant and nursing women be given good advice when it comes to seafood in their diets. thank you, mr. chairman. >> thank you, senator murkowski. thank you for your courtesy to senator sanders, and even though you are cheering for hearing and also thanks to senator casey. dr. califf, after a call on senator casey, i'm going to leave for another appointment and turned over the hearing to senator scott who will ask his questions, and in it are no other in -- no other questions, they will conclude the evening. >> thank you, thank you. thanks with me.

dr. camilli grateful you were here and we're grateful to your commitment to public service and that of your family. that i know every all know that when an individual makes a commitment to service, it involves sacrifice and the contribution, any substantial way by your family so we're grateful for the. wanted to try to cover maybe three topics, one or two of which i might have to do by way of written questions, but the first is children and that's what i will spend most of my time. the second is food safety and the third is an issue that's been raised about independence and ensuring that's the case going forward. first with regard to kids, we are told that today is world premature today. so we're talking about premature babies born. i guess one in 10 born in the united states today is born prematurely. we have to legislation over time that speaks to this. one is the recent fda safety and

improvement act which required among other things that fda higher neonatologist into office of pediatric therapeutics to work on implementation of the provisions of the act for neonates. that happened here that hiring was done. we're grateful that that happened. one of the areas i will be looking at more broadly is, as you work, is to focus on the implementation of changes by the fda that come as a result of both the best pharmaceuticals for children act and the pediatric research equity act. we can amplify those later. but just with regard to treating premature infants, we know that more must be done to accelerate the development of both therapies and devices to treat infants in neonatal intensive care units. so if confirmed i guess my first

question would be, how might you use nfda's existing authority, the regulatory authority, to promote the development of cutting edge treatment for premature babies speaks thanks for asking that question, senator casey. you may not be aware of this but when the best, when the children's act first came into existence i was one of the instigators with the phrase children should not be therapeutic orphans. that is, doctors were forced to give treatment to children with no evidence about the right way to get the treatment. then we ended up being the coordinating center for the nih part of this to take drug of hir award all found and to figure out the right does the now have a neonatal intensive care unit network from my old institute which is focused on this. i've written about 20 papers on this topic. we need to keep moving along and we need to move on to another very high priority issue where the right doses of drugs are just not known for the most

part. >> the second question, i appreciate the background of what you've been doing, the second question may take more reflection because it's kind of a broad-based question. you can certainly amplify or add to what you say here by way of written in response. but anything you could say or anything you would hope that congress would do to increase fda authority in this area? >> the food safety? >> no, i'm sorry. >> on children? >> yes. >> i think we're in pretty good shape or entrance of authority, but if you have what ideas let me know. i think the studies could be better than could be broader. but i think we can make that happen working with the community. >> and i will move to one of the question a asked which two children, so-called neonatal abstinence syndrome. we are told now among other statistics that one baby is born

every 25 minutes with opioid withdrawals, meaning the equivalent of neonatal abstinence syndrome. it's increased some fivefold in the last 12 or so years. the majority leader of senator mcconnell and i just got a bill through both senate and just yesterday the house, which we hope will be signed into law to focus on this problem. anything that you can tell us about your previous work or work you can do leading the fda on this specific issue as relates to neonates speak with this is a terrible problem, the concept that an unborn child would be exposed to opioid and essentially edited at birth. and as you know we have a public meeting on this recently. like the opioid problem altogether, this is a committee effort. we've all got to work on it, including the fda. we have a series of measures that were implemented including

a major effort on physician education which is critical. tens of thousands of doctors have now taken the required courses through the post marketing program. this is a huge problem. we've got a lot of work to do on this at a look forward to working with you. >> mr. chairman, i have one more minute? >> certainly. >> thank you very much. i know you're waiting. part of this we can develop more indirect question on food safety. one of my constituents recently, just recently was severely second by, with listeria in 2012. and ideas as a result of ingesting ricotta salsa, ricotta salade achieves in italy, among many other stories i know that constituents have with regard to food safety. ended up this is a resource issue, or i should say lack of resource issue as well. but can you tell us all a bit

about what you hope to be able to do even within the confines of limited resources? >> it's been a privilege to get to know mike taylor who heads up this part of the fda. he's been doing this for years. these, a team of this was to get fsma put together. i think the real key, this is such a massive food, just a lot of things. high quality analytics like every other industry is using now is what were implemented so we can target the inspections to work highest risk is the repeating using genomics as you know for bacteria to figure out exactly where they come from by doing complete genotyping just like we do with people. so a truly moving the site along and as you know realigning the workforce so that is allocated to preempt and prevent these problems before they occur, rather than just reacting. >> and i will submit for the record a question about the

issue raised about independence, and i appreciate what you said in your testimony about the duke contract as well as your own statue been taken since being at the fda on recusals the fda on recusal but i would develop a broader question to cynthia. >> i'm glad to respond. i just wanted to note in light of senator warns questions, duke university has graciously agreed to make the contracts available and i think they are either in the staffs and were on the way. so it will be good for you to look at those. also just know, the consulting money abided by these principles but also made a personal decision to donate that money for a non-for profit charities. it's religious side of the work of the was important, not the money in this case. >> thanks. thanks, mr. chairman for the extra time. >> dr. califf, thank you for your willingness to serve and think of allowing me to clear up the fact that george south carolinians and not from north carolina.

stood thank you, sir. >> senator, dr. califf i'm the cofounder of the sickle cell pocket. we focus it into a to make sure people understand and appreciate the devastating impacts that sickle cell has throughout the nation to specific with the african-american communities. as you know sickle cell while rare is devastating to communities and families. it is one of the most expensive diseases to treat given the high incidence of hospital readmission. and yet we haven't had any new treatments introduced in the market some say for 20 or 30 years. how can we address this and create an indictment that incentivizes investment in research and development for diseases that affects smaller site but stop the population? >> thank you for asking that question. one of the regrets i have about the wonderful opportunity at the fda, i was glad to do but i left behind some things i was working on. one of those is the issue of

diseases that affect minority, particularly poor minority people, differentially. we had a big project going on in north carolina, west virginia and mississippi look at the population is using electronic health records. one thing that pops right out you is that sickle cell disease while people are children pretty well covered by the medicaid system, with first rate care if it when people become adults they are on their own. frequently live in rural places. they can't get to the big centers. this is create a disincentive to their putative love. the good news is gary givens is the head, good friend. i was working with them and i think there's a copper has a plant including some of the designations from moving more quickly. i'm aware of some of the new things that are in development and to look really good. if i wasn't obligate working with those new things. >> excellent. thank you.

the two diseases that affect my state at a rate higher than the national average our heart disease and diabetes. in 2013 heart disease was the leading cause of death in south carolina and account for $3.1 billion in hospitalization costs. in 2013 is will, 11.3% of south carolinians have diabetes. we are in desperate need for cures for these two chronic conditions. however, the high risk can cost -- particularly phase three trials actually seems to great an incentive for researchers and professors to avoid working on medications that could help the many americans and south carolinians suffering with these chronic diseases. what ideas you have for reform in the clinical trial process, incentivize researchers and investors to delve into the high risk high reward areas of medicine?

>> i intended to ask how many hours have but i will keep this brief. in the population-based studies we were doing with and innovation grant in north carolina, unfortunately not just government, west virginia, mississippi, it's really devastating. this is focused on diabetes. we need to get it under control. in addition to the cures that you mention we also just need to deliver good health care to people close to where they live and that's what our pockets was doing using electronic health records to set up system systemn neighborhoods to people about the care they needed to do with chronic disease. on the clinical trials, it's a problem that's what it is something we discussed earlier. which is that for disease like heart disease where have a lot of effective treatment already, we don't let something on the market that's not going to be safe and effective. we have to do that with clinical trials. here's the good news. we are committed after all the federal agencies to work with industry and academia to develop a national system that delivers

better clinical trial results with larger, more representative populations at a lower cost per i was a dramatically lower cost. using electronic health records that we already have almost every american has won. we've got to overcome the interoperability hurdles in some terminology but we can do this. that would enable people to develop these therapies at a much lower cost but with better information about safety and efficacy. >> my final question. back in september i had an opportunity to ask dr. woodcock of the fda about lately of bio similars. she stated there were trade-offs in various labeling decisions but did not provide any clarity as to what industry, physicians and patients can expect and when they can expect a, which was a primary part of my question was the wind. i continue to feel as if there's a serious risk in not providing that a product is a bio similar considering that there could be small differences between bio

similars and the brand-new counterparts, unlike with generics. can you provide any update on where things stand with the labeling of bio similars? >> all i can tell you is we're working really hard on it and it is a very tough, public issue. zebari said, which migrate in cartilage was developing biological products that were highly effective at the least, these modules are competent and difficult to work with. you have to understand them. dr. woodcock is one of the world's authorities. i've a lot of confidence in approaches she's taking. the labels ultimately have to both encourage the use of biosimilars where it's good, and enable providers and patients to understand when there are differences. we are really working hard to come up with, and also have to fit in with global standards about nomenclature that exists so that as these are on the market they can be tracked because there's a safety problem we can keep up with the.

those are all the factors. as you know i can't to exactly when we will be done but everybody's interested in this end is a very high priority. >> thank you for your time today. having record will remain open for statements for 10 days. i ask that senators submit any written questions by 5 p.m. on november 24. thank you for being here today. the next help committee hearing will be on mental health on wednesday december 2. the committee will stand adjourned. [inaudible conversations] [inaudible conversations]

[inaudible conversations] >> today the brookings institution hosts a discussion of what's next for france and europe following recent terrorist attacks. foreign policy experts will also discuss why france seems to be a

prime target and how the international community should respond. our live coverage of the discussion begins at 2:30 p.m. eastern on c-span. >> tonight our landmark cases versus brown v. board of education. part of the program focuses on the dalton is the lord for all for brown and other plants used to go plants used to get the effect of segregation on an american children. here's a look. >> the doll test was integral to the brown v. board of education because it clearly demonstrated that separate was not equal come and separate was not good. in fact, separate was an injustice. mobility and here are the dolls that that doctors use in their doll study. the doll test was a series of studies that maybe clark and

kenneth clark did to try to determine racial awareness in young children with the implication being that in a segregated society, if the children are aware of race and the differences in race and the differences and how different racial groups are treated, that it would impact how they felt about themselves. what they did actually became very well known, part of the brown case, was they showed young children, black and white balls come and they would ask their children, show me the doll that's nice. give me the doll that's the best. did me the doll that looks like you. and more often than not the black children showed the doll, a nice doll was the white doll.

