immediate interest. i remember when bob kerry and i spent the three years on a bipartisan basis on the alzheimer's study group and we were here in the senate, we had 15 or 18 senators come to a hearing and i think all but two of them had a personal relationship with alzheimer's. wul suddenly -- well suddenly people said let me get this straight. it is going to create jobs, it is the right thing to do for disease and the only possible treat to balance the federal budget and somehow that conversation broke through. i'm frankly trying to figure out how we get it into the presidential campaign next year because i would love the candidates to have to answer the question are you going to try to get to a balanced budget by bureaucratically depriving people of goods and services or are you going to try to invest in the research that lets us break free because the truth is it -- if you postpone alzheimer's on set by five years you cut the projection in half.

now that is $10 trillion. so there are not many places you can say i can take $10 trillion out of the spending stream to keep you healthier. >> let me follow up on this now speaker gingrich. you are a conservative and as a result may have credibility than i do in some circumstances on the question on the role of government here. why isn't it enough to count on private industry to do this? why do we have to have a substantial investment from the federal government? >> it's a question about american history. [ inaudible ] and i are developing a project on why george washington matters. and people don't often notice that the founding fathers wrote into the constitute a patent office because they so deeply believed in the future. they made investments. the first federal highway was

built during washington's lifetime. they believed in improving things. they talked about them as improvements. jefferson launched an expedition to the west and there was a children's book on this called from sea to shining sea it was supposed to cost $2,800 and it cost $38,000. and there are patterns that don't ever change. but the idea of jefferson's era of taking people and senting them to the pacific is comparable of going to mars today but jefferson understood we needed the knowledge and most of is stored up in the academy of natural sciences in philadelphia. so we have had a long history of investment. congress passed the money to enable the first telegraph to be built between the capitol and baltimore. that was a congressional investment. now i think that we have to recognize -- lincoln, he was the only president to hold a patent

and lincoln was totally fascinated with technology and brought a lot of it into the civil war to the benefit of the union. so i think there is a long history of america being a company of technology advance and willing to invest in a better future and recognizing the government had a significant role to play in that. >> and let me ask that with a little bit more shortness to the point right now on health care in particular. given that the taxpayers are on the hook for medicare, for the veterans administration, for other health care costs, if we fail to make the investments in nih and discover the cures that we need, who is ultimately going to pay for this? >> well, let me try to paint a picture for a second because it is worse than your question.

anybody that goes out and talks to cutting-edge scientists know we are right at the edge of break throughs that are so extraordinary. i'm at the age where i have several friends who have unique difficult problems and when i can help them find the best two or three people in the country their lives are suddenly transformed because the best two or three people in the country are 20 years ahead and are doing things in laboratories and doing things in hospitals that are like magic. and we're having break-throughs at every single level of health. to know that exists and this close in regenerative medicine and within a generation we could help you regrow your own liver rather than have a transplant. to help you re grow your kidney so you don't have to have insulin injected for the rest of your life, to help you re grow if you are in a car wreck, to re

grow your nervous system that we have experiments with and we see things in the lab and look at a wounded warrior because the science we are applying is 20 years behind the science that is in the laboratory and then you look at the failure to fund this and frankly it is probably the thing which comes closest to driving me nuts because -- and i say this all to my fiscal conservative friends you have trillions of dollars of guaranteed expense sitting on the table and you'll never get away from it and never have enough -- to my liberal friends you'll never have nur bureaucracy to rationally spend this money because in the end you have to cut off services. that is what happens. so if you don't want to cut off services to people with long problems to people like alzheimer's or autism, if you want the break thinks you have to solve this. and being creative and honest

about it i can get us to a federal budget almost in perpetuity and there is no other strategy with the baby boomers aging that gets you to a sustainable balanced budget. and one -- and by the way which you hinted at us and by the way, while we're saving trillions of dollars we'll create hundreds of thousands of high paying american jobs and strengthen our balance of payments. >> so if congress boosted nih funding again and if we could come together and get an agreement to do that, how would you recommend we structure this funding? >> well, first of all, without putting him absurdly on the spot, i would try to get francis collins to really reflect on the lessons from the human genome project. i'm not a big fan of the peer

review small grant model. i think it leads to incrementalism and extraordinary caution and not made progress on the scale and i think this is one of the challenges we have in selling nih to people. when you double it you want to see -- so what is the rhythm and the excitement. it is a similar particular that nasa has. i mean boredom is not a good device for getting people to be involved. the human genome project was stunningly exciting and done outside of the traditional patterns so i would look at three key areas. one is to what degree can we design much larger grant projects that are driven toward goals, the way the human genome project was. the second is to what degree can a modest amount of money be put into prizes of a variety of forms and if you look at the history of aviation it is amazing how much activity was stimulated by modest prizes. lindbergh flu the atlantic for $25,000. and a lot of people were trying

simultaneously. and third, i would say, we need to find a way to guarantee that a significant part of that money goes to younger researchers so that they have a chance to become principal researchers not just surfs working for seniors. and also and i hesitate to do this because you represent the state most effected but i would love to have someone to question the scale of money we give to the universities for administering these stuff. if you look at the money of harvard or john's hopkins both of you in one look, just to look at that and say come on can't more of that go into research. >> and let me ask you on the funding part of this, should we be doing, should we be doing capital budgeting as a way to increase the funding substantially for nih? in order to fund nih, do we have

to cut short-term spending in other areas? >> we don't have to cut short-term spending in other areas. i would take it off budget an issue of alzheimer's bonds because i think the long-term title -- tidal wave it coming that the most fiscally prudent thing you could do is cut that wave through research. and i'm happy to cut that notion in terms of talking to conservatives because there is no other alternative that works. second if you look at how the navy builds aircraft carriers they can't put the money in because of the nature of the federal appropriations process so they can't buy the whole carrier but they can sign a contract making it prohibitive of buying the carrier. it is slight prohibitive. i think we can fund projects over a four or five or six year period and i understand -- again

i'm a constitutional conservative. i think congress should have control over things but i think there are practicalities. the transcontinental could not have been built on an annual budget so they had to design an innentive plan over a multi-year period. and i challenge this -- and this puts some of my close friends in a bind because they have to get this through omb and the white house and i would challenge nih to come back and say give us some project so large and so exciting that it justifies a capital budget and let's go fight for the capital budget. >> sir thank you very much. mr. speaker, i feel like i'm standing or pitching low and slow over the plate. but i am very pleased to hear your answers. we have a gaping hole in the nih budget. right now it is $12.5 billion. we need a serious plan to fix it. and if we really want to dream big about what we can create then we need to get out here and

fight for more funding for nih. i proposed a bill called the medical innovation act which would increase nih funding by 20% without raising taxes, without cutting critical programs and it doesn't have to go off budget. if there are other ideas folks should put them on the table but it is time to get this done. i think that it goes without saying that you and i have fundamental disagreements in some areas but it is clear that one thing we agree on is what congress must do and i hope that we'll be able to follow your example, double the funding for nih as you did in the 1990s and bring home some of the promises of medical research in this country right now. thank you. you had another comment. >> just one comment. speaker gingrich i want to again thank you and going back to some comments we were making before we started today. i'm hoping that you'll use your

influence to help us achieve the things that we have to achieve. as i was listening to you i don't want something to go unnoticed. you talked about key people who play significant roles in making sure that we had appropriate funding for research and particularly medical research. and i often say that out of our pain comes our passion to do our purpose. and you know i think that the people that you talked about obviously had pain that they had experienced in their families and they were able to take it to the halls of congress and make a difference not only perhaps for their families, but also for many others all around the world. an then i thought about what you said about how important senator warren said about how important this research is. i have a family member, ten years ago they said well they thought she had a terminal type cancer but because of work at

