Stifling Innovation: Examining the Impacts of Regulatory Burdens on Small Businesses in Healthcare (House Small Business Committee hearing, May 8, 2024)
Summary
The printed record of a House Committee on Small Business hearing, Stifling Innovation: Examining the Impacts of Regulatory Burdens on Small Businesses in Healthcare, held May 8, 2024, Small Business Committee Document Number 118–050. The committee met at 10:03 a.m. in Room 2360 of the Rayburn House Office Building with Chairman Roger Williams presiding; Williams and Ranking Member Nydia Velázquez gave opening statements. Four witnesses testified: Dr. Brian J. Miller of the Johns Hopkins University School of Medicine; Dr. David Anthony Eagle, medical oncologist at New York Cancer & Blood Specialists, Patchogue, NY; William J. Newell, Chief Executive Officer of Sutro Biopharma, Inc., South San Francisco, CA; and Dr. Diana Zuckerman, President of the National Center for Health Research. The committee adjourned at 11:48 a.m.
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STIFLING INNOVATION: EXAMINING THE IMPACTS
OF REGULATORY BURDENS ON SMALL
BUSINESSES IN HEALTHCARE
HEARING
BEFORE THE
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTEENTH CONGRESS
SECOND SESSION
HEARING HELD
MAY 8, 2024
Small Business Committee Document Number 118–050
Available via the GPO Website: www.govinfo.gov
U.S. GOVERNMENT PUBLISHING OFFICE
55–528 WASHINGTON : 2024
HOUSE COMMITTEE ON SMALL BUSINESS
ROGER WILLIAMS, Texas, Chairman
BLAINE LUETKEMEYER, Missouri
PETE STAUBER, Minnesota
DAN MEUSER, Pennsylvania
BETH VAN DUYNE, Texas
MARIA SALAZAR, Florida
TRACEY MANN, Kansas
JAKE ELLZEY, Texas
MARC MOLINARO, New York
MARK ALFORD, Missouri
ELI CRANE, Arizona
AARON BEAN, Florida
WESLEY HUNT, Texas
NICK LALOTA, New York
CELESTE MALOY, Utah
NYDIA VELÁZQUEZ, New York, Ranking Member
JARED GOLDEN, Maine
KWEISI MFUME, Maryland
DEAN PHILLIPS, Minnesota
GREG LANDSMAN, Ohio
MARIE GLUESENKAMP PEREZ, Washington
SHRI THANEDAR, Michigan
MORGAN MCGARVEY, Kentucky
HILLARY SCHOLTEN, Michigan
JUDY CHU, California
SHARICE DAVIDS, Kansas
CHRIS PAPPAS, New Hampshire
BEN JOHNSON, Majority Staff Director
MELISSA JUNG, Minority Staff Director
(II)
CONTENTS
OPENING STATEMENTS
Page
Hon. Roger Williams ................................................................................................ 1
Hon. Nydia Velázquez ............................................................................................. 2
WITNESSES
Dr. Brian J. Miller, MD, MBA, MPH, Assistant Professor of Medicine, Johns
Hopkins University School of Medicine, Baltimore, MD .................................. 5
Dr. David Anthony Eagle, MD, Medical Oncologist & Chair of Legislative
Affairs and Patient Advocacy, New York Cancer & Blood Specialists,
Patchogue, NY ...................................................................................................... 7
Mr. William J. Newell, J.D., Chief Executive Officer, Sutro Biopharma, Inc.,
South San Francisco, CA ..................................................................................... 8
Dr. Diana Zuckerman, President, National Center for Health Research, Wash-
ington, DC ............................................................................................................. 10
APPENDIX
Prepared Statements:
Dr. Brian J. Miller, MD, MBA, MPH, Assistant Professor of Medicine,
Johns Hopkins University School of Medicine, Baltimore, MD ................ 35
Dr. David Anthony Eagle, MD, Medical Oncologist & Chair of Legislative
Affairs and Patient Advocacy, New York Cancer & Blood Specialists,
Patchogue, NY ............................................................................................... 43
Mr. William J. Newell, J.D., Chief Executive Officer, Sutro Biopharma,
Inc., South San Francisco, CA ..................................................................... 51
Dr. Diana Zuckerman, President, National Center for Health Research,
Washington, DC ............................................................................................ 59
Questions and Answers for the Record:
Questions from Hon. Velázquez to Dr. Diana Zuckerman and Answers
from Dr. Diana Zuckerman .......................................................................... 64
Additional Material for the Record:
American Academy of Dermatology Association (AAD) ................................ 68
American Academy of Family Physicians (AAFP) ......................................... 75
Associated Builders and Contractors (ABC) ................................................... 86
(III)
STIFLING INNOVATION: EXAMINING THE
IMPACTS OF REGULATORY BURDENS ON
SMALL BUSINESSES IN HEALTHCARE
WEDNESDAY, MAY 8, 2024
HOUSE OF REPRESENTATIVES,
COMMITTEE ON SMALL BUSINESS,
Washington, DC.
The Committee met, pursuant to call, at 10:03 a.m. in Room in
Room 2360, Rayburn House Office Building, Hon. Roger Williams
[chairman of the Committee] presiding.
Present: Representatives Williams, Luetkemeyer, Stauber,
Meuser, Van Duyne, Ellzey, Molinaro, Alford, Crane, LaLota,
Maloy, Velázquez, McGarvey, Gluesenkamp Perez, Scholten,
Thanedar, and Davids.
Chairman WILLIAMS. I would like to welcome everybody. And
before we get started, I want to recognize Congressman Stauber
from the great State of Minnesota to lead us in the pledge and the
prayer.
Mr. STAUBER. Dear Lord, thank you for bringing us together
once again in this Small Business Committee. We thank you for
the Chairman and the Ranking Member and calling on both sides
of the aisle, and we ask that this be a productive meeting.
We thank the witnesses for traveling here. We thank them for
their safe trip here and ask that they return safely back to their
families.
In your name, we pray. Amen.
Please join me in the pledge.
I pledge allegiance to the Flag of the United States of America,
and to the Republic for which it stands, one nation, under God, in-
divisible, with liberty and justice for all.