the doll that was the best was the white doll. when we got to the last question, give me the doll that looks like you, that's when the children would pause and be a bit more confused or looked troubled. dr. clark would say, as they had said in many cases, this is the bad doll, this is a nice doll. and so remembering that they had said this is that bad doll, a navigation of the doll that looked like them. and it was particularly difficult for them. and some children, some black children would do, and some shows the white doll because couldn't embrace it.

after having said this is bad, not nice, they couldn't embrace it. >> more tonight on "landmark cases," brown v. board of education live at 9 p.m. eastern on c-span. >> c-span presents "landmark cases," the book, i got your landmark cases a series which explores 12 historic supreme court decisions including marbury v. madison, korematsu v. united states, brown v. the board of education, miranda v. arizona, and wrote the way.

landmark cases the book features introductions, background, highlights an impact that each case written by veteran supreme court journalist tony mauro and published by c-span in cooperation with cq press management of sage publications incorporate. landmark cases of able for $8.95 plus shipping or get your copy today at c-span.org/landmarkcases. >> david jackson takes a join u. on monday morning i want to talk about the president's tone and what you've seen from this presu coverage as. a different yesterday in kuala lumpur than the tone he used last week on monday in turkey? >> not intrinsically by the islamic state. he's pretty consistent on that one thing that struck us during his trip to asia was the harsh tone he took towards republican critics at a couple of new covers. he was upset with republican proposals to shut down a syrian refugee program in light of the

paris attack. several people even some of the president allies remark using harsh in tone towards republicans and he did towards the islamic state. intensity with islamic state he's been very consistent all along. both before and after work and sang we shouldn't over hype what they can do we should also never that they are killers. and as he said keeping in perspective and realize in the long run we are going to prevail host would've expected here this week? piece is that dissident with french president françois åland? >> i'm not sure. it's striking to me president hollande is coming to washington to speak with president obama in the oval office and he's going to moscow to speak face-to-face with russian president vladimir putin. something is going to present obama has hinted he's going to announce quote an intensification end quote upper efforts against the islamic state. i do feel he would affect the present come here in person, dopamine in the oval office meeting with reporters afterward from this news conference.

i suspect what are some kind of announcement about new ways to do with islamic state over there in series of. post accurate headline from the fiscal times, their lead story this morning on the front page. president hollande calls for a sense of urgency in the fight against isis. kenya contrast what other leaders are saying what the president's tone? >> guest: president hallman has been a lot more critical and disavowed his attacks on islamic state without the natural because the actual attacks took place in a city. he was devastated when will the attacks took place was resource and he was a specific target. there's a decade and more critical but i don't their present obama's tone to change. i think is pretty pretty consistent or out of it once people come he doesn't want to get i guess the phrase is too carried away because he doesn't want to commit ground troops to the fight against the islamic state and he does what people come he didn't want to build up

the islamic state by expressing so much fear about them. >> host: you mentioned president putin of russia. and you talk about the presence relationship with vladimir putin? there was that interesting meeting that the two men had overseas. we're showing a picture. applet that meeting happened in turkey when they were both there. >> guest: no one really knows what happened. billy thing both sides will confirm is that had a chat for about 30 minutes which is quite a long time. i'm assuming the two presidents are talk about more cooperation in syria. rushes over to there. we are there with about 50 special operators. .. hollande wants to create a grant coalition to state.he islamic that is his purpose in going to washington and mexico -- moscow. host:

[inaudible conversations] >> once again, if you would take your seats we'll get started on our final panel of the day where, as promised, we're going to devote our discussion to value-based purchase can out-based purchasing, what is the potential for those arrangements and the obstacles and how do we get to better value and better accessibleity for patients as soon as possible. let me introduce our panelists.

you have been introduced to at least this gentleman already. dan durham. and america's health insurance firm, thank you for being with us. ken frazer, the president and chief executive officer of merck, one of the nation's pharmaceutical manufacturers and ken is the head of pharma. steve miller from express script, one of the leading pharmacy benefit management companies. bernard tyson is with us, the chairman and chief techtive officer of kaiser permanente, an integrated delivery system covering 10 million americans in many parts of the united states. and then finally, with us is allen spielman, assistant director of health care and

insurance, federal employee insurance operations in the u.s. office of personnel management. so, welcome to all of you. before we go into our topic today, which is the outcome based or value based purchasing of pharmaceuticals we have been hearing about today. like to ask eave -- each of you to express -- the top opportunity and the top policy challenge you see in bringing to market the very drugs and treatments and cures and making those affordable and sustainable foremost americans, and getting the best treatment and. so dan, from the perspective of the nation res health insurance plans, give us your perspective. >> thank you, susan. i'd like to start by thinking

secretary burwell and acting administrator slavic for inviting us to be a participant in this very important discussion. i spent four very enemy able years here, and also like to thank the hhs team. know how hard they work in putting this forum together. it's a monumental task. today beer in a consumer-driven market. consumers are demanding value. as quality care at the lowest possible price. and that's what health plans are focused on. we're driving value in today's healthcare system by collaborating with provide ifers on quality, and negotiating on price. we do this in very innovative ways. we're building high-value networks, we are focused on payment and delivery system reforms, including bundle payments, patient centered medical homes and global

budgets. these are changing the inventive -- incentives to drive value for patients. when it comes to prescription drug prices, think we've reached a point here. we're still very much in the fee for service world. we have to move to the value world. and that's what health plans are focused on. and there are specific examples here we're going to talk about today, and we have already heard about some of the barriers, but recently harvard pilgrim reached an agreement with amben on a cholesterol lowering drug focused on outcome, and we have seen this with merck and cigna, diabetes medicines and many other examples but we need to see more. more prevalent in europe and other countries that whan we see in the united states.

so the bottom line is, driving value in the system for consumers. we need innovative medicine. health plans want to provide the best innovative medicines to their patients. but they have to be affordable. and prices have to be sustainable. and so we need to focus on solutions here, private sector, market-based solutions, that drive value. so we're paying for outcomes. we're not paying for value. i think it was said best this morning, 20 years out it will be outcome equals revenue. hopefully we'll get there sooner than 20 yours but value is the place we need to be and all stakeholders have an important role to play in driving value in our system. >> all right. ken frazier. >> thank you. i also want to thank secretary burwell, sacketting select slavic and all the people for giving us this tremendous forum today, and i would say i hope

it's the beginning of the serious discussion between all the participants in health care about how we can provide greater value to the people that we all exist to serve, which is patients. as a whole the presearch and development efforts of the pharmaceutical company and the biotech industry have had an indelible, lasting effect on preventing illness and extending life and we have the potential to do even more and that's why we're spending tens of billions of dollars each year in our quest to do just that. that said, my company and the industry share the concerns that have been expressed about the rising cost of health care, particularly when those costs are passed on to patients. we share the administration's goal for creating more affordable and sustainable health care system, promoting innovation and improving patient access to new medicine. we, too, believe in the potential of value-based

approaches to derive greater value from healthcare spending, and in fact as we just heard, partnered with several private insurers, including cigna to implement these kinds of things over the past five years. but it's important for us to recognize that policy and systemic changes are needed to enable us to fully realize this potential. our efforts must start with a holistic patient-centered focused witha view of role in innovation and medical progress in achieving better value. we need to work together to look at the value of all kole opponents of the system. drugs, devices, hospitalizations and interventions. as we continue our work to create better value-based approaches, and while we work to address the unmet medical needs of patients, diseases such as cancer and alzheimer's, we need a policy and regulatory environment that supports and rewards innovation, and allows

biopharmaceutical manufacturers to be full partners in the movement towards this value-based health system. spending on prescription drugs has not been the dominant driver of u.s. health care costs. the this week, avaler released a report showing that prescription drug costs were in the the reason for rising premiums. medicines hold great promise for reducing costs in a rapidly growing aging population. even the cbo, the congressional budget office, recognized an increased use of medicines and medicare will lead to cost savings elsewhere in the system. let me just summarize by seeing the issue we're discussing here today, the shift towards value-based payment, is a good example of how it is that we can drive the kinds of goals we want. better patient outcomes, lower costs in a way that they're

actually sustainable for all participanted in the health care system. thank you. >> thank you. steve. >> few for having me and i want to thank hhs for having this forum today. this is, as ken said, hopefully the beginning of a discussion that we alled in to have. as you heard already today, pharmaceuticals are the biggest challenge in health care right now, that is, it's the most rapidly rising costs in all of health care, and while we're paying $300 billion today, that's going to go to 400 boundary line 500 billion over the next several years. we need a sustainable system. we need a system that rewards the pharmaceutical manufacturers and allows them to continue to be the great industry they are in the united states but we also need to have feareddability and access, so what we're going to talk about hopefully on this panel is not just value based but indication based, outcomes based, innovative new payment system wes have to adopt if wore going to be able to continue to

reward these companies but also make access and affordability available to our patients. when we started the price war for the hepatitis products because it was actually a new product in the marketplace, and that was -- we were able to shift market share and reward other companies. every time we do something which it disruptive in the mark place it looks to be antione company; it's actually really pro another company because we rewarding them with mark share, what value-based, indications based, outcomes based plans have to do as we move forward is we have to identify the ways to reward people and make it clear we can shift the marketplace. so what can government and pharma make do to make for a

better disputer what do patients and payers need to do? without getting all components working together, the final thing i'll say is the enemy for all of us us waste in the healthcare system. the united states we spend $3 trillion a year. it's estimated a third of that is waste. now, one person's waste is another person's profit, and we have been very ineffective in the united states at going after that waste. you haired other people talk bit morning about the waste act cause, we have to root out every bit of that waste because if we do, that money is -- can be re-allocated to pharmaceutical products 0, can to social service products and other things that will make a bigger difference. so i'm excited to talk about that on this panel today. >> great, bernard. >> thank you, and it's great to be here. i have to say, as i was reflecting on this topic and this discussion and how to tee

up my two or three minutes, i struggled somewhat because i don't want to get trapped in the latest headlines of value-based something. and i talked to enough people to see that we don't really have a common definition for that term anyway yet, and depending on who is promoting value-based is usually the view that one may or may not agree with. i work hard every day to make health care affordable for 10.3 million people and hopefully for the country by demonstrating with an end-to-end system how we can la holistic include at the entire spectrum of health care to populations from all walks of life. as it pertains to this topic, i

start with a different conversation at the table with my partner across the table from me of pricing. i start with, i can blame 10.2 million members and this is the price you said but i need this kind of a price because that's the way the system works in this country and every industry. and i hear back, i would love to do that but i can't because i have this problem, that problem, and medicaid gets favorite status, and the government forces this and that. i go, well, there's something wrong with this picture. that's what start with. sal u-based pricing, if the market would dictate that a pill is worth a thousand dollars and is true live market-based, if someone can charge $10,000 for that pill and i don't have a choice but to accept the $10,000, if i go from 10,000 to