nih it is now chronic. and so those are the things that we don't necessarily talk about when people -- when we are looking at dollars and cents but those things mean so much to so many people. and so i want to thank you again for being with us and i'm hoping that you will join us on our crusade to lift up all americans so they can live the very best lives they can. thank you. >> let me just thank you both for your leadership in doing this. these are the kind of conversations that ultimately in a fro society allow it to talk to it self-and find dramatically higher value solution and you two are doing is very important and you have my commitment that anything you need to help in this project, anything i can do you can call me. >> thank you. let this be the start of a new alliance. thank you, speaker gingrich. i would like to ask our folks to set up for the second panel and we invite the members of the

second panel to take their places. our first panelist is dr. carol espy wilson. professor of electrical and computer engineering at the university of maryland's a. james clark school of

engineering. dr. espy wilson received her ph.d from the massachusetts institute of technology. an expert in speech communication, the doctor is a member of the national advisory board of medical rehabilitation at the national institute of health. she is already the founder of the omni speech, a company that is commercializing for youths in cell phones a software technology to separate speech from background noise that was created through dr. epsy wilson's research. welcome. >> and i'm very proud to have a chance to introduce our witness from massachusetts, dr. aaron kesselheim is an associate professor of medicine at harvard and a faculty member in the division of -- i do this, pharm aco epidemiology at the bringham women's hospital where he brings regulation on therapeutics and

law and he earned his bachelors from harvard and his medical and law degrees from the university of pennsylvania and he also earned his masters in public health from the harvard school of public health. he is certified in internal medicine and he serves as a primary care physician at the phil is gen center at bringham women's hospital. welcome, doctor kesselheim we are pleased to have you today and thank you for linding your -- lending your expertise to this panel. and i'm honored to welcome dr. mariana mazzucato from the chair of the economics of innovation at the science policy research unit of the university of sussex. the doctor completed her ph.d in economies at the new school for search research in new york. she is the author of the entrepreneurial state debunking public versus private sector myths which was included in the

2013 book of the year list issued by the financial times. so thank each of you for being here. and if you could each just provide some opening remarks and we'll get started with questions. dr. espy wilson. >> good afternoon. thank you for the opportunity. sorry. good afternoon. thank you for the opportunity to be with you today to share my experience with federal investment and research in innovation. i've been a professor now for almost 25 years and i've been able to sustain a research program with the support from the national science foundation and the national institute of health and i'm in the process of commercializing technology that originated from this research program and that effort too has been funded through small business innovative research grants from the national science foundation and a small business technology transfer research grant from the national institutes of health. i think it would be informative

for this hearing to start by describing typically that the academic career track will start for some as a post doc and then on to an assistant professor and then five or six years and then to an associate professor with ten year and then another five years one may become a full professor. now if you are at a major research university, a significant part of your time as a professor is spent conducting research which includes the training of graduate students at independent researchers, possibly some training of undergraduates and this is becoming more and more important as we want to build the pipeline of graduate students ready for graduate school in the stem fields and collaborations with colleagues inside and outside of your university to address problems that may expand several disciplines. even the combination of research in teaching is important because

professors can share their research in the classroom to help students understand how the subject matter they are learning can be applied to do analysis or solve useful problems and to motivate them to seek a research career. as many have said here today, conducting basic research helps us to build a understanding of all sorts of matters, helps us to solve significant problems, develop useful technology that can be transformative and all the while training the next generation of scientists and engineers. the funding of research should be of highest priority, basic research that provides the advances that will benefit our children and grandchildren and it is supported almost exclusively by the federal government. both basic and applied research are vauluable but there are alternative sources of support for applied research. without basic research there is no applied research and innovation. and federal cutbacks in this funding has been huge. excellent innovative research is

not being funded. nor example at the nih and we have talked about them today the funding percentile is as low as 9% in some schools whereas in 2001 it was as high as 29%. and this reduction in the number of proposals that are funded has had a significant negative impact on the morale of investigators, not just the one applying for the grants but the peers who are seeing the proposals not being funded. it also of course has a significant negative impact on the training of students and the degree to which fundamental research gets done. young scientists and engineers are making other choices. career choices. and these are the very people we should encourage the most to do research because they are the next generation of drivers of innovation. for some particularly like computer scientists and engineers, they can find interesting jobs even research jobs in industry however many of our young scientists are headed into underemployment.

also program offices are cutting budgets significantly because they are trying to spread the wealth but that causes considerable disruption in the research and the training of students and in particular one of the first things you cut is your travel budget but that doesn't allow you to send students to conference to develop the job prospects they need. cutting back in funding also is having a negative impact of making agencies more conservative in the research they support as a result there are no incentives and encouragement and financial support of faculty and students toward out of the box and creative ways of thinks. in real terms, while government supported research is shrinking here in the u.s. it is growing in most of europe and asia and we're seeing this based on the sort of research presented at conferences. this trend begs the question of where will the big break-throughs in the future come from.

finally i'm sure you're aware of the existing problem of too few u.s. students going into stem fields. i fear that federal cutbacks will only make this problem worse. and i feel confident in saying that much research universities it is already the case that our graduate student population, particularly in the ph.d level in stem areas, consist of mainly -- mostly foreign students, not americans. and we need to look for ways to turn this deficit around. so investments in research and education have a huge return but only over a long time span. these investments we make not necessarily for ourselves in the short-term but for our children and grandchildren. it is sometimes not easy to think that far ahead but it is impair pairive -- imperative that we do so. now i would like to address the strans legislation of lab to a start-up for commercialization. the research being translated at

my company omni speech was supported by nsf and multi research grants as part of the grant at the university of maryland. i did not conduct this research with an eye toward commercialization. after disclosing it to the patent office and giving some talks at research review days, i got a lot of feedback and encouragement to do a company and that began my foray into entrepreneurship. in addition to the fact that the university of maryland at college park has a very active entrepreneurship incubation program, it was of the utmost importance to me that the small business research and small business technology transfer program exists. for omni speech the grant was the critical catalyst for beginning the effort to transform original research code into a commercially viable solution. it enabled me to hire the virs engineers and to reach out to

prospective partners for evaluation and more over as a tiny start up it was critical for establishing credibility. and finally through matching funds through the phase two program was critical in the angel investment to further expand the team as we prepared for commercialization. the government must continue to provide incentives to spur innovation and support the development of new technology as the efforts in turn lead to expanded employment and the growth of the middle class and the improvement of our quality of life. the programs are doing well. nsf has raised in the last couple of years the funding amount for the phase two awards from 500,000 to $750,000 and this is significant and will help start us considerably. especially since commercializing technology can take a lot of effort, resources and time. in my case given it was research code that we were

starting with that code was computationablely very expensive and we had to optimize the code to make it run many times faster to fit on a dsp chip so it took us a lot longer to do this task because we never had to commercialize code before. so i also want to point out that the nsf has developed the i core program and this program is to foster entrepreneurship preparing engineers and scientists to extend their focus beyond the laboratory in the commercialization of technology supported previously by nsf funded research and this program has been shown to make a significant difference in the success rate of these companies. because they also are fostering an eco-system where they are surrounding or wrapping around these companies mentors, angel

investors, venture capitalists and marrying these scientists and engineers with ceos, people with a lot of business acumen and can help them get to the next level in their company. some of the companies this program only exists for two or three years and people have achieved success where they are licensing technologies or their companies have been bought out by google or -- >> doctor, can i ask you to wrap up. >> that was the last part. >> this is really great. >> on the entrepreneurship side, the federal government is doing well, but just remembering that we have to start with the basic research to get to that point. >> good. thank you. dr. kesselheim. >> thanks. excuse me. thank you. it is my pleasure to talk about my research in the sources of transformative medicines. the wholly grail of drug research and development are

transformative medicines. innovative drug with ground raek breaking drug and care. patients have worried about the reduction of new products despite a drug development process there is controversy over therapeutic of new medicines. arguing public ins tucsons niegs nih support medical innovation that is distinct from the process of drug development. while this drug development remains vital i want to focus my comments on the valuable yet under recognized role played by public investment. i led a survey of clinical leaders in a dozen different medical specialties to determine what they thought were the most transformative drugs approved by the fda in the last 25 years. the experts came to a consensus of 26 drugs and drug classes an then i examined the development history of each of the drugs.