Chairman WILLIAMS. Good morning, everyone. And I now call
the Committee on Small Business to order.
Without objection, the Chair is authorized to declare a recess of
the Committee at any time.
I now recognize myself for my opening statement.
Welcome to today’s hearing which will focus on how overregula-
tion in the healthcare industry limits small firms’ competitiveness
and stifles innovation.
I would like to start off by thanking our witnesses for joining us
here today. Thank you for being here. Your attendance is greatly
appreciated, and we value your input on these important issues.
Now, we have consistently heard how overregulation is pre-
venting some of our best and brightest entrepreneurs from inno-
(1)
2
vating and trying new things. We have heard this from many dif-
ferent industries, and today we will examine how these efforts can
still stifle innovation in the healthcare industry.
The FDA is responsible for protecting the public’s health by en-
suring the safety and efficiency of the new pharmaceutical drugs,
as well as medical devices. There is a lot of responsibility that goes
along with this authority. For obvious reasons, we want to make
sure that the medicines people are taking are going to be fulfilling
their intended purpose. However, there is always a tradeoff in
these decisions. And if the FDA shies away from any and all risk,
it will significantly limit innovation and make it harder for small
businesses to make an impact in the healthcare industry. The bal-
ance between risk and innovation is a fine line, and we must be
able to maintain that.
This Committee knows that small businesses are on the tip of
the spear across the economy when it comes to innovation in any
industry. The healthcare industry is not an exception. Developing
a new drug can take more than a decade and bring with it an ex-
tremely high price tag. Unfortunately, on top of the cost of develop-
ment, small businesses have to spend significant time navigating
the FDA’s bureaucratic process. This presents a significant barrier
to entry for main street. So navigating red tape does not only ham-
per what drugs come to market but also how doctors are treating
patients.
In a hearing we held earlier this year, we heard from a doctor
who was serving as a witness say they only spend 12 percent of
their day focusing on direct patient care. The other 88 percent is
spent complying with government and private insurance require-
ments. Doctors want to treat, cure, and innovate, not spend time
on bureaucratic red tape.
This issue is very personal to me. My wife is currently under-
going treatment for glioblastoma. Throughout this process, I have
heard countless stories from Americans looking for cures and
learned about many of the challenges in bringing new treatments
to the marketplace.
As a small business owner myself, I know the potential that lies
within Main Street America today, and we just need to make sure
they can operate in an environment that allows them to flourish.
I am looking forward to today’s discussion, and I hope the hear-
ing shines a light on the burdensome red tape currently restricting
our small firms and providers.
I ask unanimous consent to submit three op-eds from the SBE
Council for the record. And, without objection, I will order that.
I would like to, once again, thank our witnesses again for being
here with us today, and I am very much looking forward to our
conversation.
With that, I would like to yield to our distinguished Ranking
Member from New York, Ms. Velázquez.
Ms. VELÁZQUEZ. Thank you, Mr. Chairman.
I would like to thank all of the witnesses for being here today.
We all know that small businesses are the lifeblood of the econ-
omy, but that is especially the case in healthcare, where small com-
panies are at the forefront of technological innovation and are de-
3
veloping many groundbreaking new products. And their influence
is growing each year.
According to one study, the proportion of new drugs discovered
by small startups more than doubled between 2009 and 2018, and
by some accounts, now makes up as much as 80 percent of the
market. Yet despite their outside role in advancing innovation,
small firms encounter significant barriers.
The process of bringing a new drug or device to market can be
costly and time-consuming because of the need to prove the safety
and efficacy of the product. The FDA is responsible for protecting
us all from potentially harmful substances or defective devices. For
most, new drugs manufacturers often must conduct animal testing
before obtaining approval to conduct clinical trials on humans, and
those clinical trials can take years and cost millions of dollars.
Some will say this process stifles innovation, but ensuring med-
ical products prove their safety and clinical effectiveness prior to
going on the market is necessary for public trust, individual safety,
and advancing genuine innovation.
With that said, it is important we recognize FDA’s attempts to
balance scientific scrutiny with regulatory flexibility. Congress and
the FDA have long sought to expedite this process, particularly for
rare disease treatments. Expedited programs of the FDA help bring
potentially life-saving treatments to the market much quicker,
bringing hope to many patients and their families.
Unfortunately, that does not come without potential for abuse.
Occasionally, drug companies use expedited programs to cir-
cumvent placebo-control studies, then drag their feet on conducting
the required follow-up studies. As a result, companies are able to
garner millions of dollars in sales without proving clinical effective-
ness. While I have full faith in the FDA’s decision-making process,
there must be safeguards in place to prevent drug companies from
taking advantage of regulatory flexibility.
Our regulatory system in healthcare is essential for keeping pa-
tients safe and delivering genuine innovation to the market, but
that cannot be done without strict scientific standards.
I hope today we can discuss ways to support small businesses
and their role in saving lives with new innovation, while also recog-
nizing the need to prove those products are safe and effective for
human use and consumption.
I would like to thank all the witnesses again for being here, and
I yield back.
Chairman WILLIAMS. The lady yields back.
And I will now introduce our witnesses.
Our first witness here with us today is Dr. Brian Miller. Dr. Mil-
ler is an assistant professor of medicine at the Johns Hopkins Uni-
versity School of Medicine located in Baltimore, Maryland. In addi-
tion to being an assistant professor of medicine, Dr. Miller is a non-
resident fellow with the American Enterprise Institute where he fo-
cuses on a variety of issues, such as Medicare payments, Food and
Drug Administration, and healthcare competition.
Dr. Miller earned a medical degree from the Feinberg School of
Medicine at Northwestern University, a master’s of business ad-
ministration from the Kenan-Flagler Business School at the Uni-
versity of North Carolina at Chapel Hill, a master of public health
4
from Johns Hopkins Bloomberg School of Public Health, and two
bachelor of science degrees in biochemistry and chemistry from the
University of Washington.
I want to thank you for joining us here today, and we look for-
ward to the conversation ahead.
I now recognize my colleague, Representative LaLota, from the
great State of New York, to briefly introduce his constituent who
is appearing before us today.
Mr. LALOTA. Thank you, Chairman.