8,000, i'm still paying more than what the market would do if the market was really working on my behalf as i work with my partner across the table. that for me is a starting point, a fundamental flaw we need to address now in the 21st 21st century. i've heard debate nat you're going to run innovation into the ground. no, we're not. every other industry has figured out how to do this in a free market concept. and i'm not saying we throw the baby out with the bath water them fact of the matter is i can't tell you how pleased i am that the industry is now looking at possibilities to cure diseases as opposed to coin to manage the illness. that's a major step forward. and the whole system should be rewarded for that kind of innovation. but at the end of the day, the american people, the employer, the government, are paying for

all of this, and it has to fit into an affordability-1/2. and so when i -- envelope. so when i see and talk to members around the country who are trying to figure out how to make ends meet and they have the additional burden of a healthcare system that is weighing them down, that they haven't seen a real wage increase in 20-plus years, i end up saying to myself we have to come up with better solutions to produce the value and also making sure we have a viable and sustainable health ecosystem. and that for me at the end of the day is what the value base is all about. are we making a difference to the affordability piece of the formula that people who are paying for this can see it in tangible ways. >> thank you susan and thank you, secretary burwell. i want to talk about the benefit

program in our strategic perspective. the federal employee program is the original health insurance exchange, as foundin' 1960, 250 plan choices nationwide. total of $50 billion and covers over 8 million people. both active employees and retirees in the same risk pool, and the impact of prescription drugs, the economic impact, on our program, is enormous. over 25% of that 50 billion, 12 billion or more is represented by prescription drugs. we have been on a journey for the last 25 years in managing prescription drugs, and it started back in introducing and enabling managed door tools and techniques and promoting transplantation parent -- transparency and contractual

arrangements and now the best practices, whether it's managed -- drug prices or management of the specialty benefit. we're entering a new phase and that's to link plan performance to quality, customer service and resource use. a true pay for performance. but our money where our mouth is. we have a half billion dollars, add 50 billion, that we can apply to this, and adopting measures at the population level, at the plan level, consistent with our population, such as controlling diabetes. so, our strategy really is threefold. we want to leverage the individual choice market dynamics with our promotion of best practices, among our plans,

and enabling innovation and create financial insettive for population health and management of cost outcomes, and we think that will create the dynamic, the catalyst, for continuous value innovation. >> great. well, thanks to all of you. so, to move to our topic on value-based payment, outcomes-based payment, we have been tossing these phrases around all day. we probably haven't done as much as we could have to break some rocks and explain how these arrangements work. so, i'll ask you to give us a sense of how the arrangement you struck with cigna around diabetes drugs was structured. we know it's not necessarily the model but all of these arrange. s but give us a sense how that arrangement came together and how it incorporates the con sent of value based payment.

>> well, there is no single definition of value and that's one of the challenges we have. value can be difficult to define and difficult to measure, based on which person is looking at it. but in the cigna case, we sat down with the very important customer of ours, we realized it was very important for us to make sure that diabetessic patients were reaching blood good glucose rules and we provided an additional rebate to cigna if they can show that under their broad -- not just form callingol interventions, they are getting patients to their goals and part of that obviously is to make sure that patients are taking their medicine on a regular basis. so instead of just paying people for the amount of market share that we get from that particular health plan, we just incentivize

people to make sure the patients got the benefit of the medicine, and the medicine of the other interventions and they were in fact getting to goal. so you got the outcome you wanted, which is that people are controlling blood glucose level and can we were able to pay them for reaching those outcomes. that's a very good example of what we can do. >> you paid them in what form? mailed a check or -- >> the form of a rebate. >> on the original cost of the drug? >> exactly. right. so if you're going to pay us for a certain amount of our drugs, we'll actually give you a higher rife bait if you can help patients take the drugs on a consistent basis, and you can also show that the patients are not just taking the medicines but getting the benefit we want. they're hitting their goals. >> how has the arrangement worked? >> i think it's worked very well. i think cigna is happy and merck is happy and that's an exemplar of one approach to value-based pricing arrangements. >> now, steve, you all have been involved at express scripts in

other types of arrangements discussed between pairs and providers. give us a sense of how some of these others work? one of you stress indications based outcomes. >> one thing we announced in 2016 we are actually going to introduce indication based price for cancer products. this was an idea that i stole from someone much smarter than myself, peter bach from memorial sloan-kettering. he has been talking about there is for a long time. it recognizes that a drug is initially brought to marketplace for one indication, so let's take tarciva in lung cancer. it's a very good lung cancer agent. for the right patient it can extend life for 5.2 months. they then go on to study it for indications for pancreatic cancer, it will extend your life by 12 days. the trouble for us as consumers

is do you ever pay the exact same amount for something that works one-tenth as well. name another product that would work for one-tenth as well you would pay the same price? in our marketplace that's what we see. so to make this happen in 2016, what we have done is we had to do three things. one is we had to change our system so that we could actually adjudicate drugs at the indication level and not just the drug level, because right now all claims are at the drug level but we have to get the information on the indications that it's going to be useful. the second thing we needed is we needed external third party experts who could tell us what the alternative value is, and so we again turn to peter and a ganymede steve peer union. they -- peerson. they helping us give us some idea what true value should be. the third and most important

thing i needed was i needed tens of millions of patients that would agree to have this on our form laarey, sew put out an rpf to the pharmaceutical industry, got a phenomenal summons, and so for handful of drugs we'll be doing this in '16. the reason just handful in '16 is we have to make sure the system works. we have to make sure that number one, we are giving patients the best clinical options that are available to them. at no time should patients be caught in the middle. number two is we have to be giving visibility to our plans that they're paying the right fee. we have to be giving pharmaceutical companies visibility to what is going on so they feel comfortable doing this. and if it's successful in '16 we

can expand this to other drugs and categories outside of cancer, like inflammatory disease and others. >> so explain how this affects an individual patient who might have lung cancer, be in effect involved in this arrangement? >> so this is actually interesting because there's a regulatory barrier that is prevented this from happening and still prevents it from happening most cases. you heard about medicare best price. the trouble with medicare best price is that someone will -- if they'll accept $100 for lung cancer, but only $10 for pancreatic cancer, that's ten dollars becomes best price. for the government they won't care if it's just for pap career attic cancer. we have made it a math problem. said what is the less discount you would achieve, give that to all the patients involved. so the pharmaceutical manufacturers accepted a blended rate across all patients, and so all patients will benefit from

the lower price, even though it's based on indications. >> and the lower price would apply for all of the drugs in that class? >> it would apply to the contracted drug. so those companies that don't want to contract this way may find themselves on the outside looking in. >> okay. and you said that is going to go into effect. that arrangement -- >> 2016. >> don't know that the results are going to be. >> don't know what the results are yet. there's a lot of great experiments going on now. my point is that we're going to have to try a tremendous number of experiments and it's going to take cooperation with everyone in this room to be successful. >> allen, from the standpoint of the fehvb you said you were very much moving in the direction of having these kinds of arrange. s with the plans that are essentially making their products available to the federal employees and their dependents.

explain how some of those arrange. s would work. >> well, what we do -- we certainly spend a good amount of time with the key pvm, like express script, that support a lot of our plans. i think over a dozen plans that work with express script. and what we try to do is create the dynamics where these sort of experiments and problems can happen and what is critical is trying to identify, there are regulatory barriers we have had, either conscious or unconscious, that we can remove to enable some of these to happen. so, i think every one of these innovations we have the capability to deploy in our program; the proof is in the pudding. does it result in greater value and a lower cost? what is missing from the equation is the patient

engagement to actually see the demonstration of the value. i think that's something we all need to work on. how can we better engage them so they're making decisions on which plan and arrangement to go to based on clear demonstration that they have added value, and that's part of our future agenda. >> so, ken, you and others talked about this difficulty of defining value. are we going to have to define value potentially in different plays, drug by drug, condition by condition? how are we going to proven this? sounds like a monumental tax. dan? >> i do think value does vary from situation to situation. let me start we saying, i think it's most important that we remember that individual patients' lives are being affected here, and so we want to make sure that when we define value wishing think about it from the patient perspective. but there's also obviously an economic perspective.

as bernard said earlier. so, just that one example, the patient has a viewpoint, the payer has a viewpoint. it's going to vary depending on the disease, going to depend on the time horizon. that's a big issue you can talk about. depends on what time horizon you're measuring value in. often we have drugs that are administered today that prevent long-term hospitalization. it depends on what the measurement period that you look at. if you look at too short a period you don't get the benefit because you prevented those hospitalizations and those other interventions down the line. so, all of those are variables that go into the question of how you measure value. and i think all that leads to point that you have to have a lot of different experiments leak the ones we're talking about, and that's why i'm a firm believer in allowing these private market experiments to go on. because the examples that we just heard about in cancer may not be applicable to certain chronic diseases like diabetes.

so we have to experiment and find the right way to find that concept of value, but i would say that we should recognize that value is composed of many different factors that are viewed by many different actors in different ways. >> how do the member plans think about that question of defining value? >> ...