a full result of the investigation are available in papers published in health affairs and among others but one of the major themes was publicly funded academic and scientists with a therapeutic approach about disease mechanisms and going so far as to demonstrate proof of concept. for example the red blood stimulator was first purified at the university of chicago laboratory of eugene gold wasser in 1971 who also proved the potential therapeutic effect. when -- with his help as a consultant, am gen produce the large quantities of come edgen and leading to a rare type of leukemia was the very first successful targeted cancer therapy. it arose of dana farber cancer institute that set out to

[ inaudible ]. he and his colleagues developed he identified an active agent. or [ inaudible ] the first product to demonstrateinib-of hiv at the cancer institute in michigan but with the rising threat of hiv they submitted drugs for possible candidates. [ inaudible ] was submitted among hundreds of other drugs and it was submitted far higher than any other compound. clinitians at duke university and [ inaudible ] was approved a scant three years later. one variation, the seminole scientific concept arose in university settings and later followed up in the [ inaudible ] ssri antidepressants. the university of lubt in sweden

investigated the role in sweden and they showedize effect and efficacy in treating depression and a research team at lilly started treating [ inaudible ] the first to be fda approved. the transformative medications treated different things and one thing emerges the centrally of government funded and academic basino vators. drug companies play a vital role in collaborators who provide drug samples to move forward, but our findings do not support the concept of the pharmaceutical company as the single source of [ inaudible ] drug development. further reports can be found in a story behind sof usaa fill and

other [ inaudible ]. has made in understanding hiv since the discovery with grants to build labs and discover labs and conduct trials and one of the [ inaudible ] was pharmaceutical at emory and a senior research scientist at the v.a. who formed a start-up called farm asset to treat hepatitis c eventually hitting on [ inaudible ]. as for the concept of viral inhibitors many of the key insights identified in the survey arose in academic or government-sponsored settings but these are pattened and generally used for products. the products based on insights and the result of the intellectual property occurs with the pharmaceutical company and this leads to misperception of the products. so one of the out comes of the miss perception is drugs focus on providing great erin sentives

for drug producer by extended patents and as an example you can see the bad half of the recent 21st century cures legislation passed by the house of representatives. in contrast reductions for nih funding have threatened sources that we found did support most transformative drug innovation so i firmly believe that policies that support federal investment in scienceno vase will produce more transformative drugs in the future. but the high risk high cost aspects of basic research may need to new therapies that have raised concern as to whether this could lead to the socialization of risk and privatization of drug development. and we should think of returning a small share of the revenue of the infrastructure by being plowed back into the [ inaudible ] funded research. but creating transformative drugs, we hold great promise for further advancing transformative

development. thank you. >> thank you very much dr. kesselheim. and dr. mazzucato. >> thank you for inviting me here. this is one of the only topics economists agree about. so it is agreed that spending on r&d which we should remember is one of the inputs into the innovation process have an absolutely very important effect on long run economic growth. but the real issue and that is where we get back into the debates between economists is how do we talk about this and what is the example of the role of the public sector, when it interacts with the private sector in nurturing the innovation of economy and there we have a problem and i think i want to focus on the limited way that economists have talked about this and also limited the way that policymakers have -- have feels enabled or increase the budget whether of the nih, nsf or nasa. and it is not a coincidence that

i work at the policy research institute in sussex founded in 1965 because it was the only places that head-on confronted the notion that the economists have the role of the public sector in financing innovation is to fix market failures. of course we've heard a lot about basic research but it's not just about basic research. the public sector has been slooud absolutely fundamental for financing innovation across the whole innovation change and i was really happy to hear speaker gingrich say the word get shaping. if you look at what nih nas is, svr have enabled in the u.s., has been market creation and market shaping. through a decentralized network through action oriented agencies. in economies, we don't even have the words to talk about market shaping and market creating, so we talk about public good and of course, basic research is a

public good. why is it a public good? because the spillovers when it happens, are just so hey it's hard for a private firm to appropriate the returns from that and hence you get underinvestment. so the developed hazard to stul in so the government has to step in. you see different actors across the whole innovation chain applied research and as we were hearing before in the patient finance that early stage companies require because if you know anything about venture capital, you know they're very exit driven. they want their returns in three maximum five years. that exit tends to happen through a buyout or an ipo and, you know, that's fine maybe for n some gadgets but it's not going to get the nano tech revolution, or today's clean tech revolution that so many people are hoping for. so i really want to focus on those points and how the

inability the talk about this, we have a problem as tony used to say has, again, really hurt policy making in this area. lots of these agencies have been mission oriented, right? the most obvious mission is going to the moon. but if you read the website today, they clearly have a mission to nurture out of the box thinking around renewable energy innovation. if you look at the nih website, it's absolutely mission oriented and how do we include missions and visions and econometric models? we don't. also, if you look at the three big problems that we have today, which is first of all the cuts that we're witnessing in research altogether, so you know, the latest figure is that federal percentage as a total

r&d was 60% and it's dropped to 20% to 25% in the years in the 2000s recently it's gone back up to 30% because of ara, which is great. however, this is a massive fall. it's also increasingly focused just on basic research. while it's wonderful that we, again, are talking about basic research and the importance of it today, we have to remember that the big successes in the past came from nurturing these linkages, fundamental dynamic link aenls between basic and applied research. if you look at the aggregate sector, it looks like the private sector is making up for that. however, that has been increasingly around applied research. so the private sector used to spend something like 35% of total basic research spending was in the private sector. now it has fallen to about 20% and it's increasingly narrow in scope. this is actuallyco evolved

alongside a real dysfunctionlty we have today in unfortunately, the many countries but especially the u.s. which is increasing utilization of companies so spending more on things like shared buybacks and r&d. this is fundamental because if we look at those times when we had an active private sector engaging with an active mission oriented strategic public sector, you have to ask yourself, why were they doing that? so bell labs, as we often hear about, it came from a deal with government, right? at&t was a big monopoly. government said, fine you can retain your monopoly status as long as you reinvest your profits. bell labs was the answer to that provocation. we really don't have -- if you want that kind of deal making today between the public and private actors, and partly i think this is because we've allowed this narrative to be so pervasive, that's the only thing that the public sector has to do is sort of facilitate, derisk, to rate the conditions for innovation and all the really

cool stuff is going to happen within business. and the problem is that that is a historically incorrect. we've always required a dynamic creative strategic public sector alongside business and i really hope we get to talking about that. because as long as we just talk about basic research, we kind of miss that whole wider story. >> excellent. thank you very much, doctor. so let me start with the question about where innovation comes from. if we want medical innovation we have to understand where the discoveries come from. two-thirds of the highest drugs with the most tlaep therapeutic research stem directly from discoveries made through publicly-funded research. doctor, you found in a recent study that most of our truly transformative drugs are based on insights gained through publicly funded research something you've summarized in your testimony here today. but a 2001 health fair study

found that it's often cited by the drug industry found that 91% of drug patents are owned by the private sector and the industry says this is evidence that innovation comes straight from the drug companies. so, doctor i want you to help us understand the discrepancy in these two descriptions of where innovation comes from. >> well, i mean, i think there are a number of explanations as to why it is that health fair study might sound bad. first of all as i said in my comments, a lot of the key insights such as the -- you know, use of tumor necrosis factors to block disease that inspire a whole field of therapeutics are not necessarily patentsble insights, but

nonetheless arise from decades in the case of the inhibitors and a vastin story. decades of a government-funded research. and those kinds of key insights that then catliez the subsequent development of products are not patentable, although the products are. on the other hand, pharmaceutical companies do an excellent job of trying to build a patent ticket around their invasions and will subsequently patent changes in incremental innovations. and so we'll build a -- you know a -- we did one study showing, you know, over 200 patents around one particular drug. so i think that on the one hand it's the case that a lot of the key innovations that come from public money are not patentable. on the other hand, it's the case that pharmaceutical companies pursue patents to excess.