It is my privilege to introduce our next witness, Dr. David Eagle,
M.D. Dr. Eagle is a board certified hematologist oncologist, and has
practiced medicine for over 20 years. He is currently the Chair of
legislative affairs and patient advocacy at the New York Cancer &
Blood Specialists located on Long Island in Patchogue, New York,
just outside of my district.
Dr. Eagle has published multiple oncology, health policy, and
cost-of-care articles. He has previously served as an editorial board
member for the journal Oncology. He also has appeared on The On-
cology Show on Sirius XM’s Doctor Radio channel, and provided
briefings on oncology health policy for congressional staff right here
on Capitol Hill.
Dr. Eagle is a past president of the Community Oncology Alli-
ance and a member of the American Society of Clinical Oncology.
He graduated from the University of Virginia School of Medicine,
and then completed his internal medicine residency and fellowship
at the University of Florida.
Thank you, Doctor, for joining us today. We look forward to the
conversation ahead.
Chairman WILLIAMS. The gentleman yields back.
And now our next witness here with us today is William Newell.
Mr. Newell is the chief executive officer of Sutro Biopharma, Inc.,
located in South San Francisco, California. Mr. Newell has served
as CEO of the Sutro Biopharma for over 15 years, developing can-
cer therapeutics for areas of unmet needs. Previously, he served as
the president of Aerovance, Inc., a biotechnology company focused
on respiratory diseases.
Mr. Newell currently serves on the boards of directors of the Bio-
technology Innovation Organization’s Health Section, Emerging
Company Section, and is a member of the executive committee. Mr.
Newell received an AB in government from Dartmouth College and
a JD from the University of Michigan Law School.
Thank you for joining us today, and we look forward to the con-
versation ahead.
And I now recognize the Ranking Member from New York, Ms.
Velázquez, to briefly introduce our last witness appearing before us
today.
Ms. VELÁZQUEZ. Thank you, Mr. Chairman.
Our final witness is Dr. Diana Zuckerman, the President of the
National Center for Health Research, a nonprofit public health
think tank that conducts and analyzes research on health policy
issues. She is trained as a post-doctoral fellow in epidemiology and
public health at Yale Medical School.
Dr. Zuckerman worked in the House and Senate and then as a
senior White House advisor. She was also a fellow at the Univer-
5
sity of Pennsylvania Center for Bioethics and the first nonphysi-
cian elected to the Women in Medicine International Hall of Fame.
Welcome, Dr. Zuckerman, and thank you for being here this
morning.
Chairman WILLIAMS. Okay. The lady yields back.
And before recognizing the witnesses, I would like to remind
them that their oral testimony is restricted to 5 minutes in length,
and we stick with that. If you see the light turn red in front of you,
it means your 5 minutes have concluded, and you should wrap up
your testimony. Now, if you keep going, you are going to hear this.
Okay? And that will—we will want to wrap it up, as I say.
I now recognize Dr. Miller for his 5-minute opening remarks.
STATEMENTS OF DR. BRIAN J. MILLER, M.D., M.B.A., M.P.H., AS-
SISTANT PROFESSOR OF MEDICINE, JOHNS HOPKINS UNI-
VERSITY SCHOOL OF MEDICINE; DR. DAVID ANTHONY
EAGLE, M.D., MEDICAL ONCOLOGIST & CHAIR OF LEGISLA-
TIVE AFFAIRS AND PATIENT ADVOCACY, COMMUNITY ON-
COLOGY ALLIANCE; MR. WILLIAM J. NEWELL, J.D., CHIEF EX-
ECUTIVE OFFICER, SUTRO BIOPHARMA, INC.; AND DR.
DIANA ZUCKERMAN, PRESIDENT, NATIONAL CENTER FOR
HEALTH RESEARCH
STATEMENT OF DR. BRIAN J. MILLER
Dr. MILLER. Thank you, Chairman Williams, and Ranking
Member Velázquez, and distinguished Members of the Committee.
I am a practicing physician at Hopkins, an internist, a non-
resident fellow at the American Enterprise Institute. I run a large
policy research group, and I actually worked at the FDA. I was a
reviewer in the Center for Drug Evaluation in the Office of New
Drugs. I also serve on the Medicare Payment Advisory Commis-
sion, and I previously served 4 years on CMS’ Medicare Evidence
Development & Coverage Advisory Committee.
Today I am here in my personal capacity. My views are my own
and not those of Hopkins, the American Enterprise Institute, or
MedPAC. Disclosures aside, I want to start and talk about innova-
tion.
So my grandmother was this tiny, little, part-Norwegian lady
who would bake for us every year at Thanksgiving. And she loved
to garden. And I remember as a kid, for a couple years she couldn’t
bake pie for us—and I love food. It is a problem. I love carbs. I re-
member her hands being red and swollen.
Then I remember one year she baked a pie again, and I remem-
ber that year because that was the year the first TNF alpha inhib-
itor was introduced, and her rheumatoid arthritis was able to be
treated. So she could bake again, garden, and go about her life.
So innovation, for me, when I think about it in my head, the first
thing I remember is eating apple pie as a child. So innovation is
not really just a number; it is your life.
A bipartisan Congress has worked for 30 years on pharma-
ceutical product, innovation, and promoting safe medical products.
I saw the direct impact of these tools when I worked at the FDA,
tools like accelerated approval, which is an objective science-based
mechanism for early market entry for drugs meeting an unmet
6
need based upon a surrogate end point. There has been a lot of cri-
tique of these sorts of tools recently.
We should remember where they came from. In the eighties we
had the AIDS crisis, and activists from ACT UP actually occupied
the FDA for a day in 1988 and made the news. They didn’t have
access to treatments, the FDA was a barrier, and products were
available in other countries. And this started a 30-year cycle of
FDA reform.
If we actually read the studies from the critics of these pathways,
it says that many of these studies get done. They sometimes get
done slowly. When I look at this and say, if these trials are done
late, yes, maybe the company should—there are other things that
the company can or should do, but it also tells me that we need
to change how we do clinical trials.
And, for me, as I said, it is not just my grandmother, it is per-
sonal. My father died of glioblastoma 2 weeks before I moved to
Chicago and started medical school, and he was 58. For me, inno-
vation is about people and their lives and their functional status.