based on the best evidence that there to determine how to place a particular product. there's a lot of ways to define valley. the real question is, what type of product are we talking about? if it's a cancer medication that can extend life for a couple of months but is very high-priced does that necessarily reduce other health care spending? not it had to give continue chemotherapy and its side effects and the like. that extra two months can be very important for an individual and other family. it becomes challenging to get a specific measure of value that is consistent across all. how do you measure about of

lifestyle drugs which are big sellers in the marketplace. >> we will have a separate forum on to win. bernardi, utah but sitting across the table negotiating. as you would sit across the table talking to some about it on the basic arrangement, one of the issues that was identified was what the payoff is way off down the line? your health plan come you got to pay the bill for the drugs today. how do you factor in a benefit that maybe 10, 20, 50 years down the line? who is a rebate check going to go to someday when that benefit crops up ask somebody enrolled in kaiser today maybe someplace else tomorrow. how do you perceive these contracts are going to work in the real world? >> you know, it's a combination of who benefits, and how do you

project the future risk of individuals and populations based on the results that will happen today, to put it in your analogy. in our example we now know because we've all of our patients on the electronic health records and where detailed information. we know that based on the population inside of kaiser permanente who will qualify for the hepatitis c drug, i now can quantify that that's going to run the an additional half a billion dollars or more per year over the next several years to administer the drug through our positions to all of the patients who qualify for that. so that's now a couple billion dollars that i can see into the future over the next couple of years because we're going to do

the right thing by our members. in return our members are going to be healthier but that doesn't mean they're not going of other issues they are dealing with. but over time the risk will be in there and hopefully in reality less. so it might affordability formula i get to reduce my risk factor, therefore i could take a lower rate overall to the market and pay the market back, my customers, my employers, the government and how much i'm actually charging. in some i like the fight is very direct, that if i can reduce the savings, whether it's through prescription drugs or just sound, preventative care, that means i need to have less money to take care of this individual in that population, then i give it back to my customers informed of the rate that they pay over all for me to do what i'm doing

inside of the system. so that's how i see and that's how the system works for me. within kaiser permanente. as it pertains to the value to the patient, it really depends. it's a complicated question because if i know for fact, as we do, that you can do certain things to prevent something from happening, then the person who you're trying to convince to do this, that, or the other because it's the right thing to do, may be conflicted i want to do it but not being able to afford to do it, or that wanted to make the economic choice to pay for this now that could prevent something from happening in the future because it is not affordable. intercity with a chronic disease and it is interfering with your functionality in life, you are afflicted integrated away to

accept the medical advice at all of the things that we can bring to bear. and so over time, you know, you start to tease out the difference between someone who has cancer or diabetes or heart disease, that is impacting the functionality of their everyday life, versus someone who's been told that you have high blood pressure and we can get this under control. and the economics of you feeling fine every da day and the econos of what it will take to prevent that from turning into a stroke or heart attack in the future depends on the economic is working, you might render a different decision as to whether or not you would use that drug. affordability is central to what we are talking about. of value-based formula for me starts with the equation of

affordability. that's not based on how much it cost me to provide the care. it's how much can people truly pay him that affordability envelope, no matter how you define it. >> has kaiser permanente entered into value-based contracts with pharmaceutical companies? and if so how do they were and how did they address this issue of maybe the benefits really are way down stream, the rebate checks may be coming but it maybe 15 years from now. >> it's a combination of things that we use the same tools that you're hearing from rebates to areas that we can contract. we have different ways in which we manage the drugs inside of kaiser permanente. quite frankly we spend more energy focus on trying to make sure our members are adhering to taking the drug, which is a major problem as you know, that you've got people in our health care system in our country who

might start taking the drug but then stopped after a while. and so we invest in those systems that help our members to stay motivated to take the prescriptions and allow us to make sure where that type of partnership. so the things that i invest in a round is, for example, pharmacy system that will let us know if the member has not refilled their prescription. and over a period of time if you have 30 days worth of medicine and you haven't refilled it in 60 days, we want to know what's going on with you and to rebuild signal systems like that that allows us to help manage the person in a holistic way around taking other drugs. that has a long-term return because we are, as ken said order, keeping the patient as healthy as possible. so that's part of the ecosystem that i'm able to build inside of a system like kaiser permanente

because our interest is in the long-term health of the individual who more than likely it's going to stay with us for many, many years. >> so another concept that has been, come up in today's is the notion of shared risk of shared risk between manufacturers and providers, potentially also pbm's. let's talk a bit about those kinds of models. what do you see as the viability of those models? how probably could those be extended and what difference would those make to this whole question of an enabling manufacture to bring to market these very important new products, new treatments, new cures but also make the pricing more sustainable? >> i think there are a number of contracts we do share the risk today. with our customers. and i think that one of the challenges that we face and,

frankly, some of the public contracts that we have is that we are restricted in some of the tools that we can use in risk-sharing. >> give us an example. >> i would just a couple of things. first of all in order to have a good sense of what the true real-world risks are and benefits associate with that, we sometimes have to look beyond what's in the labor of the drug. but we are restricted in communicating those things to our customers by fda regulations. so that would be one restriction. >> let's take a specific example. there might be something, the drug has been shown to be effective and this particular but we think there's another condition that could be effective. build out more. >> we have measured certain outcomes, certain chemical outcomes, clinical outcomes but we haven't measured the impact on hospitalization. that's not a part of the clinical trial, right? one of the things we want to do,

one of the things your peoples that often is that drugs as a percentage of aggregate health care spent has gone up. that's true. in some ways it's because we prevented some downstream things. that's not always in a clinical trial. we didn't study the impact of this drug on hospitalizations over five or 10 year period. but when the drug is out in the marketplace, we oppos have post marketing data, a lot of data about that. that would allow us to talk with our customers about a -- about arrangements with the defection of the risk of that patient, subsequently being hospitalized for heart failure, for example. but that's difficult for us to do in the world in which we are constrained by the way the drug which originally studied to get it approved. >> as we discussed some of the earlier, we need some leeway from the fda on that to make

those discussions. >> that is one of the many restrictions that we face. >> let's also broadened the question and talk about incorporating value-based commitments. some of the new alternative payment delivery models that are coming online now, courtesy of cms. bundles, for example, what if you mention the bundles. could we think about incorporating new contracts will arrangements around prescription drug use into bundles, or other kinds of, again, these alternative payment models speak was yes. is critical. health plans of the d business r quite some time and we're working collaboratively with the cms to bring these innovative systems that have been done in a private space into government programs. and it's critical. >> was a good example of one of those? >> you can see what they're doing on hips and knees right

now. spent a comprehensive joint replacement program speak with exactly. just like risk-sharing arrangements with prescription drug. again it's getting the incentives right. we do it with providers by collaborating with them on the quality metrics and then on the prize decide the risk-sharing arrangements through bundled payments, through global budgets and the like. so incentive the incentives aret outcomes, quality outcomes, not a volume. that's the key. i think the challenge is, there's no silver bullet when it comes to prescription drugs. these types of risk-sharing arrangements work when you have competitors in a category or class. because then the pharmaceutical manufacture as an incentive to differentiate themselves from their competitors. that's inserted into these types of risk-sharing arrangements. when your single source of drug with no competitors, what's the incentive? you have a monopoly and vessel

resolve, health plans are price takers. we have no leverage to negotiate. that change with a competitor came on the market. steve and health plans are able to negotiate to get discounts but the real challenge is how do we deal with a single source drugs that have no competitors? >> what is the answer to that? steve? >> let me come back a little bit when you talk of risk-sharing. this other innovative ways to risk-sharing. when it comes to hepatitis c, one of the things we're really proud of is i don't get to get the price down so we could treat everyone regardless of stage, but express scripts guaranteed the kids. so the patient didn't adhere, we refunded the money. because if you think about it difficult to treat these patients come in this case 84 days, when you look at the price difference, i could've said a nurse out of the house everyday to give the patient of the drug for what it was worth but we

develop predictive models, able to predict which patients were most likely not do it here. we were actually able to develop cell phone apps and other tools to help the patient. we gave them reminder messages. we are doing the exact same thing in a different way. we are accepting the risks the total budget of our plan so that if we don't a utilization management welcome if we don't get a good rebate, then actually will backstop the plan. so there's lots of different ways to look about risk-sharing as we go forward. the same thing goes for bundles. there's innovative ways to think about bundles. think about bundles in a different way. if you have a pharmaceutical manufacturer that makes all the drugs in a disease like diabetes, could you offer a pmp why, per member per year where the doctor could choose any product as long as they use that company's product. so that way they have

availability so that patients love it because in going through a prior authorization. but doctors love it because they don't have much paperwork. they can use every class of drugs, and the pharmaceutical manufacture loves it because they're getting the entire market share and we like it because it's easy to administer. one of the things we haven't touched on, there's not just writing toward burden, there's administered burden. one of the big problems is when you get out based comes -- you continue to administer the burden will be that much of the savings. let me give you an example. you have a drug for diabetes. you're going to guarantee the blood sugar. the patient doesn't achieve the blood sugar can i say you all me money. he said look, the patient didn't take the medicine. i don't own any money. i say the patient didn't take the medicine because they had a side effect. so what happens is -- >> a long conversation. >> but it is every single

patient so it eats up all the savings. this is why we're really excited about in part because of the new contracts with the definitions are incredibly simple. administration is incredibly easy and the flow of the monies can go back very quickly so that the patients and the plans can benefit. >> allen, i know you wanted to get the word in spent i want to comment on bundling. we need to strive more to include pharmacy in the bundles. there's a lot of surgical bundles for a variety of reasons, a lot of them are administrative. not been able to include pharmacy costs and that's the goal for all of us i think. >> plans are doing that with cancer care. united and other health plans are including the price of the cancer medication in the bundle. again to change the incentive because the oncologist is paid based on average sales price,

6%. if you have an oncology medicine that's $2000, another one that's $100,000, and a bundled arrangement you're going to use the cheaper drug. because that's how you're going to get rewarded. so give the art examples that are working on the bundled side that include drugs and we need to continue down that road. >> can't i just to build on this? because i'm in total agreement. the are a lot of innovative ways to do the things that we are describing. one of come and that's exciting quite frankly insurance of taking particularly about how to do it out to ultimately drive costs down, drive quality up, access, et cetera. the challenge inside of that for me though that i see into every single day because i have all of it, is that i can look at the

innovations that we have gone on that ultimately will reduce hospital days. so -- >> or liver transplants. >> so i invest billions of dollars in our diagnostic systems enter hospitals. why? because of the quicker that our physicians can nail what's really going on to construct the treatment, the quicker our patients can get out of the hospital. they want that. we want that. then there's a warm handoff to the outpatient. and so you wind up with a whole ecosystem how you care for the person and to end. the challenge is when you begin to slice different parts, you know, you might create the economic value, but somewhere else it's going to go up and down that they still end up with a health care system that is not affordable and still out of whack. support of the challenge is how do we think about, and in

particular now, especially drug that will impact large populations and produce no question about it a real value to someone. the fact that we have a drug that can cure hepatitis c is a beautiful thing. the question though is, can we afford it at $100,000 a treat but? times whatever the ultimate operation that might look like. i think we all will come to the edge, no, we will bankrupt the whole system. so the question is how do we start solving to a value-based system for large populations who, it's inevitable that the direction we're going with the innovation is that we will be able to pick over time these massive illnesses that we've all dealt with, heart disease, cancer, diabetes, and start to move away -- >> not to mention alzheimer's. >> answer moving away from how

you managed that illness to how do erratic it that illness. the hepatitis c gives us a ray of hope that you know what, this might be possible. inside of that, all of us are going to have to rethink the whole infrastructure of how do you think about the financial models that will support the combination of innovation, curing diseases and people open living much healthier lives and take on more responsibility of the overall health as opposed to managing basic care system that is only there to deal with episodic cases. and i think that's where the value-based conversation ultimately needs to get to have a population and individual level because health care is not just one interaction. it's a series of things that goes on to of people to live healthy lives. >> i think this discussion also raises another aspect of what period of time do you measure