we did a study looking at all of these patents that are held in the health care sector and found that the small sliver of patents that were held by academic institutions and government were actually much more important in terms of being cited more in subsequent patents than had much more impact on the field in terms of their generalized ability and value than the patents on average held by the pharmaceutical sector. >> so the federal government invests a lot of money in research. the drug companies use that research to develop new drugs and then when those drugs earn money, sometimes billions of dollars, the taxpayers don't necessarily reap the reward. that's how i'm hearing you describe this change. now, some drug companies argue that the government recoups its investment in basic research because the drug companies pay corporate taxes on their profit. do you believe that the taxpayers are being adequately compensated for their investment

in the drug companies, dr. kesselhime? >> well, i mean i think we could do a lot more to try to invest some of the -- you know, the positive profites and outcomes that come from these products into the biomedical enterprise specifically. you know when you look at pharmaceutical manufacturers and you look at how much money they doe vote to research and development, only 20% of pharmaceutical manufacturers sales are devoted to research and development, the amount that they spend on administration and advertising is actually far more. so i think what we need to be doing is taking some of the enormous profits that emerge from the pharmaceutical industry and plowing them back into the

buy your medical enterprise that in many cases provided the underlying discoveries that loud those profits to be made. >> well in fact, though, i think there's much conversation about that going in the opposite direction with drug company profits. perhaps i could get you involved in this dr. mazacato. there's a lot of talk about cut corporate taxes from companies that can trace their profit back to patents or other forms of intellectual property. so i want to know what you think about this sort of innovation box tax cut. would it spur innovation or increase federal investments in research? doctor, do you have a point of view about this? >> first of all, i think it's very important to remember that we remember what a patent is. and a patent is a monopoly pore 20 years, right? so as a policymaker, the goal should not be to increase, you know, the profits of companies. it should be actually to increase the research if you

want the leads to those patents. this is what policymakers are trying to do all around the world. and the evidence is that these patent innovation box policies are not very good at that because what they're targeting is the income generated from the patents rather than the research that leads to them. this is true of lots of r&d tax credits. in holland they just designed one which is quite intelligent i think, because it targets the research that leads to the r&d. so the labor hired rather than the income generated from that r&d. but i think we should remember that, for example, the act which in 1980 allowed publicly funded research to be patented. if you read that act, it's really interesting. they also say we better make sure that the taxpayer doesn't pay twice, right? so just like year, i think the nih spent arounded 39 billion in research, both basic and applied. and the problem is what happens to the prices of these drugs?

do they reflect that input? so it's not only -- and i've been reading a lot about this, but the pricing mechanism itself could be one way to be rewarded so that you don't pay twice. but the government has never felt the confidence to cap the prices of drugs because precisely of this long narrative that i talked about before where you're metaling in the market when actually you've created that market. as soon as we talk about government having a say on the price or even the whole obamacare, if you want, vision where we talk about the government metaling in the health care industry. so this is why we need a new narrative. so what i'm hearing you say, to boil this down a little bit is we get more innovation if we do more federal research for basic

research, not if we make these giveaways to big drug companies. >> there's no evidence. so the patent box which has been tried and tested in places, like the uk, there's no etched that that increases investment and innovation. it might increase time that people golf. i don't know. that might happen. but what driechs investments and innovation by the private sector are their perceptions of where the future market and opportunities are. warren buffett is very good on that. >> good. >> and what we're talking about is what actually drivers those future policies. that's what we're talking about and that's what policymakers should be talking been. >> one more question and then i'll hand it over to the congressman. then ask about something like the impact of my medical innovation action which could boost the nih budget by about 20% without aciding new taxes and adding to the deficit by asking the drug companies to put

a little more of their profits into nih. no surprise, the army of lobbyist that's work for the biggest drug companies don't like this bill. but, doctor could i ask you how the medical innovation action might affect the pipeline of new products and affect the drug industry itself? >> well, i think the medical innovation action is a good idea because it provides a substantial sum to the nih for its work in -- in catalizing drug transformance and development, to make sure drugs are evaluated and approved so that we know that they work and are safe before they can come on the market. so i think that the -- ufrlts the amount of money that pharmaceutical companies have made over false advertising and other problems is that -- has led to a substantial amount of money that they could be

contributing back into the -- into the development economy through this medical innovation. >> well, naung very much. and it's clear from the testimony we've heard today that new drugs are build on a foundation of taxpayer supported investments in basic research. it does not make sense to me that congress says that it wants more innovation and then turns around and cuts the budget for nih, for nsf, for our basic research. it is time for lawmakers to put their money where their mouth is. i think the medical innovation action is one way we could get back on the right track. so thank you all. congressman cummings. >> yes. the journey from lab to market certainly involved many steps and is a perilous one that many technologies and discoveries even some of the most promising ones have not succeeded in making. is that right? some of them don't make it. >> thank you.

>> and for that reason the it's my understanding it's based between the lab and market is often call the valley of debt. yush in the process of taking a software technology that you developed through your research out of the lab and into the commercial market, just a few questions. your firm speech has received several small business innovation research grants from the national science foundation. how important have those grants been to enabling the so-called valley of death? >> well, i hope we've crossed it, but we're well on our way to if we haven't. but critical. i would not have started the company in the first place if those grants didn't exist. being a propheter, i know how to write proposals. it's something that we do all the time. and so having that there made it

a lot easier. but i'll also add that university of maryland has been very supported through professor students forming companies and so has developed a lot of programs. and one crucial program for me, was a program called the venture accelerator. that i joined where you have people with a lot of business acumen who have been entrepreneurs several times. they're there to advise you to help you write a business plan to help you develop a financial model, to help you think like a business because because that's very different from thinking like a professor. >> in other words, that goes to effectiveness and efficiency of what you're doing. >> yes. >> is that right? >> yes. >> sometimes i think you have people that go out there and they were trying to reinvent the wheel and they don't know how to do it. the next thing you know they fall in the ditches and they never get back up they become discouraged and the next thing

you know, they'll decide on it. >> yes. so that's also the goal of the icor program that nsf has developed. again, that came after i had started so i wasn't able to take advantage of that program. but one of the main things that they have, people who are thinking of being entrepreneurs do is to test the market, to actually go out and talk to your potential customers, to your potential strategic partners and understand what is the market need? because oftentimes we develop technology because we think it's great only to find that there's no one thattel really wants that telling. so you want to make sure that you don't waste that time. and they've been able to reduce the possibility of that happening significantly. >> how important is venture capital funding to getting that technology to market? >> dependant on how much money you have. if you're able to generate revenue early, you may not need to get inventory occur capital funding. but if it's going to take a

control amount of time to get that kind of traction where you're generating millions of dollars that can support all of your employees and your growth then you need venture capital. >> you said something and i don't want it to go unnoticed. you talked about how when these younger people cannot get grants to go and to do research, you said they often become underemployed. and neither warren and i have not looking at this whole middle class prosperity situation and the idea that -- we have one hearing or two where we talked about people being saddled with debt, students come out of school saddles with dead. then we have a situation here where if they don't have opportunities, then they don't have a job to even pay the debt.