I think about clinical trials—we are stuck in the seventies. The
FDA has promoted concepts as real-world evidence, patient-report
outcomes, but we have to make it real. Making it real could mean
for something like COPD, you do a 6-minute walk test at home,
you assess spirometry for lung function at home. You do for Par-
kinson’s, say, a video interview to assess their ability to move.
All these outcomes are patient-focused, and they are and can be
done in the setting of the patient’s home. We are not necessarily
forcing the patient to drive to a study center. They also decrease
the cost of trials, which allows for small companies to develop inno-
vative products, and they also increase the diversity of the patients
who participate in clinical trials.
How do we do this? Well, you need the FDA reviewer to be the
counselor to the company, because the reviewer is sitting on top of
an entire therapeutic area at the FDA. The problem is that there
is too much management, too many administrative layers at the
FDA. If you are a reviewer, you have your—you are doing the
work, then you have a team leader, you have a deputy division di-
rector, a division director, then you might have an office director,
and then you might have a super office director, all of whom are
highly trained technical physicians and scientists reviewing the
work that you already did.
So I think that we need to collapse some of those layers of ad-
ministration, put those people back on the front line of reviewing
medical products for efficacy and safety so that they can be a better
counselor to industry, and particularly small business and entre-
preneurs.
Other things that we can and should do include returning the
staff to the office so that if you are a small company, you are not
just facing a sea of black on Zoom.
In conclusion, I think there are a lot of things that we can do
that are pragmatic and that are bipartisan to help lower barriers
to entry for small companies and entrepreneurs to safely—to create
safe and effective, innovative products to treat disease and help ev-
eryday Americans.
And I thank you.
7
Chairman WILLIAMS. Thank you.
And I now recognize Dr. Eagle for his 5-minute opening remarks.
STATEMENT OF DR. DAVID ANTHONY EAGLE
Dr. EAGLE. Chairman Williams, Ranking Member Velázquez,
and Members of the House Committee on Small Business, thank
you for the opportunity to participate as a witness in this critically
important hearing on regulatory and related burdens in small busi-
nesses in healthcare.
I am a practicing medical oncologist with New York Cancer &
Blood Specialists, and serve as Chair of legislative affairs and pa-
tient advocacy. I am a board member and past president of the
Community Oncology Alliance, a nonprofit group advocating for
independent nonhospital-owned community cancer care.
My career began in a small practice, three-physician independent
community oncology practice, in Mooresville, North Carolina. I
have been privileged to care for patients in an era of immense sci-
entific progress in overcoming a disease as it threatens to take our
closest loved ones from us.
My physician partners and I work closely with our nurses, nurse
practitioners, medical assistants, and ancillary staff, caring for pa-
tients battling cancer and blood disorders. We were a family.
We live with our patients on the front lines of an increasingly
broken medical system. We often acted as their last line of defense,
not only for their medical illnesses, but also for the confusing and
overwhelming medical system in which they and we, as their pro-
viders, increasingly were fighting.
Barriers to care, both large and small, sometimes incidental,
other times intentional, popped up all over the place and were al-
most always far too much to bear for patients facing the battle for
their lives.
Over time, our small practice, operating as a small business, en-
countered significant pressures from large, well-funded hospital oli-
gopolies in the Charlotte area and beyond in North Carolina. In
2017, one large health system in our region gave us an ultimatum:
Be acquired by us or we will hire physicians to compete against
you.
One of the prime motivators for this aggressive move by the
health systems was the federal 340B Drug Pricing Program. The
acquisition of our practice would generate substantial immediate
profits for the health system, allowing it to further expand. Fur-
thermore, we were faced with declining payments from Medicare
and commercial insurers.
In 2018, my two partners and I had little choice but to join the
large hospital systems of employees. Our small independent prac-
tice that had served the community for over 19 years was gone.
Hospital clinics operate under stifling bureaucracies, and as a re-
sult, almost immediately I was unable to see the same number of
patients that I was able to see daily in my own independent prac-
tice. As devastating, the hospital later switched over its billing sys-
tem and was able to charge significantly more for the same serv-
ices. Patients came to the same building, were treated by me, their
same physician, and received the same drugs but at a higher cost
to them. Patients who I treated and followed for years simply left.
8
Due to consolidation of hospitals into large health systems in
North Carolina, I joined my current practice in New York. Unlike
the large health systems, we are the only major cancer provider in
our region that accepts all insurance plans, while also being the
only major cancer treatment provider that does not receive State
funding or other subsidies. We have open clinics in underserved
communities, are the lowest cost cancer providers in all of our mar-
kets, and were recently named the number one physician practice
in New York by Castle Connolly, a rating system based on physi-
cian peer reviews.
Cancer research, drug development, and care delivery are in a
renaissance. I am privileged to practice in an era of breakthrough
scientific progress. However, patients often do not get the treat-
ment that they need or in the best manner possible.
We face a fundamental choice in this country. Who is in charge
of patient medical care? Is it physicians and patients making deci-
sions on treatments together in the exam room? Or is it insurance
companies, massive, consolidated health systems, and government
regulators like CMS, controlling personal healthcare decisions from
afar? Over my career, the shift has absolutely been toward the lat-
ter.
In my written testimony, I touch upon some of the other signifi-
cant forces pressuring medical practices, including utilization man-
agement by consolidated insurers and pharmacy benefit managers,
misguided CMS regulations, and Medicare payment cuts that are
forcing independent physicians out of business.
These factors, combined with the mounting pressures from mega
health systems, are resulting in cancer patients losing access to
care, not getting the best treatment, and paying more for their
healthcare.
I look forward to your questions.
Chairman WILLIAMS. I now recognize Mr. Newell for his 5-
minute opening remarks.
STATEMENT OF MR. WILLIAM J. NEWELL
Mr. NEWELL. Chairman Williams, Ranking Member Velázquez,
thank you for the opportunity to appear before this Committee to
discuss the drug development ecosystem and the challenges small
biotechnology companies face.
My name is Bill Newell, and I am the CEO of Sutro Biopharma,
Inc. I have been at Sutro since January 2009, and working in small
company biotech since 1998. I also serve on the board of the Bio-
technology Innovation Organization and Chair BIO’s capital forma-
tion work group.