the value of a new drug in? bernard said a couple times we can't be $100,000 for a hepatitis c. that's a general comment. because we had competition where able to drive is constant in the near-term spent an effective price is now closer to $50,000 spent which is actually interesting enough is essentially a cost per patient of the last series of drugs where you could essentially one out of three patients. so you spent 150,000 take your one patient out and now you almost 100%. the point is going to get too. it's actually per queue are much cheaper. and so i think we've got to look at things in a holistic way. i also make the point because i was at brooklyn became forward with the inhibitor for hiv/aids which when added to the standards of care make hiv a chronic, manageable disease. i think abou people forgotten tt

people were building hospital wings to house aids patients now. that drug which i is a 20 years old like into windows introduced we heard very similar conversations about the affordability of the drug. the drug now, of course, is available in perpetuity at a generically. look at what step and said unto the population. they can make heart attacks have been prevented by staton's. of course, downs are available today for pennies a day. is a bit of time when the drugs were judicial to the expensive. the point i'm making is how you judge the cost and the valley of medicine depends in large part on what time period you're talking about. from our perspective because it is until the short patterns and because we now get s some which covered dish and the we are getting help see, that return is made up front when the value of the drug is an annuity is a point of making. >> what i was saying earlier to

this exact point, what i was saying earlier is i do want to pay that $150,000 went into overtime federal grow should be priced at $50,000. but right now, unlike another part of my industry, i can work it down to $50,000 because there's a mutual when i get the wind on my affordability of 10 million plus people i take care of the person on the other side of the table will win because their company gets the masses of 10 million, if you will, to take care of, to offer their product. but to sit across from someone and to be told i wish i could give it to for 50,000, but guess what? i can't get unrestricted. i need to get my return but whatever the mental mindset is there any think ken is right in terms of if it isn't set up correctly you and up with this kind of dynamic that is going on. but i do not want my members

have to pay $150,000 because there at the front of the line which is what we're talking about. and then people who are led on a system might get it for $50,000. what i feel good about the 50,000, i promise you already paid for 10 x 10 x. the investmn the one and $50,000 which is the way this thing is calculate. so i'm sitting here going back is not that the free market is supposed to work. >> so let's stay on this point about the free market. all of you with exception of alan are in the private sector. alan is primarily dealing with plans that are in the private sector, although employees and dependents are working for the government. you've all talk about your preference for private sector solution. perhaps you heard our earlier panel primarily inpatient it can get very hard on the side of we need some more government intervention. we need to have decided to able

to negotiate prices on medicare. last to the left on the table the problem of single source of drugs so it doesn't appear there's a competitive private market responds readily at hand were single source drugs. what aspects of public sector regulation do you think do merit exploration? is it having the secretary negotiate medicare prices? sure that the particular steps in the area of single source of drugs where you don't have a negotiating partner or another company you can shop business with because there's only one supplier? >> let me start by saying i think the concept of the medicare part d plan as it's been constructed is a construct that actually balances a lot of interest. high patient satisfaction, it has been one of the few government programs, to my

knowledge, and i hesitate to say this in a government building, that has come in so far out of a projected budget come is probably one of the most efficient government programs in the history of government programs. it comes with exception of their employees which is also based on a project model, right? so the simple fact of the matter is you will be able to find this single source situation that will be a problem. but across those plans i can tell you we are negotiating like mad for access to there. you have to take a step back and say, what's so broken about a system that has high satisfaction and is substantially below any projection that's been made about what it would cost? that doesn't mean that it's perfect but let's be clear. there is a such thing as a perfect system. is the system i do believe strikes a balance between creating incentives for drug

companies to come up, because a solution to the single source of drug was a competitor that invested in the same program. my company is coming out very soon with yet another drug in that category. if you take away those incentives in the marketplace, the single source situation is out of and longer-term problem than it would be otherwise. >> what would be a regulatory role, if any come in that situation? and particularly now it's not so much even in these newer drugs. we are single source suppliers of older drugs who are driving up the price in. >> again i want to be very clear. i can only speak for what i've talked about pricing. i want to be very clear. they are having people who i believe have abused market breakdowns to charge more than they should've charged for the initial drug i don't think that's the typical situation. when we price a drug, we just

came to the mark whitaker important cancer drug, we made the choice to price its equivalent laid with the prior drug even though it is substantially more effective and substantially less toxic or because we are saying what's the value to the patient? what's the value to the system? what do we have to do about access? what we have to do to sustain our own but don't to do the alzheimer's program that we are also think in the work progressed to those things that our challenge is not to maximize profit and pricing but to optimize short-term and long-term. we want today's patients to access to today's medicines but we also want to mars patients including all the alzheimer's patients to access to the disease modifying agents have not yet been invented. let's be clear. alzheimer's is going to bankrupt us. not single source of drug. alzheimer's in 2050 will cost

our society in the u.s. $1.1 trillion if we don't get a modifying agent. .. >> we pay more each year even though the product hasn't changed at all. we need to actually support

bio-similars. we need to play patent games because all that does is keep expensive older products in the marketplace and doesn't allow them to get to generics. someone mentioned this morning, we cannot have america paying 33% more. 4.6% of the world's population, we are somewhere 70% of the probability. we need to spread that out over 6 00 million. they need to treat every drug as a breakthrough, which is what you want. you want the first drug, the second drug and the third drug. because if i can get his

hepatitis market also think about what we can leverage, drive the prices faster. we need all drugs. we need fda to speed approval process because right now the generics market is dysfunctional. it takes too long for the market to be self-regulatory. we need to find the nih. if you want things that the industry will not develop, let's say vaccine, you can develop for vaccine. finally, this has been brought up earlier. people say they want outcomes research. when you strip the core of the opportunity to look at the cost of drugs, they're not allowed to consider economics. then you have to add the ability to have dollars as one of the

features. we have to continue to pay. those drugs are going to be expensive and we have to be willing to continue to pay and for consumers we have to make sure the copays make sense. this idea that we have patients on the hook for this incredibly high co-pays, yes, they do need to have economic incentive in the copay but we know it just drives down and we have too many cancer patients and other patients and then finally, we need to advocate because once we have the patient advocating and the payers advocating we are not going the change the system. i will stop there. >> short list of activities tbu very important ones. thank you, steve. [laughter] >> once more.

we have 15 minutes and we are going to try to get through as many as we can. we will do our best. so, please. >> hi, michael sherman, i applaud the discussion. some companies merk have been at the table, others have said, no thank you, we don't need to do this, how can we encourage them to be part of the solution? i'm wondering along those lines if a company can't explain in a way that makes sense, tied to cost of acquisition why can't we allow deportation from europe? >> i'm going to stop you there. take the first part of the question. how do we get all the pharmaceutical companies to do

table for the discussion? the reason they come to the table because we think we have a responsibility to the system. it's not just to our shareholders, our shareholders are important to us but patients are important to us, we've existed for 125 years by looking at what's in the best interest of patients and ultimately we have to think about the sustainability of this system. we don't think about the sustainability of the healthcare system. there won't be any health plans, any pharmaceutical companies. i don't know how to encourage the other ones to come to the table but let's just demand that they do. >> let me suggest that you take up the importation with discussion at perhaps at another time. let's move to our next question. >> thank you for taking my question. you know, a couple of weeks ago, actually maybe a little longer than that we heard public

outrage of price hike, their ceo became one of the most hated men in america and by public pressure, tremendous publish pressure, all over the internet, all over twitter feeds he relented and brought the price down. >> hang on. >> but the most important question here is really give us more context. from a consumer standpoint, we look at that and say there's only one guy that makes that drug and we can charge whatever price he wants, right, how is this situation different? i mean, we are struggling. everybody has -- all day today tried to distance themselves from this situation. actually it's the same thing. you have a lock on this problem. >> let me answer the question by saying, the first thing --

>> how is it different? >> let me explain. there's a drug used for bladder-cancer patients. we are one of three suppliers, two generic suppliers went out for quality. we haven't charged one penny more because we think of ourselves as responsible company. we don't get up in the morning and say, oh, my god, the other two guys are out of the market, we can jack up the price, i want you to understand that that is a hedge-fund manager. they come to work every day because they actually want to make a difference in the world and we believe great drugs can change the world. we don't believe profiting changes the world. >> is valium a one-off situation? >> i have to say those who

invest 7 and a half billion dollars in shareholders money in areas like al -- al >> you don't get a nobel price if you haven't been doing this for years. so i actually don't like touring being used. i don't consider them part of the industry. if their model is to not do any research. >> i mean, i really appreciate that question. i want to offer a slightly different perspective without talking individual companies but just what i see in terms of flaw with the models here because that example is not just an individual. there are companies that buy smaller companies who spend all

their time inventing a drug and then they buy the company and they charge what we see happening, right, it goes back to an earlier question. i absolutely believe that the government should be sitting at the table with the purchasing power and saying, we will negotiate a price for the population. not that they're going to break with his company. but the idea that i get to sit back and produce this wonderful drug and i can decide whatever price i want to charge at the end of the day because there are no forces that will effectively address that issue at least over a period of time. to me that says we are not on the level plain field yet, and that's what i think the government should look at.

how do we make sure the field is leveled. so this gentleman who is an investor says this is an opportunity to make a lot of money, and that's what the net effect is. bought a company, charges what he wanted to charge. i don't believe price has come down yet, but i can show you a lot of examples where smaller companies who are bought by bigger companies and what i get is the 100,000-dollar bill. so there's something wrong with the whole echosystem of what we are saying that we have to address in a holistic way. >> thank you very much, let's move to the next question. >> we've heard on this panel and throughout the day talk about

hepatitis c and hiv and tremendous treatment advances and impact on individual health outcomes which i think cannot be overstated but we haven't talked about the public health as such and treatment with hiv is prevention, with a cure we are preventing new infections, that puts hiv and hepatitis c apart. i would be curious to your thoughts on the value equation, should we and how can we measure the public health impact in value when we are talking about the tremendous new treatments and interventions? >> well, i want to thank you for making that comment. value gets measured by different constituencies different. it's hard to evaluate the impact of a person who doesn't get hiv, but we know it exists. we can start thinking about eradicating hepatitis c.