>> exactly. >> and i haven't even gotten to giving the feel probably of hopelessness and wasted you know potentials that they could be giving these great gifts to the world. and that's something that, you know, we just kind of -- i don't want us to pass by that because we've got a lot of young people who want to go out there and do great things. but unless we open these doors, and senator warren talked about it a lot about how all of this you know allows us great jobs. that is significant. do you see that? i mean do you see young people? you're a profront seater. do you see young people falling by the wayside or becoming discourage discourages? >> yes. even the young scientists who are trained and are able to apply for proposals through nih. i mean i think there's research that shows it's the young investigators that are hurt the most because they don't have the

track record that your more established scientist ves. unfortunately when you're sitting there in a peer review panel, you think the more established scientists, you know what they're capable of. they tend to in my opinion, get favors over the young investors because they don't have a proven track record. >> we're also cutting off our pipeline. >> exactly. they do try to make efforts at nih to give special attention to young investigators. but there's still a lot of them who end up without support. >> doctor, in your book the entrepreneurial state, you discuss how u.s. and i quote has one of the most interventionist governments when it comes to innovation. if the government no longer played the rolled of mission centers, is there any other

force in the united states capable of making what president kennedy called the national commit of scientific and technical manpower facilities to marshall of nation's capabilities and talent toes solve our biggest challenges? >> well, no. i think that the point is not do we need, you know just a state, another private sector, a more private or more. it's always be very important dynamic public/sprieft, if you want interactions that have been fundamental to creating the kinds of innovations. the problem is today we have real crisis on both sides so we don't have that mission oriented or if you want we have less confidence for many agents even to talk about their commissions. they have to show their economic value. but also you know, when we think about these sbir funds

for example, which you were just talking about, in some ways what they were able to do in the past were to act kind of like a public dc fund, which by the way is very common around the world. this knot about communist, it's about how to get capital investments and innovation. but the problem is by not allowing them to talk about tlemz in a particular way, we haven't allowed them to do what any normal venture capitalist will do which is to welcome failure, right? when you try to innovate, you will fail and fail and fail again. michael jordan i think has one of the best quotes on that. but what the private venture capitalists have is they have the ability to reap some of the reward on the up side which you were talking about before to also cover ta downside investment, right? all the failures. so this lack of ability to admit, yes, we are kind of like a public venture capital fund

has not allowed nih, but i would argue nih and bartha to think more concretely about how to create a resolving fund. and you see sth with, say, the recent guaranteed loans that were given to companies. everyone knows the cylindra story. why? because it failed. it was a great story for anyone that wanted to bash government. actually, everything behind the iphone that we know, you know, was picked, internet gps, touch screen display, siri they were all picked by different government institutions for financing. so if we admit that for each internet you'll get 20 concords for each tesla, you'll get 20 cylindras.

they have to get much more realistic about whether the tax system by its own, if you want is actually bringing back enough money to do these experiments again and again. >> let me ask you a question about china. the 2014 global r&d forecast reported china was continuing to make double didn't increases in its annual r&d budget. projected that if this rate rate of growth continues through the end of the decade, china could surpass the u.s. in total r&d spending by about 2022. is china trying to emulate the r&d model we utilize in the u.s. and is it trying to entice researchers and new technologies to leave the united states to come to china? >> well, china i think has an incredible ability to adabt and

learn in some ways the right lessons. they're spending 1..7 trillion on these five new sectors which are broadly defined. it's very much milg mission oriented policy. if you look at these five areas, they're all in that green direction. they're increasing massively their r&d expenditures. but i think what's also interesting is those countries around the world that are able to a see that as an opportunity as opposed to a threat. so denmark you know, small country, is the number one provider of high tech services to china's green economy. and denmark is sort of punching its weight in terms of investment and innovation and they themselves have been able to engage in china in this interesting way that sees these chinese investments, again, as an opportunity. and i think what would be transformational for the u.s. is to stop seeing china as a threat

in terms of oh, god, they're increasing their r&d investments more than we are and ask themselves how they can benefit from this massive increase in spending because they're also potentially supplying a demand side, not just the kind of supply side push which in some ways we've all been talking about supply side pushes on innovation. that's an important point which is all the big technologyical revolutions in the u.s. required a demand side policy, right? so mass production would not have had the effect that it did in transforming productivity across the whole u.s. economy without big thinking mission oriented demand side policies. and one way i think that china today is thinking about that is precisely using green as a new direction, also for the i.t. revolution, right? so you not just spend on r&d in

high tech areas, but you would think how are you going to help the phi fusion and the employees of those innovations across the whole economy. green becomes an interesting direction to think about how in this country we allow i.t. to get fully deployed. >> i think the data make it clear that so create real innovation, we need more investment in basic research. but right now, instead congress is focused on lowering the fda standards for aprofessional so that companies can get their products on the market faster. the industry argues that patients just aren't getting new drugs fast enough and it's too hard for them to get drugs approved approved. i think this is a very sdrus game so i just want to ask a question about this. doctor, can you tell us about the authority the fda also has

to speed innovative new drugs to market and in the fda is using that authority? >> sure. there are a number of pathways that the fda has to provide patients with access to important new drugs treating serious or life threatening conditions or unmedical medical need. there are at leave phi different pathways that have the effect of trying to speed new cures to market. last year, especially two 30s of the fda were approved vee kra one of these accelerated development or review pathways. so not only does the fda have these pathways in place, but it is using them liberally. if you look at the statistics a lot of new drugs are being approved on the basis of stus studies in you know, treating biomarkers or other surrogate

end points. most new drugs are approved on the basis of studies in six months or less despite the fact that they're intended to be for chronic diseases and used for a lifetime. so i think the statistics and data don't support the industry's assertion that there is a very long and arduous process for a -- for testing, approving new drugs once it's known that those drugs work. in fact it's quite the opposite. >> that's very helpful. lowering fda standards may make drug companies even more profitable, but it is not going to make them more innovation. so let me ask you another question about this. some things put forward in congress would allow drugmakers to advertise and promost uses for their drugs that aren't approved by these called off label drug uses, that have only initial clinical evidence that they my work, very small trial.

as an expert can you explain how innovation and safety would be affected if these proposals were passed into law? >> yeah. these proposals are very dangerous for patientes and public health. what they would do is allow companies to get drugs approved on the basis of an extremely narrow limited indication and promote them widely for conditions where they might not be effective and they may be unsafe because there hasn't been any testing done in them. patients want transformative innovations. they want treatments for their conditions, but they want treatments that work and treatments that are safety. if you don't allow -- if you don't provide companies with a requirement to do those kinds of tests by virtue of having the fda approve those conditions, companies won't do them. so you're not going to get that kind of testing that we need in

order to guide physicians trying to prescribe these drugs to guide patients who are looking for these drugs. we don't know how to use them and whether they will be working. meanwhile, because these drugs are defensive, we would be dumping resources into these treatments that aren't well known when what we could be doing is testing them first to make sure they work and then using them appropriately. >> that is a very supportful point. the fda is the gold standard around the world because it has protected americans safely anden sures that the drugs used are effective. we could disman the fda but lower standards wouldn't produce any new cures and it certainly wouldn't keep us any safer. if we're serious about finding new cures congress should better fund the fda so that the fda can do its work. we need to make a real commitment of real dollars here.