Sutro Biopharma focuses on research and development and man-
ufacturing for next-generation cancer medicines; primarily, anti-
body drug conjugates commonly referred to as ADCs. Our company
is 21 years old, and we are still a pre-commercial company, mean-
ing we have yet to secure FDA approval for a medicine we have
developed.
I was employee number 19, and today we have over 300 employ-
ees and a market cap of approximately $300 million. Like many
U.S.-based biotechs, Sutro has seen substantial domestic job cre-
ation with about 40 percent of our workforce in or supporting our
9
U.S.-based manufacturing facility. This is the world’s only manu-
facturing facility utilizing cell-free protein synthesis technology at
scale.
I am pleased to say that we recently began two pivotal phase 3
trials for our most advanced medicine. This is an ADC for patients
with late-stage ovarian cancer and for patients with an ultra-rare
pediatric leukemia, but readouts are not expected for a few more
years. We have multiple additional potential cancer medicines and
research in early clinical development.
In many ways, Sutro’s corporate journey is a microcosm of the
small biotech financing experience. We have raised approximately
$190 million in venture capital. We went public in 2018, benefiting
from the JOBS Act of 2012. So far, we have raised approximately
$535 million in public market offerings.
In addition, collaborations with larger biopharma companies
have been essential to advancing our research and development.
We have received approximately $720 million in funding and reim-
bursements for R&D collaborations and our licensing product can-
didates. This funding comes primarily from large and mid-sized
biopharma companies.
In addition, at various points in time we have borrowed from
venture lenders. I am proud to say that we are debt-free as of ear-
lier this year.
All told, Sutro has raised almost $1.6 billion in the company’s
history, and we are still several years away from our first approved
medicine. That eyebrow-raising figure is, unfortunately, very typ-
ical of the small biotech experience in bringing a product to mar-
ket.
Also, like many biotechs, we have had our share of failures along
the way. This is not unusual for our industry. Only approximately
12 percent of products reaching clinical development stage are ever
approved, and just half of products reaching phase 3, pivotal trial
stage, ever get FDA approval.
In my remaining time, I want to emphasize the need to reauthor-
ize the pediatric priority review voucher program. The current pro-
gram expires September 30 of this year, and Sutro and our indus-
try partners strongly support the Creating Hope Reauthorization
Act of 2024. This bipartisan bill provides critical incentives to pro-
mote research and development for drugs to treat rare diseases im-
pacting children across the country.
As I mentioned, Sutro is pursuing a phase 3 trial for an ultra-
rare pediatric leukemia which affects approximately 50 infants and
toddlers a year. The sad reality is that the economics of pursuing
our medicine in this indication would clearly dictate that we should
not do so. The key economic rationale for us to pursue this ultra-
rare indication is the value to Sutro of a pediatric priority review
voucher. It is cases like this one that make it imperative that this
program be reauthorized.
Lastly, I want to thank the Members of this Committee who ei-
ther co-sponsored or voted for the American Innovation and R&D
Competitiveness Act of 2023, H.R. 2673, which was overwhelmingly
approved on a bipartisan basis by the House earlier this year.
However, because H.R. 2673 has not yet been enacted into law,
we paid $15 million in federal taxes this year as a result of the
10
switch to a 5-year amortization schedule, even though we have
never sold a single vial of medicine. This tax liability means two
phase 1 clinical trials for our cancer medicines no longer have
funding.
I have included additional policies in my written testimony that
highlight other actions Congress can take to support small biotech
companies. As the innovation driver of the biopharmaceutical eco-
system and industry that keeps America at the cutting-edge, it is
important to create a policy landscape that supports companies like
Sutro.
I am honored to be here discussing both the challenges associ-
ated with running a small biotech company and the true honor it
is to dedicate each and every day to the service of patients and
their loved ones.
Thank you for allowing me to testify today. I look forward to an-
swering your questions.
Chairman WILLIAMS. Thank you very much.
And I now recognize Dr. Zuckerman for her 5-minute opening re-
marks.
STATEMENT OF DR. DIANA ZUCKERMAN
Ms. ZUCKERMAN. Thank you.
Chairman Williams, Ranking Member Velázquez, and distin-
guished Members of the Committee, I am Dr. Diana Zuckerman,
president of the National Center for Health Research, a public
health think tank here in Washington.
I appreciate the opportunity to be here today to share the views
of the Center, which does not accept funding from any companies
with a financial interest in our work. Our goal is to use research
information to inform and improve policies and programs for the
healthcare of everyone in this country.
As a scientist and a policy expert and a cancer survivor, I look
for common ground. I respect the important work of all the other
panel members and this important Committee. And I think we can
all agree that we want small businesses to succeed and to provide
the best possible products.
In medicine, let’s agree that we want innovation that is defined
as better products and better treatments that have meaningful
benefits for patients: Living longer, spending less time in the hos-
pital, and having a better quality of life.
The FDA makes it very clear that it does not expect or require
absolute certainty when it approves a drug or medical device, and
I will give two examples of their flexibility.
A few weeks ago, a company named Amylyx reported that its one
and only drug, Relyvrio, did not work. FDA had granted approval
to the drug to treat ALS, also known as Lou Gehrig’s disease, even
though the company ignored FDA’s advice to complete their clinical
trial before they asked for approval.
FDA scientists and advisory committee members warned that the
evidence was weak and that the drug might not work at all, but
FDA approved it anyway because ALS is a terrible disease, and the
agency wanted to be flexible, and patients hoped that the product
would work.
11
The drug cost $158,000 per patient per year, even though it was
a combination of two much less expensive ingredients, one of which
is a dietary supplement sold on Amazon for a few dollars.
The company promised to continue studying the drug, comparing
it to placebo, and eventually they reported that patients taking the
drug were no better off than patients on placebo. Meanwhile, last
year, the company had $380 million in revenues, and the two
young men who co-founded the company paid themselves $7.4 mil-
lion each just last year.
When Relyvrio was taken off the market, the stock dropped 80
percent, and 70 percent of the staff were left—let go.