in our company we had infectious diseases. 4.5 million children, 42,000 that could -- would have a serious illness if they wouldn't have vaccine. we want to continue and encourage these kinds of cures and make sure they are available for people in prison population, for example, that to me is a very important thing and sometimes we are going to take seriously in hepatitis c. >> the reason we want today get the price down because we wanted everyone with hepatitis c treated. i find it not acceptable that we were treating the ones with most advanced. so treating everyone is the right thing to do and there's no more disease if we need to do this. i tell you this also, if price

to polio vaccine like we see, we still have polio today. we have to have reasonable prices so we have access and affordability and we have companies trying to find the patient, engage the patients and get them treated. >> all right, thank you. now to peter, tempting to make pose a question, sorry, peter, we didn't get to you. >> i ask the same question no matter who i'm asking it to. [laughter] >> thanks for the comment. so my group invented the drug advocate, the question of value and quite a bit of discussion about value pricing or finding the right price and you made a comment about broad landscape, something that resinates with me. i want to ask a fairly granular question, is it that we can't define what the domains of value

are or we don't know the relative contribution of each of them? the reason i ask this question is i treated the drug as looking at cancer-drug prices which i thought were a reasonable array of domain that could define value. we built in a flexible way to manipulate how long prolongation of life or rarity of the condition mattered. so i want to know am i in the right place, do i kind of know what the domains are but we don't yet know how to weight them so we can come to valuate price? as i mentioned, you can, whatever, anyone who sorts of want to -- give me an answer, thank you. >> we actually are using the drug in our evaluations of drugs because peter actually has been thoughtful. you know, there's a lot of argument, and is what i value

and what you value is going to differ, and so the value is in the eyes of the beholder. seeing my daughter walk down the aisle in three weeks made me really valuable versus prolonging my life and having a lot of side effects in another year. you heard it earlier today. we have got to figure out how to add value because the individual would ask less care and not more care. >> you heard that from heather on the panel earlier that given the choice she would not opt for extending her life as if it were as serious cost and so on. so next question. >> i'm edith mitchell, i'm a professor on medical oncology at thomas jefferson university. my question is related to the

changing demographics in the country. it is well recognized that minority populations are increasing in numbers significantly and at a rapid pace, in using all of the information that you have discussed today, i wonder if one of you can comment on how we are using these processes to address the disparities that occur in minority populations specifically with poor outcomes in most disease state, how are we utilizing our information to determine the effectiveness in populations and how can we use the value-based outcomes to lead to equity in these populations? >> quick comment. that's another example of what i was saying are the challenges associated with saying that we can only practically communicate what's in the label, because

those subpopulations, we have drug that is work in broad population that actually have opposite impact on the minority population. like hypertension drugs. >> absolutely. >> the other, pete, i appreciate you using that term equity because the other piece is having the information and the done in -- database in the systems to know that a drug can be effective to a given population but there are challenges of how the population is taking the drug and to be able to tailor of those individuals becomes dealing with disparity issues. it's not one-size-fits all.

>> okay, i hesitate to disenfranchise our last four questions. let's make an attempt f you quickly, we will go quickly among the four of you, get your questions on the table and we will ask them all at once. >> thank you very much. i would like to ask how can the system incorporate the patient's per perspective including the data that we bring to the table with registry. are there formal mechanisms put in place that we are discussing today to be sure that the relevant data is incorporated in decision making, i think you find that we have better decisions. >> thank you, we will put that to them. >> following up on the discussion on all the issues, what's the one specific change that you would recommend government-making law or policy or practice at fda or cms that you think would improve the space here, kind of following on

steve's list. >> okay, great. margaret. >> hi, so patient engagement has been talking about the blockbuster drug or intervention of the history. how are you working on patient engagement. this is a follow-up to what kat just brought up. they want to be participants in this conversation. i think in the bio pharmaceutical industry the train has left the station, there's a lot of work, a lot of science to be developed but we are not getting there in the payer community, i want to hear on how you are working on that. >> okay, then the last one. >> thank you. my question on new risks and outcomes base models and frankly how scalable. >> the

>> all right, let's do quickly patient -- incorporating patient engagement. dan, why don't you take that? >> we are in a consumer-driven market. the consumers are demanding value and plans are responding to that with tools on their websites to help patients find the best value for their money, and will continue to do that. >> okay, on the question of shared risk and these other outcomes space models, how scalable are they, can we do this fast enough that we can get out ahead of the enormous price increases in this pipeline of specialty drugs? steve, why don't you take that? >> no. >> we can't. we are going to need other tools. >> we already can't afford what's already out there so it

can't happen fast enough. >> where are these things scalable speed is of the essence and we're already behind. okay, last question. one change, one important change at fda or cms in the short-run that would do the most to make a big difference. let me have ken on that and bernard you can weigh in on that. >> communicate broadly about our products. >> because those could, in fact, be -- >> violations of law. incentive that violates the law. >> bernard and alan. >> we wake up one day and turn on the news and secretary is telling all of us that 117 we are going to be negotiating prices.

>> in medicare. [applause] >> a man who has medicare advantage plan or two. alan. >> only government employee here, i don't pretend to suggest what the government should do in law, but i think in general what are the tools, goals and standards and objectives that we can measure outcomes and to find value for more payers and more patients. >> all right, i think as you've heard stated over the last hour and a half, the value-based and outcome-based strategies critically important. you've also just heard they are not going to get us quite far enough and they are probably going to be -- have to be other strategies employed whether it's more government intervention, more regulation, looking at some of the other aspects, what is going on at the fda et cetera, it's a big job, a long list. we could probably add 20 more

things based on the conversation, all of today, but we've come to a very important ending, i want to ask you all in joining me in thanking this panel. [applause] >> thank you. >> i want to welcome to the stage mina, md and ph.d, she helps to drive strategy and manage the implementation of the affordable care act and delivery system reform and previously she practiced at bernard at san francisco. >> thank you very much, susan. what an incredible discussion we had today. first i want to start by thanking you for moderating the discussion. you've really made it very productive and it is very much appreciated. and thank you to all of you who have joined us here in the great hall and also to all who have participated online.

the consumers, the healthcare professioners, manufacturers, government representatives and all of our other partners. as a provider, i know how powerful pharmaceuticals can be in promoting health and curing illness, but the high and growing cost of drugs has created hardship for families, employees and states. so today's discussions really reflect the perspective of the diverse group of stake stakehols impacted by the rising cost of drugs and echo complexity of transforming our healthcare system into one that delivers quality over quantity and puts the patient at the center. we set out here with the goal of bringing stakeholders together in a discussion on how our nation can lead in innovation and deliver access to high-quality affordable medicines and today we made progress toward that goal by

identifying common ground to work together and heard ideas about how best protect consumers' access to important drugs. in our first panel we heard from consumer and patient advocates on the challenges facing patients and providers in excessing innovating life-changing therapies such as cost of prescription drugs are affecting family budgets. patients and providers value innovative therapies and curious but consumer advocates talk about the struggle. we also heard ideas on how to provide patients and providers with relevant information to support better healthcare decisions, in particular we saw that the patient perspective needs to be at the core of how we define value. keeping drugs accessible and affordable is on the minds of all the stakeholders in this

room and the panel after lunch focused on how to balance access and affordability. the panelists talk about current purchasing models in the public and private sectors. we discussed the important role of generic drug, curving drug spending and providing choice. we also heard how states, health plans and employers are innovating with utilization management tools to control overall drug spend but also make sure individuals are accessing the medications they need. for example, our panelists discussed using plan design to make sure that the right people get the right drug at the right amount at the right time. importantly data such as comparative effectiveness can help make more informed decisions at the point of care. but as we see, there's much more to be done.

taking a cue from our delivery system reform efforts, we can deliver better care, spend our dollars in a smarter way and put patients in the center. you just heard from our last panel, they discussed value-based and outcome-based purchasing strategies, what has worked and what the hurdles are in expanding these models. merk spoke to their outcome-based purchasing arrangements for drugs treating diabetes and multiple sche -- sclerosis where the patient benefits. we also heard the need to better engage patients. it is clear from the discussion that all of us in the room have a stake in working together around the value-based reimbursement and fair drug pricing, just in last panel we

heard from a pair, a manufacturer and integrated health system, a plan and a farmy benefit manager in how they are working on innovating models to share decision making. although, we have our work cut out for us, we know we can come together and reward value. keeping health care affordable for the long-term is a priority for the department. we want americans to have access to the latest innovations in pharmaceuticals that save lives and improve the quality of life for people with illness. our goal is to foster a healthcare system that delivers most affordable highest quality medicines and results in healthier people. as you have heard, this is a complex problem and there is no one solution. however, the most effective

solution will be a result from all of us working together. the consumers, the healthcare professionals, employers, manufacturers, insurance issuers, government representatives and all of our other partners. thank you again to all the stakeholders that are engaging with us on this issue and to those of you joining with us today, we look forward to continuing this discussion and the important work to foster innovation and increase access and affordability to prescription drugs. thank you very much. [applause] >> all campaign long c-span takes you on the road to the white house, unfiltered access

to the candidates at town hall meetings, news conferences and speeches, we are taking your comments on twitter, facebook and by phone and always every campaign event we cover is available on our website at c-span.org. >> he talking about why he wants to be president and recent criticism over policy experience . >> joining us from iowa dr. ben carson, author of a more perfect union. dr. carson, why do you want to be president? >> well, it wasn't something that was on my bucket list, quite frankly, but after 2013, there were so many people clam

ouring for me to do it, i thought it would die down and every place i went there were people out with signs and i started getting petitions, 5,000 every week until i had hundreds of thousands of them clogging up everything and i finally said maybe i should listen to what these people are saying and i was struck by the elderly people that had given up and waiting to die, giving up on the american dream and so many young people were concerned about their children began thinking after spending my entire life on the welfare of children, even though that it was impossible, lord, if you want me to do it, you have to open the doors, i'm not going

kick them down. formation of a tremendous national team, money coming in like crazy. next week we will hit our 1 million donation. i see it as something that needs to be done. my fellow americans were asking me to do it and i will continue to walk through the doors as long as they are opened. >> you say the nations are in shambles and these are the times that men souls. >> i think there are a number. first of all we are severely divided. a house divided against itself cannot stand, never has to and never will stand. we have a war on virtually on everything, women, income wars, age wars, religious wars and obviously this is not working for us, our strength lies in our unity and we are fundamentally

being changed into something else. we also have severe fiscal problems. there was a time when we made every effort to keep the books balance. i'm sure he would stroik out if he saw what we were doing. 18 and a half trillion dollars national debt. to pay that back it would take you 5,000 years at a rate of $10 million a day, 365 days a year. that's what's being put on the backs of our children and tus much worse than that actually. when you look at the fiscal gap which is the amount of unfunded liabilities, medicare, medicaid, social security, all the governmental programs, the governmental agencies, first is what we expect to bring in through taxes and other revenue sources, which we are not developing well, by the way, those numbers should be ie

identical if we are fiscally responsible, if we are not there's a gap, fiscal gap that sits at over $200 trillion. the only reason is we can sustain that is print money inappropriately. we can't sustain that and we may not always be the reserve currency the world that can print money. there are several nation that is are protesting about us simply because we are appear to be irresponsible. later on imf will look at china in terms of application shift currency. we need to get our house in order from that standpoint. we need to be looking at those thing that is threaten us in the future. not just reacting when a problem occurs.