thank you very much. >> dr. kesselheim according to the data here, between july 2013 and june 2014, at least 1200 generic drugs more than doubled in price. are you aware of this? >> yes. >> there is one generic drug on the lot that could reverse the effects of heroine overdose or opiods in minutes. according to cdc heroine related overdoss nearly group ruineleled over the last decade. and yet the company that makes this in the nasal formula increased its prices across the country by more than 50% over the past year. and baltimore where i live, the

cost of this more than doubled in less than one year. doctor kesselman, are you aware of these price hikes? >> yes. >> the only explanation for these price increases seems to be that this company see tess increase in demand for the product and it sees the lack of competition and it is increasing its price toes make additional profits. this year, i introduced a medicaid generic price fairness act. this bill would require generic drug manufacturers to pay rebates when prices increase faster than inflation. brand name drugs already pay these rebates. my big would simply extend the same offer to generic producers. do you think this proposal makes any sense? >> well, first of all

absolutely. i think it's great that we're talking about generic drugs in a meeting on innovation because one of the key principals towards drug innovation is that sure we need a period of market exclusivity in which a brand name kb can make back its invested revenue, but what drives innovation is when the exclusivity ends and a vibrant generic drug marketplace in order to compete with the brand name companies and that forces them to then pursue the next great thing. and in this case, it seems like there is a major market failure in the case of being able to provide these generic drugs for reasonable prices and we need substantial attention to this particular case as well as the many other cases that i know you've looked into and others have looked into about generic drugs that have been increasing in price and i think that your bill is a good step in the right direction, but i think there are a lot of other things that could be done to try to make sure

there is a vibrant drug marketplace to try and promote innotion vacation. >> a lot of people don't realize it but there are -- according to the american hospital association, over 90% of all hospitals are suffering from drug shortageses. and a lot of this is that folks are hoarding the drugs and then jacking up the price i mean and over and over again and creating situations where a lot of hospitals cannot get first rate drugs. are you aware of that? >> i am. it's very wasteful. a lot of these drugs are old drugs, there's no intellectual property covering them. this is a problem of a lack of attention that i think our society has on making sure that there is a vibrant generic drug market and you know policies that can help ensure that these kinds of shortages are addressed

in a timely fashion. i think the fda has taken some steps internally in it but i think they could use a lot more attention and resources like the kind you're trying to bring to it. >> we're going to continue to try and shine a spotlight on this. going back to this project senator warren and i are involved in, we're trying to figure out how do the middle class and others keep more of their paychecks. they're paying more .more for the basis of life and producing more, yet and still they're not getting paid more. and then they see the paycheck that they're getting being -- i mean, it's slippinging and they don't know -- they're trying to figure out how to make ends mooe meet and they can't see a future even for their children where their children do better than what they did. it's all a part. it's so amazeing how all of this

comes together. and how every aspect, again, is hitting that middle class over and over again. i have to tell you, people are tired and many of them are throwing up their hands trying to figure out what can we do to make their lives better and this is an efforts in that regard. >> i want to thank you all for being here today. dr. espy wilson thank you and good luck making it through on the project. thank you very much and thank you for reminding us that we need the right language to discussion this and expand some of our vision of what research really means and what it means to support research, how it changes our economy and our country. i think the key message here today has been that innovation is built on federally funded research and speaker gingrich, we were delighted to have him

here to talk about how in the 90s he was successful in doubling the nih budget. and i was glad to hear him say he thought his only mistake was he didn't triple the nisf. but since then we have headed in the wrong direction. we have cut and cut and cut support for basic research. we need to support that research. we need to make sure that america doesn't go bankrupt trying to deal with the medical problems of the future. so i want to thank everyone for being here. >> it's interesting when president obama was in kenya, i set up at 5:00 in the morning and watched his speech. one of the things he said is one of my favorite quotes, he says,

we do not inherit what we have from our -- mainly our environment and our opportunities from our ancestors. we borrow them from our children. we borrow them. the question is is what are we going to provide for our children? when you look at research, making sure that people have a best medical care, making sure that we take advantage of innovation, making sure that we open the door for jobs, good jobs and jobs here in the united states that have impact all over the world it's all connected. it's all connected to what we do here today. you all have contributed greatly to our discussion. we're going to take what you said and use it in every way that we can. we'll probably be calling on you again, trying to get your advice seeking your advice because, again, we want the best

minds. and we have them sitting in front of us. and we also, of course thank speaker gingrich for his contributions and, again, thank you very much as we march forward trying to make a difference. my mom used to say, in my time and in my space i will make a difference with god's grace. thank you very much. >> thank you.

sgloos the house passed a bill stengd highway funding for three months until october 29th. kooel keith laing of the hill writing about it today with a vote with one member present in favor of 385 in favor of that bill, it extends highway program funding for three months. what kind of programs are we talking about? >> this bill is set to replenish the highway fund. there will be no increases in this bill. they're just going to extend spending at current levels for another three months, which leader said would buy some time to work on a longer bill. everyone is saying they hope to get to a multi year bill before the end of the year. >> now, we haven't had a multi year bill in a while. a number of short-term funding.

what is the impact on states with short-term funding versus a long-term deal? >> well transportation advocacies here in washington and leaders from the state department of trpt transportation said it makes it harder for them to plan large construction projects because they're only guaranteed funding at these piecemeal levels. the last extension was two months, this one is three months. that is weakening the nation's infrastructure. >> how many short-term funding deals has congress passed? >> this is the 34th since 2005 if you're talking about a bill that is longer than two years. >> now, the senate has continued work this week on a six-year bill. what is the status there on what the senate is doing for highway and transportation funding? >> well, the senate has said they're going to accept this to prevent the interruption in transportation funding that i was speaking of earlier. but they've also said they're going to finish work on their multi year bill. they have a six-year authorization. it only contains three years

worth of funding right now. so it's contingent upon them finding the rest of the funding to finish that plan out. but they say they're going to finish that and do a final vote on it tomorrow in the hopes of putting pressure on the house to pass a multi year bill on their own when lawmakers come back from this august recess. >> let's talk about the house. with a short-term bill in place only until october 29th now we go back to the house. what kind of prospect is there for a six-year deal or a long-term tooem deal coming out of the house? >> well, the house that originally passed an extension that would have carried until december to provide even more time. because they would like to work on a package to tie this into corporate tax reform. they say that they can take some money from what's called repatriation and taxing overseas revenues and put that back into the highway trust fund. there's been some skepticism about that in the senate and they have a package that they're suggesting. so it remains to be seen if the chal better committees come

together by october. >> who are the key leaders in the house and senate that are working towards get ago highway bill put together? >> this has reached the highest levels of both chambers now. the senate bill was authored by senator mitch mcconnell paul ryan has worked on it in the house, speaker boehner said today that it is going to be a top goal for him to be a long-term highway bill by october. so it is not something that is being discussed in committees any more. >> republican res democrats, are they playing nice? are they working well together on highway funding? >> this has been an a issue that's divided more along the chambers than in parties. you had republicans in the senate really pushing for this multi year bill and republicans in the house balked at it because they were opposed to the inclusion of a renewal of the export/import bank in the measure which was talked about in the senate. >> what is the white house view on the short-term versus long-term funding for highway and transit and where does the

transportation secretary work into the mix here? >> the white house said today that president obama will sign this temporary patch if it's passed by the senate as expected tomorrow. the white house doesn't want to see an interruption in transportation funding right now, especially at the height of the busy summer construction season. but transportation secretary anthony fox said the president's patient sess wearing thin. he's proposed a six-year bill of his own, which includes some of that corporate tax reform idea that are being talked about in the house and he's saying that congress should take up that measure when they come back. >> keith laing covers transportation for the hill. he is also on twitter, @keithlaing and you can read him at thehill.com. thanks for joining us. >> thank you for having me. >> a couple of events to tell but on c-span3. a house agricultural pam investigations the recent avian flu outbreak that killed 48 managerial turkeys in 21 states. we'll have live coverage starting at 8:30 a.m. eastern.