Another example is Sarepta, a company that submitted its only
product for FDA approval based on data for only 12 patients and
no placebo group. I have never seen any study like that get ap-
proval. But despite that lack of evidence, Exondys 51 for Duchenne
muscular dystrophy was approved. And they granted accelerated
approval in 2016 because, as a small business, Sarepta did not
have the capital to continue to do their clinical trials unless they
were able to sell their product and make some money.
The company promised a larger study would be completed in
2020, but here we are, 2024, and it still hasn’t happened, and we
are still waiting for any credible evidence from the company to
show that it works after 8 years.
The price of the drug has increased from about $400,000 per pa-
tient per year to over a million dollars per year per patient, and
families have gone broke even paying the co pays, and Medicaid
has, as a result of that, footed most of the bill.
So these examples are two that show that FDA is sometimes
very helpful to small businesses, sometimes ignoring the agency’s
own requirements to give companies a chance to succeed. And
there is research showing that many large companies also benefit
from this flexibility. And in my written testimony, I have provided
examples of the research evidence and the lower user fees that
FDA charges for small businesses and how Congress has passed
user fee legislation that helps to level the playing field for small
companies.
The bottom line is that we all want medical products to be safe
and effective. Small businesses will have the resources to meet the
FDA’s evidence standards for many types of medical products, but
not all.
What’s the alternative? If the FDA reduces the burden on compa-
nies by not requiring them to provide clear evidence that a new
product is safe and effective, that increases the burden on patients,
families, and physicians, because we must make life-saving and
life-changing decisions without the facts that we need to make the
decisions that are best for us and our patients.
Thank you very much.
Chairman WILLIAMS. We will now move to the Member ques-
tions. Under the 5-minute rule, I recognize myself for 5 minutes.
Healthcare is something that is extremely personal to every
American. We need to make sure that patients can get the care
they need by the providers they want at a price they can afford.
Unfortunately, I have heard stories, as we have heard today, from
people that are not able to abide by these three principles for many
12
different reasons, one of which is a complicated, expensive process
to get new drugs on the market.
I understand these challenges firsthand, after my family
searched for the best treatment options for my wife, Patty, after
she was diagnosed with glioblastoma in December of 2022. As we
learned about the various possibilities and tried to select the best
path forward, we were shocked to hear that certain options were
only available abroad because they had not been approved in the
U.S. yet.
I understand the need to ensure we have safe medicines and
treatments coming to the market, but it made me think what hur-
dles might be in place that are slowing this down and what the ef-
fect on patient outcomes may be.
So, Dr. Miller, you worked at the FDA and are currently prac-
ticing medicine at Johns Hopkins University and probably have
some great insights on the variety of challenges that cause cases
like my wife’s to be a reality for so many Americans.
So my question is, can you elaborate on some reasonable changes
that can be made to streamline the approval process so we can
bring more treatments to the marketplace without sacrificing pa-
tient safety?
Dr. MILLER. Thank you. And I am very sorry to hear about your
wife.
Chairman WILLIAMS. She is doing good.
Dr. MILLER. That is good to hear.
I think the clinical trial reform is the thing that PDUFA has
promised for 30 years and, frankly, hasn’t delivered on. Getting the
reviewer to actually guide small companies and entrepreneurs who
are scrappy and want to do things differently is the first step that
I would do. And doing that would mean collapsing layers of man-
agement and making sure that the primary task of the FDA is fo-
cusing on review of products to make sure that they are safe and
effective, because the FDA—CDER, for example, has 5,800 employ-
ees. Most of them are not focused primarily on that task.
Chairman WILLIAMS. Now, with the passage of the Democrat-
led Inflation Reduction Act, the University of Chicago estimates
that its provisions will result in 135 fewer drugs being brought to
the market. Along with these provisions, President Biden called on
to expand these price controls to include 500 drugs, as opposed to
the IRA’s 50.
The American Dream is built on risk and reward. If there is not
going to be a profit incentive to bring new drugs to the market-
place, fewer businesses will dedicate the necessary research and
development dollars to make them a reality.
So, Mr. Newell, as a small pharmaceutical company, how do the
IRA’s price controls impact your business and deter innovation?
Mr. NEWELL. Thank you, Chairman Williams.
As you would have heard from my testimony, we have raised a
substantial amount of capital through the years to bring our medi-
cines forward and to build our business. We work in the biologics
field, and I have other colleagues who work on small molecule
medicines. In particular, those are things that are pills that are
given to—for patients.
13
Particularly in the IRA, we see that there are substantial dis-
incentives for investors to invest in companies that make small
molecule medicines because of the different terms allowed for the
introduction of the price negotiations that are mandated by the
IRA. For biologics companies like Sutro, we have a 13-year window,
but a small molecule manufacturer innovator has a 9-year window.
That is a disincentive to investors.
Given the tremendous amount of money that it takes to bring a
drug forward to prove its safety and efficacy, we should be not
disincentivizing people who make small molecule medicines for pa-
tients.
Chairman WILLIAMS. All right. Thank you.
And, Dr. Eagle, in your testimony, you emphasize that
healthcare consolidation is on the rise and small practices like
yours are struggling to keep up.
So in the brief time that we have left, can you please describe
to the Committee how consolidation harms patient care, and be-
yond just patient care, what are the downsides of the consolidation
in the healthcare system?
Dr. EAGLE. I think a large consolidated system is, first, they are
more expensive. You know, they tend to be hospital systems that
charge facility fees. You know, they can provide excellent care, but
I think it oftentimes is less convenient for patients.
I think small physician offices, you know, get to know the com-
munity better, you know, have better processes, and provide lower
cost care for patients and more affordable and more convenient for-
mat.
Chairman WILLIAMS. Thank you. I yield back.
And I now recognize the Ranking Member for 5 minutes of ques-
tions.
Ms. VELÁZQUEZ. Thank you, Mr. Chairman.
Dr. Zuckerman, the FDA has strict standards for approving new
drugs and devices to prove their effectiveness. Is there any evi-
dence that you are aware of that FDA’s high standards have driven
innovation and investment to other countries?
Ms. ZUCKERMAN. Thank you for that question. I haven’t seen
that evidence. You have to remember that the standards are very
similar in other countries, and there aren’t very many drugs or de-
vices that are available in other countries but not here. And we pay
a lot more for them. So there is a lot of incentive to—to get FDA
approval.