it needs to be done because because magnetic pulse every 150 years. last one is 150 years ago that can knock us down decades, not the mention a nation that exploted the nuclear weapon in our atmosphere. and if you coordinated that with the attack and dirty bombs, it could be a disastrous scene. we are not proactive anymore. same thing with energy resources. we could use those in geopolitical way and to change all the economic sectors in our world, which we are a step of oil from the middle east.

we don't really need oil from the middle east. we really need to relook at some of those things. >> $18 trillion and growing, as you point out in the website, third largest item in terms of federal expenditures, in order to cut the debt, are you willing to cut entitlement programs, social security, a bulk of what we are spending right now in the federal government? >> i actually don't think that is the first thing that you need to do. i think you need to fix the economy first and how would you fix the economy? well, you need to create an atmosphere that encourages and is having a profound effect on our economy. and people say, well, how does that affect the economy. every single regulation cost moneys in terms of goods and

services, i think that's passed on to the consumer. it doesn't hurt a rich person when they walk into a store to buy a laundry detergent but a person notices it right away. everything is up 10 cents, 15 cents because of regulations. it impacts of average americans to experience the american dream. also by having very high debt, the fed is not really able to raise the interest rates where they need to be. you hear very -- every quarter, we are going to try to raise interest rates and then they back down, why? because the debt service on 18 trillion already is $250 billion a year, if we let the interest rates rise on

normal level we are talking a trillion dollars, we simply don't have a trillion dollars as our debt accumulates, so what we have to start concentrating on is how to drive that down, by the way, what does that do to the economy, what does it do to small banks? it's driving them out of business, they don't have an incentive to make a loan to the average guy so he can start a business, the big banks can benefit and big corporations because they can borrow and buy back stock and increase their value. what about the average americans? that's where the backbone is. we have to really begin to understand, you know, the complexity of the economy. it's not a simple thing. if we fix the regulate -- regulatory problem, then we will have a tremendous boom that will

occur, and jobs will become available at that point and it is at that point that you then address the entitlement situation and at that point it does not seem cruel and unusual to do so. >> you mentioned vladimir putin and this morning on abc you said that dealing with 2:00 a.m. life and death decisions, is that a fair comparison, do you think it prepares between the life-and-death decisions for commander in chief? it's not as it is being a surgeon making critical decisions that do involve life and death. there aren't a whole lot of areas where that happens but i believe that life experiences count and that this country was actually designed for citizens

statemen in the leadership role and not career politicians. yet, when you look at congress there's 8700 years of political experience there and that really doesn't seem to be the solution. >> do you think you personally are prepared to be commander in chief? >> i do believe i have the ability to do that. certainly as i look back over past commanders in chief but also one of the things that i learned as a surgeon particularly during complex procedures is you don't do it all yourself, even though you have a great deal of knowledge, even a great deal of experience, but new and different types of situations come up. you have to be willing on a continual learning curve because the world changes every single

day and it's changing at a rapid pace, you have to be able to keep up with it and surround yourself with people that are fluent in the things that are going on and you have to be wise. >> jonathan was released after spending 30 years in a federal prison and some say that he should be allowed to go back to israel, do you have a view on that? >> i really would have to have all of the details of the information that he gave to israel and whether he still represents a danger with more information that he has. if after doing that analysis it does not appear that he can do more damage, then i certainly wouldn't have any problem with it. >> i'm not sure if you saw the story from political, social conservative and headed up a major family event in iowa saying that many people are concerned about foreign policy credentials and that's why one

of the reasons why your poll numbers have dropped in iowa, you want to address that? >> i would simply say they should actually listen to what i'm saying. i was one of the very first individuals to talk about the need to take a land from isis in order to make them look like losers, deprive them from revenue that they get from their oil and how we need to fight to battle over there and really take it to them so that they don't wind upcoming to us, talking about how we need to increase our own vigilance in terms of the fbi, tsa, and teaching our own citizens about how to react in case of a terrorist attack. these are all things that we need to be doing big-time, we need to be affecting the world monetary markets so they're not able to move money around. it has to be done at a very

significant level and it needs to be done quickly. >> an owl these issues whether it's foreign policy or we saw seven years ago in meltdown on wall street and the economic impact on the u.s., who would you surround yourself with, what type of individual, if you want to name names, feel free to do so? >> i would have a combination of people with real-world experience in economics as well as some of the academics who talk about the theory. neither one of them is always a 100% right but when you listen to the combinations, i think that works. the same thing with military strategy. i think you want to have people with real practical experience and then there are a number of what i call military philosophers, they teach these courses. you know, sometimes they have good things to say and sometimes

they're moving in opposite directions. i think you need to hear from all sides of an issue and i think the other thing that is absolutely critical for a leader in particular commander in chief, you need to go down a whole list of scenarios and you need to put together the protocols for dealing with those things so that they're already ready to go when it happens, and obviously those need to be updated, you know, every so often to make sure that you're not outdated, but there's no reason that you should get into a 9/11-type situation. it has to start at square one. >> don't you think if you're going to be the xee -- chief executive you want the best, you want somebody who has had some experience in these areas? >> well, when you look at the job of president and you look at

all the people who are running, i'm not sure that any have had any experience in that area except with the possible exception of hillary clinton and when you look at what that experience has led to in her case it does not go well for experience. i think what is really needed is wisdom and the ability to work with other people and the ability to be flexible and the ability to continue to learn. >> i'm going to get your reaction to donald trump on the campaign trail this past week, here is what he said about you. >> you know, all the polls said i would be the best at military, i would be the best at foreign policy, which is interesting, because if you read the front page of "the new york times" today they said about ben carson that he's unable to understand foreign policy. you know, people actually said this, that he is unable to comprehend or understand foreign policy, it was a devastating. it's all over the place and if

you watched over the weekend, you would understand exactly what they're talking about because it was devastating when you watched the interview, but he's unable to comprehend foreign policy. we can want do this. i think he's a nice guy, probably, who knows, i don't care, i don't care, we need somebody that is sharp, tough and smart and can figure it out fast. >> that was donald trump last week in massachusetts, dr. ben carson joining us from cedar rapids, iowa. your response. >> my response is worried about me and concentrates a lot on trying to denigrate me. some people will try to win at all costs. that's what they want to do. i'm not one of those people. i'm going to always stick to values and principles and talk about the things that are important, trying to tear someone else down, it's not part of the character for me. >> you've been critical of the

media writing about some of the accounts that you wrote about in your other best-selling book gifted hands. is there anything in that book that is in anyway inaccurate? >> you know, there maybe some dates that are inaccurate, none of the stories are inaccurate. i find it rather amusing that as these accusations occur and then as they're debunked. you don't hear anything about the debunking. i believe that's why it's done to raise down, to raise suspicion. they don't really care about how carefully the research was done, you know, case and point, when they were talking about my temper and they talked to people who i knew largely after that problem was resolved and because they didn't witness it, supposedly it didn't happen. you know, this is not what i would call journalism. >> how do you resolve that issue

for you personally? >> for me it was personally resolved on the day of the attempted stabbing when i realized that i was completely out of control, and i just locked myself in the bathroom and contemplated my life and i prayed, picked up the bible, all the verses in there about anger, including 16:32, person who can con scwer -- conquer a city. punch someone in the face was a sign of weakness. and i also can understand that it's a signed of selfishness. it's always about me, my and i, somebody did this to me, i want this, they are in my space.

let it be about someone else. the likelihood of you becoming upset and angry is very limited. >> who has had the biggest influence on your life? >> i would say that would be my mother because she absolutely refused to be a victim. she didn't make excuses and she wouldn't accept excuses from us even though she had a most horrendous life herself. >> in your book you talk about the press and you say that you believe that the press is protected by the first amendment, in part because it was assumed that they would be honest on the side of the people and without an agenda, so what does that tell you about the state of the media today in. >> i think there's still hope from them. there's some young journalists

who affect from bias of media and recognize that they can have an effect on our society by being honest and equipping the people with objective information. >> let me ask you about two other issues that you feature in your website, are there any circumstances that you would want to restrict at least these clips or magazines or other assault-styled weapon that is are designed to kill a lot of people? >> well, i certainly wouldn't want them in the hands of someone who is mentally unstable and has had that documented. i think that would be a huge mistake. >> and with regard to health care, you're calling it a looming disaster, what changes would you make? >> first of all, i would want to put the decisions on patients and healthcare providers and

move bureaucracy out of it. we spent plenty of money, twice as much per capita as many other nations and yet we have horrendous access. we built it into a giant bureaucracy and built it on a political platform. medicine and health care should not be an integral part of political platform and that's what i would work on by using health savings account, giving you flexibility to shift money around within a family so that you can cover almost anything, that, of course, drives the cost of catastrophic insurance because virtually nothing is coming out of that except catastrophic issues. >> how would you structure the decision-making process in your white house on both foreign and domestic issues? >> well, i think you have to have a decision chart. obviously the president cannot

be involved in every detail that's going on. that's something that i learned, you know, in building pediatric surgery but as long as you have reporting that allows the opportunity to voice their concerns, to provide their suggestions, you're much more likely to have something that runs efficiently. >> of course, with all of the issues you need to work with congress and you draw an analogy between playing pool and following the congressional rules, can you elaborate? >> well, you obviously need somebody who is willing to sit down and talk, that's something that we are not seeing with the current administration, even with the democrats. and recognize that the congress in a republic-type government is the voice of the people.