later in the morning a look at recent veteran affairs whistleblower claims. the deputy inspector general of the va is among those testifying. our live coverage gets under way at 10:30 eastern here on c-span3. when first lady ida mckinley arrived at the white house, her husband, president mckinley would sit next to her so when he saw he was she was having a seizure, he would cover her face with a handkerchief until it passed. ida mckinley this sunday night at 8:00 p.m. eastern on c-span's original series, first ladies, influence and image, examining the public and private lives of the women who filled the position of first lady and their influence on the presidency.

from martha washington to michelle obama. sundays at 8:00 p.m. eastern on american history tv on c-span3. >> next, the director of the federal air marshal service, roderic roderic allison testifies for an hour and ten migz minutes. >> the committee on homeland security, subcommittee on transportation will come to order. the subcommittee is meeting today to hear testimony on examining the federal air marshal service. and its readiness to meet the evolving threat. i now recognize myself for the

opening statement. welcome, everybody, to today's hearing on tsa's federal air marshal service. the subcommittee is meeting today to examine the federal air marshal service and its readiness to meet the evolving threat. before we begin, i'd like to express my support for the administrator who assumed his position at tsa last week. i had the opportunity to sit down with mr. neppinger and i'm hoping that he can provide steady leadership that is badly needed at tsa to bring tsa into a new and more effective chapter. while it is clear he will have his work cut out for him, i believe that his experience in the united states coast guard will be a valuable asset to tsa and i look forward to working with him and hearing his plan to fix the agency. since the beginning of the 114th congress, this subcommittee has aggressively examined several issues related to tsa's operations, policies and procedures in order to ensure that tsa is fulfilling its mission of keeping the traveling

public safe. today, we will examine what many have called the last line of defense against potential terror attacks in the sky. that is the federal air marshal service. the federal air marshal service was significantly expanded in the wake of the terror attacks of september 11th 2001. the outcome of 9/11 could have been very different if we had federal air marshals on those planes. however, we also have to keep in mind that the threat to aviation security has evolved dramatically over the last 14 years. the terrorist tess who want to do us harm are constantly adapting their tactics and we need to make sure we are not protecting ourselves against yesterday's threat and ignoring the threats of tomorrow. for example, the threat of an i.e. drchlt or an im proadvised explosive device being dead nated aboard an aircraft is very real. is a federal air marshal capable of preventing an i.e.d. from being detonated or should we

reallocate monies towards better intelligence efforts, more security measures for other soft targets such as unsecure areas of airports? the purpose of today's hearing is to discuss if the federal air marshal service in its current form is demonstrating an appropriate risk-based approach to securing our nation's aviation system from a terrorist attack. it is not clear to me whether the service and the strategy for resource allocation have kept pace with the new threats and that's why we look forward to hearing from mr. allison today. additionally, a remained concern that employee misconduct and abuse within the federal air marshal service have hurt public confidence in the air marshals and have this the ek of decimating employee morale. today, we plan to examine several key areas of this program to determine its effectiveness and whether there is anything congress can do to assist and ensure the safety and security of the traveling public. we all share the same goal and, as such, it is our duty to

ensure that we constantly re-examine what we are doing and why we are doing it in order to yield better security enhancements and be more intelligence driven. at today's hearing, we are very fortunate to have the assistant administrator of tsa's office of law enforcement, mr. rod allison, to address these issues and to discuss what tools are necessary to improve efficiency and security and on respective panel, we will have captain tim connell from the airline pilot's association to discuss the federal flight deck officer program and its coordination with the federal air marshal service. i look forward to hearing the testimony from both of our witnesses and having a meanful dialogue on how to make improvements to the federal air marshal service as we work together to counter threats facing the aviation sector. i annoy recognize the ranking member of the southbound committee, the esteemed gentle woman from new york, miss rice, for an opening statement.

>> thank you mr. chairman. and thank you for convening this hearing. i understand that this is actually the first time since 2012 that a panel in this committee has discussed the federal aviation marshall service. so it's clearly important that we do so and i want to thank our witnesses for their participation today. prior to september 11th the federal air marshal service consisted of only 33 full time sky marshals. the 9/11 attacks made it clear that we needed a much greater presence on commercial aircraft. in the wake of 9/11, the federal air marshal service was rapidly expanded through the transportation security act of 2002. 600 marshals were trained and activated and thousands more activated in the months that followed. the federal marshals as well as flight deck officers serve as one of the last lines against

threats of national flights. we know the threats are constantly evolving and have only increased in the years since 9/11. we must ensure our air marshal service is continually evolving. that is why we're here today. there are a number of issues of concern with the current state of the federal air marshal service. first and foremost, the dwindling ranks of the service, there has not been a new federal air marshal service class for four years. when you couple this with high adirection and poor retention rates, it's clear that the organization is shrinking dramatically and it races serious questions about workforce morale. as the workforce is dwindling so is the number of federal air marshal field offices. last year there were 26 nationwide. currently there are 22 and there are two more scheduled to close in 2016 which will bring us down to 20 field offices within the next year. now, i understand that these closures are determined by complex risk analyses and by the fact that there tend to be

fluctuations in which areas around the country are commercial aviation hubs. but we need to be certain that none of this comp miegzs security on commercial flights and we need to ensure that marshals are transitioning to openings in other field offices as efficiently as possible. i am very eager to hear from assistant administrator allison about the details of these closures and what measure res in place to help with this transition as well as details of what outreach efforts are being taken to improve workforce morale. i'm looking forward to hearing about other details from captain canoll to hear about federal flight deck officers and enhanced barriers. the self-less pilots who volunteer for this program are subjected to intense training and prepare themselves for dangerous aspects on aircraft. i'm interested to learn more about how it's evolving. mr. chairman, thank you again for your leadership and for convening this hearing. i look forward to a productive

dialogue with our witnesses and colleagues and i yield back the balance of my time. >> thank you miss rice. other members of the committee reminded that opening statements may be submitted for the record. we are pleased to have a distinguished witness before us today on this important topic. let me remind the witness that the entire opening statements will appear in the record. our first witness is mr. roderick allison who began serves as the assistant administrator for the federal air marshal service. mr. allison was the -- i would like to note that i met with mr. allison yesterday in advance of his testimony here today and if he displayed the same candid demeanor that he he did yesterday, i think we're going to have a productive hearing. so i look forward to hearing from you sir. and i now recognize you to testify for your five minutes sir. >> good morning.