It used to be that FDA was a lot slower than other countries.
That is absolutely true. But it is not true anymore, and it is partly
because Congress passed the user fee legislation, which really has
sped up the approval to the point that it is very, very similar in
other countries.
Ms. VELÁZQUEZ. Thank you.
Two years ago, Congress passed the Inflation Reduction Act,
which allowed Medicare to cap the price of insulin and negotiate
prices for certain drugs. Has this had a measurable effect on re-
search and development spending by pharmaceutical companies?
Ms. ZUCKERMAN. R&D is very important, and it is related to
how much money the companies have. But R&D is really only a
small percentage compared to stock prices and things like that. So
14
there really isn’t any evidence that, although this could have an ef-
fect on which drugs companies invest in but not—it shouldn’t have
a chilling effect on innovative drugs.
Ms. VELÁZQUEZ. Thank you.
Dr. Eagle, you mentioned that utilization management presented
barriers to care for doctors and their patients. Do you think the in-
creased use of these practices is a function of the market power of
insurance companies?
Dr. EAGLE. Thank you for the question, Congresswoman
Velázquez.
Absolutely. You know, we have seen tremendous consolidation
among the pharmacy benefit managers, among the insurers. One
of the tools they use is utilization management that comes in dif-
ferent forms. One is prior authorization, where, you know, the—
after the physician and the patient have decided what they would
like to do, we seek approval from the insurance company. Often it
is declined, and the next step is a step called clinical peer review,
where we have to get on the phone with the insurance company
physician.
You know, in cancer medicine, we do very careful decision-
making. You know, we look at the literature, we present with col-
leagues, we discuss cases at tumor boards. It is very frustrating
when you then have to turn around and speak with an insurance
company to a physician who may not be an oncologist. Fortunately,
New York recently passed a law that requires people at least to be
in the same specialty as the case they are reviewing. That is a fair-
ly low standard.
My first question is always: Have you read the notes? And then
we generally start the conversation from there. It is very common
for, you know, PET scans, therapies to be denied.
Another part of utilization management is fail-first therapy,
where the insurance company will demand that we use particular
therapies before others. I just had a patient yesterday who started
treatment for breast cancer where the nausea medicine that I
wanted to use was not approved by the insurance company. They
required that we substitute an alternative nausea medication. That
can be a problem.
Ms. VELÁZQUEZ. Thank you.
Dr. Zuckerman, we hear that the FDA often requires absolute
certainty when making decisions about approving new products.
Can you discuss the standard required by the FDA and the impacts
on innovation?
Ms. ZUCKERMAN. Sure. Thank you for that question.
I think the examples I gave show that it is not true that they
do require or expect absolute certainty, and, in fact, in science you
never expect absolute certainty. But you do want a reasonable as-
surance that something is likely to work for at least some patients.
And that is really what FDA has been doing, as well as making ex-
ceptions when a drug is urgently needed for a very serious disease.
Ms. VELÁZQUEZ. Thank you.
Mr. Newell, you recently signed a letter of standing with the
FDA against judicial interference in the drug approval process. Can
you expand on how a decision like this creates uncertainty for your
industry?
15
Mr. NEWELL. As I have explained earlier—thank you for the
question. As I have explained earlier, capital is extremely impor-
tant to allow us to do the work that we do developing new medi-
cines. Capital requires certainty. And if the regulatory authority of
the FDA is undermined, we do not have certainty and, therefore,
capital will not be available.
Ms. VELÁZQUEZ. Thank you. I yield back, Mr. Chairman.
Chairman WILLIAMS. The lady yields back.
And before we go any further, I just want to—you are going to
see Members going in and out. It is not because they are leaving
or they are mad or anything. We have got other hearings to go
back and forth to, so you will see that happen, okay?
I now recognize Representative Luetkemeyer from the great
State of Missouri for 5 minutes.
Mr. LUETKEMEYER. Thank you, Mr. Chairman.
A few—not too long ago, a year or two ago, we passed a bill that
says the lengthy permit process across the board is really sty-
mieing a lot of businesses, including the approval of drugs.
Ms. Maloy—there we go.
And so we had—the bill said you are going to set it two years.
Have you seen this kick in yet at all? Have you seen this process
be shortened at all as a result of this bill, Mr. Miller—Dr. Miller?
Dr. MILLER. You mean the FDA review process?
Mr. LUETKEMEYER. Yeah. Yeah.
Dr. MILLER. Not to my knowledge.
Mr. LUETKEMEYER. Because the process should have been
shortened to 2 years.
And, Mr. Newell, your process is taking years and years and
years.
Mr. NEWELL. The process has not been shortened.
Mr. LUETKEMEYER. Process has not been shortened. So our
bill hasn’t taken effect yet. We need to start talking about that,
don’t we?
You know, Dr. Eagle, you worked in the cancer realm, and in my
district, we have the largest nuclear reactor in the country at our—
on the university campus at the University of Missouri. About 95
percent of all radiated drugs that are used in cancer actually come
from that—actually used around the world come from that nuclear
reactor. It is actually at the end of its life span, so we are trying
to build a new one. But have you used those drugs? How important
is it to you to be able to continue to allow that to happen? Because
they do a lot of research there as well. I don’t know if you have
been utilizing their services or not.
Dr. EAGLE. Thank you for the question. Those are vitally impor-
tant drugs. You know, we have a new prostate cancer drug, you
know, that uses a targeted antibody plus a radiation therapy to
treat—to treat prostate cancer. We use other types of treatments
called neuroendocrine tumors where that is a vital part of the ther-
apy. It helps people extend lives with minimal toxicity. There will
be more of those therapies in the future. It is vital that patients
have access to those treatments.
Mr. LUETKEMEYER. They do lots of research there. It is phe-
nomenal. They have these little molecules that go circulating
16
around the bloodstream looking for cancer cells to go to strike. It
is phenomenal stuff. So thank you for that.