it's disenfranchise probably on their own accord because they are not very courageous, but as a result of that the executive branch and judicial branch have overstepped their bounds, and that's why we have a system of checks and balances. and as the chief executive, i would sit down with congress and make sure that they understood that and understood also that i would reverse the trend that has been going on for several presidents now of using executive orders in an inappropriate way. specifically stated why and when they should be used. they've been abused by both sides. >> from the book you talk about a lot about founding fathers, do you have one that impressed you the most? >> i am impressed by a lot of them but particularly impressed with thomas jefferson who seemed to have very deep insight into the way that people would react

and try to craft our constitution in a way that it would control people's natural tendency and control the natural growth of the government, but he said that a time would come when the people would become, you know, less vigilant and as a result of that the government would grow, would infiltrate and would begin to dominate but just to we become to some sort of government, the people would awaken and rise up and retake control. i'm very hopeful that that's what's about to happen. >> finally, what has the process been like for you running for president? what has surprised you the most, what have you learned about yourself? >> well, a lot of things i learned about myself is that it doesn't bother me when people attack me. i thought that it would really bothered by that in the beginning, but now i've come to understand that they're just

trying to protect their turf, they're trying to protect their ideology and they will go to any length in order to do that. but the thing that has surprised me most the way the people are awakening and that large numbers of people who has never been involved in the process who are coming into the process and, you know, that's surprised a lot of the pundits also. next week we will have our one million donation, no one could ever have foreseen that our campaign would be powered by the people and not the interest. >> have you enjoyed them thus far? >> the last one was pretty reasonable. the couple before that, not so much. >> what's next for you in terms of the campaign, are you for the long-all? >> i will continue as long as i feel that i have the support of

the people. i mean, because this is not about me, this is about america, this is about the people and if it ever becomes about anything else, then it would not be appropriate. >> have you even gun -- begun thinking about a running mate? >> i have, i would obviously look at somebody who has a very similar philosophy. traditionally people bring strength to the ticket, might bring another region of the country. it's much more important to have someone who is aligned with you because that person could then become a very important part of the administration as opposed to usually goes on. >> dr. ben carson, republican presidential candidate joining us from cedar rapids, iowa, thank you very much for being with us, we appreciate it. >> a pleasure, thank you. >> all campaign long c-span takes you on the road to the white house access to the candidates at town hall meetings, news conferences,

rallies and speeches, we are taking your comments on twitter, facebook and by phone and always every campaign event we cover is available on our website at c-span.org. >> tonight our landmark cases features brown versus board of education, part of the program focuses on the doll test that they use today illustrate the impact on segregation on american children. here is a look. >> the doll test was intrical because separate was an injustice, what we are looking at here are the dolls that doctors used in their doll studies.

the doll tests were a series of studies that ma measuring ie clark did to try to determine racial in young children with the impoliticcation being that in a segregated society if children are aware of race and the differences in race and the differences in how different racial groups are treated that it would impact how they felt about themselves, what they did that actually became very well known, part of the brown case was they showed young children black and white dolls and they would ask the children, show me the doll that's nice. give me the doll that's the best, give me the doll that looks like you and more often than not the black children

showed the doll as the nice doll was the white doll, the doll that was the best was the white doll. when you got to the last question, give me the doll that looks like you, that's when the children would pause and be a bit more confused or look troubled and dr. clark would say because they had said in many cases this is the bad doll, this is the nice doll and so remembering that they had said this is the bad doll, they now had to show the doll that looked like them. ..

i got your "landmark cases" series which explores 12 historic supreme court decisions including marbury v. madison,

korematsu versus united states, brown versus the board of education, miranda versus arizona, and wrote the way. "landmark cases" the book features introduction, background, pilots and the impact that each case. written by veteran supreme court journalist tony mauro and published by c-span in cooperation with cq press. "landmark cases" is available for $8.95 plus shipping. get your copy today at c-span.org/landmarkcases. >> last week attorney general loretta lynch testified about batting potential syrian refugees seeking asylum. justice department efforts to combat domestic gun violence and investigate into political targeting by the irs. she appeared before the house judiciary committee. >> the judiciary committee will come in order of that objection

features authorized to declare recess at any time. welcome everyone to this momentary on the oversight of the is department of justice. i'll begin to recognize myself for an opening statement. welcome attorney general lynch to your first appearance before the house judiciary committee censure confirmation earlier this year and we're pleased to have you here with us. last week we witnessed horrific terrorist attacks in paris which claimed the lives of over 120 innocent civilians and for which isis has taken credit. our thoughts and prayers remain with the french people, and we mourn with the. at the same time these terrorist attacks are a stark reminder that isis poses a threat to our allies and america. yet this reality is not yet clearly seen but our president. president. just hours before the attack president obama boasted that isis is contained. isis is not contained in syria. it is not contained in europe and we no isis inc. continued its campaign of propaganda here

in the u.s. we know from the terrorist attacks that obese one of the perpetrators was registered as a refugee from syria in countries through which he traveled on his way to france. just last month fbi director comey told this committee that the u.s. refugee vetting process is not adequate to guarantee that syrians referred for resettlement in the u.s. are not terrorists who plan to harvest. yet the president presses on with this plan to resettle at least 10,000 syrian refugees during this fiscal year alone. i look forward to hearing your thoughts on this issue, considering that the top counterterrorism investigator in the u.s. consistently states that the database is and law enforcement resources are not available to properly vet serious. furthermore, reports indicate that despite repeated congressional action to the contrary this administration thinks terrorists at guantánamo bay who are cut from the same

cost as the best attackers and many of whom are deemed too dangerous for release to foreign countries should be brought to the united states. transferring these combatants to the united states will only increase the odds of being released inside the u.s. these public and national security concerns coupled with unanswered questions about the cost and logistics of bringing detainees into the u.s. should cause the administration to hit pause on its reckless decision to close the guantánamo detention facility. enemy combatant should remain outside of the united states where they can be detained away from our communities and without needlessly jeopardizing the safety and security of the american people. in addition to the mountain mounting -- facing the department of justice, i would also like to focus on the need for an impartial justice department. americans have become more and more suspicious that their government agencies are biased.

to understand this one need look no further than the well-founded allegations that the irs targeted conservative groups for extra scrutiny. after numerous appeals to appoint a special counsel to investigate this, last month justice department announced that no criminal prosecution would be brought against irs personnel a connection with this matter. it is not difficult to understand what a special counsel was needed, given that only those organizations opposed to the president's overreaching agenda were targeted by high ranking irs officials. apparently, officials at the irs your secretary clinton's abhorrent notion that republicans are, quote, the enemy. i am profoundly disturbed by the administration's handling of this matter. at every turn president obama and administration officials repeatedly and publicly undermined the investigation. wendy house of representatives to the responsible step of calling for the appointment of a

special counsel to investigate the matter, our concerns and those of the individuals targeted by the irs went unresoe administration. madam attorney general, now that your department has concluded its investigation, i look forward to discussing the department's decision with you in greater detail. given the controversy surrounding the administrations mishandling of the irs targeting scandal, it is critical that justice department clearly demonstrate to the american people that able to handle with impartiality its investigation surrounding former secretary of state hillary clinton's use of a private e-mail server for official purposes. earlier this year, to inspect as jim reported that classified information was contained within the private e-mails a former secretary of state hillary clinton, and have referred the matter to the justice department. during his appearance before the committee last month, fbi director comey vowed that this investigation will be conducted,

quote, probably, professionally and independently. rest assured congress and the american people hold both the bureau and the department to this standard. the committee also remained concerned the department is subverting congress' budget authority by using supplements to funnel money to third party interest groups. the concern is institutional and nonpartisan, yet rather than suspend the practice, gucci has expanded it while quietly obstructing the committee's investigation. last week the department finally produced a small subset of relevant documents that the committee requested 11 months ago. i would like to know what you and as an experienced prosecutor would do if a large corporation behaved this way in an investigation. we sit with you today, attorney general lynch, law enforcement agencies across the country face profound challenges. 31 police officers have been

shot to death this year alone. in many places officers are understandably asking what it is worth pursuing violent criminals or otherwise putting themselves in harm's way, lest they be the target of intentional violence or community backlash. force must be is a probably, a police officers must take proper steps to protect innocent civilians. however, irresponsible, anti-police activity from many in the advocacy community and the justice department's ongoing efforts to micromanage state of local police agencies have only served to exacerbate the divide between police and citizens. this trend cannot continue. many american cities have seen a spike in violent crime. in baltimore homicides are up 71%. in august of issue the number of murders in washington, d.c. already matched the number for all of the 2014. other cities have seen similar increases in violent crime.

despite these grim statistics, however, the obama administration has continued to support initiatives that will only exacerbate this violence. on november 1 of this year nearly 6000 federal drug offenders were released from prison pursuant to a 2014 sentencing commission amendment which the justice department supported. over the next two years some additional 10,000 would be released early. this bill advice and then applied without regard to inmates criminal history and will result in the release of some dangerous violent criminals as well as illegal criminal aliens. as you know the committee has introduced bipartisan legislation to institute meaningful sentencing reform while preventing release of serious violent criminals to speak of releasing violent criminals, the murder of katy steinle in san francisco earlier this year is a tragic reminder that the lack of appropriate immigration enforcement in our nation today and the reckless

sanctuary policies in many cities across the country can have deadly consequences. it is not enough for administration officials to pay lipservice to the problems presented by sanctuary cities. federal agencies including the justice department must take meaningful steps to ensure that criminal aliens released from federal custody are promptly deported. attorney general lynch, i look forward to hearing your views on all these important topics today as well as on other issues of significance to the justice department and to our nation. thank you, now i'm pleased to recognize the ranking member of the committee, the gentleman from michigan, mr. conyers for his opening statement. >> thank you, chairman goodlatte. your opening statement could be the basis of a hearing all of its own, and i appreciate your views. madam attorney general, welcome to the house judiciary committee. nearly seven months ago after

much delay in the senate, you took over the department of justice with not one, but two tours of duty at the u.s. attorney for the eastern district of new york. you are unquestionably the right leader at the right time for the important work of the department of justice. know where is your leadership more important than in national security. the attacks on paris, france, leave no doubt that are most pressing mission, yours and ours, remains protecting the american people and, unfortunately, history shows that tragic events like these are followed by calls for

drastic action. already we have heard proposals to undo encryption, to rollback surveillance reform come into port some of the most vulnerable among us. i urge we straining these matters, madam attorney general. at this time we have very little information about how the attacks were carried out. rather than use these events as an excuse to advance policies that otherwise betray our values, i urge the intelligence community, including the department of justice, to focus on the most effective tools in our toolbox, targeted surveillance, targeted investigation, and smart policing. back at home you have cultivated strong relationships in the

police community, but you're not afraid to call out bad behavior or to prosecute police officers when circumstances warrant. that experience will prove invaluable as the department, along with this committee, takes its next steps on criminal justice reform. under your leadership, the civil rights division continues its work with police departments around the country to ensure that state and local policing practices comport with the constitution. the office of juvenile justice is also working hard to disrupt what you call the cycle of criminality and incarceration. i commend you for your work on this front, and i look forward to our partnership has this committee moves forward.