i appreciate the opportunity to appear before you today to testify about the federal marshall service or what's known as fam. we perform our core mission by deploying federal air marshals on united states flagged aircraft throughout the world 365 days a year utilizing a comprehensive concept of operations that aa lines with tsa risk-based security strategy. fam law enforcement officers receive training to prepare them for the difficult working environment. they operate at 30,000 feet in a restricted space and have no backup to call about. familiar is unique in its ability to remain flexible and to rapidly deploy hundreds of law enforcement officers in response to specific evolving threats with the transportation domain around the world. in competition of the department

of homeland security, familiar recently completed an updated addressing risk mitigation and incorporating randomness and unpredictability unpredictability. while the focus remains on the highest risk flights, the office ensures advocacy uncertainty through potential deployment on any u.s. carrier flight. a risk by flight methodology is underdeveloped which will include fam mission planning based upon passenger travel patterns assess passenger risk and consideration for airport locations with known vulnerabilities. in addition to deploying familiar's on board aircraft they assign visual inner modal response at locations to augment the visible presence of security personnel. those teams can be made up of several components of tsa each working closely with federal, state and local law enforcement partners and transportation

stakeholders to ensure the safety and security of our transportation systems. the federal air marshal service is made up of dedicated professionals whose job demands that they demonstrate the highest level of preparedness and integrity. since becoming familiar director in june of 2014 i have implemented several workforce engagement initialists to enhance communication and to promote the highest level of professionalism within the workforce. over the past year, my deputy director and i have conducted nearly 50 office visits in town hall sessions across the country. i have personally visited each headquarters sight on multiple occasions and 19ous of the 22 field offices to meet with personnel in all levels of the organizations, to communicate expectations, address concerns and answer questions. i recently launched a director's award which honors annually one nonsupervisor employee at each office who demonstrates that highest level of integrity and serve as a role model to their colleagues. i've initiated a thank you

campaign wherein hundreds of employees have received letters of accommodation for noteworthy accomplishments. these provide me with a great opportunity to demonstrate my deep appreciation to the workforce and highlight the good work of our employees. additionally additional, as part of this effort, fam maintains a robust system of both medical including mandatory physical and psychological assistance programs which are readily available to the workforce and their families. the fam medical program section is staffed with a physician and full time medical position who are available to fam at any time, 365 days a year. fam recognizes the value of this program to our workforce. we will continue to make these and on her employee assistance programs available to our personnel. fam recently completed a

staffing and field office assessment review in order to maximize organizational effectiveness and efficiency and to ensure fams are locate bted in offices in a risk based manner to cover the most critical flights. as a result of this assessment, six field offices either have been closed or will be closed in the next year. personnel from these affected offices were reassigned to our most critical offices which service the highest risk flights. the federal marshall service is a strong element in the security the tsa provides to the traveling public. we take our mission seriously and our workforce is dedicated to preventing and disrubting criminal acts on board and in transportation with the domain. i appreciate this committee's partnership and your effort for a critical mission. thank you for the opportunity to appear before you today and i look forward to answering your questions. >> that's pretty remarkable. i don't think anybody spoke

within two second of the five-minute limit. that's pretty good. if that's part of your organizational skills, we're impressed, sir. i want to thank you for your testimony. we appreciate you being here mr. allison, and we know your time is valuable. i now recognize myself for five minutes to ask questions. and i want to -- you know, let's get right into it. with reinforced cockpit doors like we have now on airplanes and we are move flight desk officers that are piemts that are armed and passenger information via the secure flight, is the need for the federal air marshal service the same or is it declining? >> mr. chairman, i will tell you if i didn't believe in this mission win wouldn't be in this job. all those things you cited are improvements that have happened within aviation security business over the years. and as we like to say, you know, no one element -- or no one layer stands on its own right? we do need to have federal air

marshals on these flights. we need that partnership with the program. we need to continue to work on the improvements on the cockpit doors, as you and i discussed yesterday, the secondary barriers. so those things will be ongoing and, as we get to a place where we're satisfied that those things are in place, that's officially mitigates the threats that we see, we'll start looking elsewhere where we can be effective and where we can add value and make a difference. >> what additional changes do you feel the air marshal service could implement to become more efficient and better risk based? >> i mentioned in my opening statement, mr. chairman that we are looking at a model of a risk by flight. so with that, i'd like -- maybe it sounds pretentious but i'd like to say we're pretty good at being risk based as we are

today, but we're going to examine critical infrastructure. our flights flying over critical infrastructure in addition to the populous areas in addition to using that passenger information from secure flight. known travel patterns of ksds, known and suspected terrorists. so we are moving to a model where we can better utilize the information that's available to make better judgments about how we assign our personnel. >> is there any new initiatives that you're planning for the current fiscal year, the upcoming fiscal year? >> with respect to operations? >> yes. >> we recently amended our concept of operations. that was started by the former director. but i was able to get that over the goal line. but in that construct what we did was we really took a look at how we were deploying our federal air marshals. on the event of 9/11, there were a number of things that we were required to do. for instance mandatory flight coverage levels at dca, looking

at long haul flights, looking at the particular areas of the country and giving them certain priority levels. we've actually readjusted that and i think it's going to make us more productive, more unpredictable and we'll be able to you know to be seen and have air marshals on flights where we otherwise would not have coverage. and i'll be happy to share that concept of operations with you and the ranking member at your convenience. >> i appreciate that. now, you mentioned i think you called it a secondary door they're talking about and that is obviously something that some groups have been interested in with respect to additional airline safety. that would -- so when a pilot is coming out of the cockpit for that temporary moment when the door is opened to have some sort of barrier there. i know now on flights they have a cart turned sideways and the flight attendant is standing behind the cart so if someone isn't able to get right up to

the cockpit door right away. is a secondary door, in your opinion, based on your expertise, something that should be considered based on your knowledge and experience? >> i think it's absolutely necessary to take a look at and see if it works if it's effective, if it's something that is going to result in less resources and more protection and security for the flight crews. as you stated, the flight crew does bring out the cart and block the entrance for the pilots to use the facilities. so we are working and have been for a number of years with boeing, the faa. i was just informed yesterday that there's some foreign partners that have an interest in looking at this, as well. so that work will continue. >> you know one of the things we touched on yesterday there has been a concern within the industry about the federal air marshal service booking flights close to the time that the plane

is set to take off within a 24 hour period, for example. and oftentimes if there's first class is full, someone -- if you're ever sitting in first class, they get bumped out of first class, they can't tell them why and that lead to some consternation and leads to some difficult explaining to try and attempt to do with the passenger who paid for a first class ticket and is no longer able to sit in first class. so first of all have you looked into this issue since we spoke? >> i did look into the issue of deadheading. and i'll get tospecifically to your question. mr. chairman, if these young men and women who fly these flights, they're having to submit their schedules and availabilities 60 days in advance. two months in advance is when we start the scheduling process. as i related to you yesterday, sir, i know more than anybody

that what we do is necessary. it's important. but at the same time, it does impact the industry to some degree. over the course -- i think it was 2014, june 14 and june 15 the amount of economic impact the federal air marshals was 0.11% of the total revenue of the industry. but be that as it may, as you can sense here, we are sensitive to that and we make all attempt toes minimize the disruption to their business. >> okay. i guess going forward, i would ask, you know, perhaps it might be advisable to reach out to some of the airlines and at least examine the issue and make sure you're both on the same page with that. we hear something a little different from them. but the bottom line is we want to make sure that the disruptions of passenger traffic is as minimal as possible, bit allows you to fulfill your duties going forward. but i guess planning, planning planning is the best we can do. so to the extent you can reach out to them, it would be

advisable you do so. >> absolutely. i'll do that. >> the chair now recognizes the gentle lady from new york ms. rice, for any questions she may have. >> thank you, mr. chairman. mr. allison, if you were given a wish list of improvements that you could make to your agency, what would they be? >> the first thing i would put on that wish list in big, bold letters is the ability to hire. you know, as i go across the country and i talk to fellow air marshals, the number one question i get is what is the future of the organization? you know not being able to hire has a detrimental effect on the workforce. there's a sort of feeling of dying on the vine. you know if i was able to hire, i would be able to open up and allow employees to move to places where they would want to go conceivably. the workforce is getting older. right? a lot of people that we hired in the beginning of 9/11 as i told

the chairman yesterday, they're going to be walking out the door, 2020, '21. so i ask the chairman for his support in working through this problem to get to where do we want to be in five years? so that is the number one issue that i would put on my wish list in big, bold letters. i think the other thing that the men and women of the federal air marshal would say is this is a tough, tough job.