Dr. Eagle, you are involved in a practice. And the concern that
I have here deals with this consolidation, just as you alluded to
with your practice. So some people are going to this concierge care,
where you pay a doctor to take care of you, whatever, for a certain
price per year or whatever, and—the insurance policy for you to
take care—have you seen this already, and what do you think
about it? Is it something that is——
Dr. EAGLE. I have seen that primarily in primary care. I have
not seen that as much in specialty medicine. In cancer medicine,
we try to make every patient a concierge care patient. You know,
we allow same-day walk-in visits, patients don’t have to have an
appointment, same-day infusions.
You know, I think the only place I have really seen that take
hold myself is in the primary care sector, but not in other fields.
Mr. LUETKEMEYER. It goes back to the premise of this Com-
mittee from the standpoint of the regulatory burden. I mean, it is
so difficult for a small practice to continue to do this.
Do the concierge care physicians, are they burdened by the same
amount of rules and regulations? Have they found a way around
this? What——
Dr. EAGLE. In that case, I think the primary change is the eco-
nomics. You know, they just operate under a different economic
system. You know, the private physicians that faced a decline in
the fee schedule for 20 years now, and particularly when you ad-
just for inflation, payments to physicians is automatically brought
down by 26 percent for private physicians.
So I think the concierge model of care is just an effort by certain
primary care physicians to solve that problem and spend more time
with their patients and not have to be their care so volume-driven.
Mr. LUETKEMEYER. Mr. Newell, you are in the business of de-
veloping drugs. I saw the other day where artificial intelligence ac-
tually developed a drug for a disease. They put in there the param-
eters to do something and this, you know, artificial intelligence
came up with a drug.
I mean, is this the wave of the future? Am I correct in that?
Mr. NEWELL. We do use artificial intelligence or machine learn-
ing to help us identify better targets for our medicines and, per-
haps in certain cases, the structure of the medicine that we are
going to be making.
Mr. LUETKEMEYER. Will that make it cheaper or does that
make it more expensive?
Mr. NEWELL. It is to be determined. I personally do not believe
that a medicine will be fully developed using artificial intelligence.
There are too many variables in the human body for us to take into
consideration at this point in time.
Cancer in particular is a very heterogenous disease, and so what
works in one patient may not work in another.
Mr. LUETKEMEYER. Okay.
Mr. NEWELL. And so I think at the end of the day, we need to
really be cautious about AI, but it can be helpful in development.
Mr. LUETKEMEYER. Very good. One more question for Dr. Mil-
ler.
17
You know, the administration is working on descheduling can-
nabis from a schedule I down to schedule III, I believe it is. And
part of the problem is the USDA—or FDA has never done the re-
search to be able to say that this is justified. Can you comment on
that?
Dr. MILLER. I think that there is still a lot of work to be done
to determine what should be done with cannabis. There are several
prescription drug-approved formulations of THC. The FDA doesn’t
have an adequate framework to regulate the other forms of can-
nabis to ensure that is safe and effective for the average consumer.
Mr. LUETKEMEYER. Thank you very much. My time has ex-
pired.
Chairman WILLIAMS. The gentleman yields back.
I now recognize Representative McGarvey from the great State
of Kentucky for 5 minutes.
Mr. MCGARVEY. Thank you, Mr. Chairman.
[Inaudible] I think about my grandmother who passed away with
dementia, I think about my dad who lives with Parkinson’s, I think
about our dear friends Katie and Ellie battling breast cancer.
And so many of us have friends and family who are living and
fighting terrible diseases. And when you are in that spot, you want
the same thing. You want them to get better. You want hope.
And so when I think about this hearing today, I want to make
sure that we are framing this in the right way, because not only
do you want hope, but you want that hope that they are going to
get better.
And I want to tell a little story about a woman named Frances
Oldham Kelsey. You worked at the FDA; you might have heard of
her before. This was back in the fifties and sixties. Of course, some-
thing again that many people faced, morning sickness.
There was a cancer drug out there, thalidomide, that was being
used in other countries that was helping women with morning sick-
ness. Forty-six other countries approved it. There was all sorts of
pressure to approve it here in the United States. One woman at the
FDA said no. Imagine the pressure on that one person saying no
to get rid of morning sickness.
And then it comes out that thalidomide caused incredible birth
defects. Tens of thousands of babies around the world were born
without limbs, were born with brain defects. The drug was taken
off. It was never used. And we did not have—the term was—it was
so common, they called them thalidomide babies. It wasn’t—it
didn’t happen here because we had one person who was willing to
say, is it safe?
So while we want all of our friends, neighbors, and loved ones
to get better, we want them to have that hope, we have to have
it be safe. And I will admit, there are obviously regulations that
are burdensome and can get in the way. But regulation itself is not
a four-letter word.
Regulations have been used to save the lives of everything from
the minors in my State of Kentucky to save the lives of people who
actually need these treatments and when they come to market.
And so when we are talking about this today, I want to talk
about some of the other things that are actually keeping these
drugs from getting them in the hands of the people who want and
18
need them, because that is what we all want. We want people to
get and be healthy, and we want it to happen safely.
So, Dr. Zuckerman, I want to ask you a question. What is a big-
ger barrier to getting new drugs and cheaper drugs to market? Is
it FDA regulations or is it Big Pharma practices like pay for delay,
patent manipulation, and side deals with generic manufacturers
that are keeping most people from getting the drugs they want and
need?
Ms. ZUCKERMAN. Thank you for that question. And I just want
to say, I met Dr. Kelsey, and she was just a wonderful woman. She
lived nearby in Bethesda.
There are a lot of—some products are very complicated, and they
do take a long time to develop and they take a long time to study.
But patent manipulation is a huge problem, because you have—you
have products like Humira, which have a couple of hundred pat-
ents—a couple of hundred patents, and they keep adding patents
to keep it on the market and to prevent any kind of competition.
So it costs enormous amounts of money to patients, and it makes
drugs very, very expensive that otherwise would have generic alter-
natives that would be much less expensive. So I think that is a
great example.
Mr. MCGARVEY. Thank you very much. I appreciate that.
And, again, this is something—we want to encourage innovation,
we want to continue developing life-saving drugs to get people bet-
ter. And so, you know, hopefully, that is what we can continue to
happen and look at all the reasons why it might not be happening.
Mr. Chairman, I yield back.
Chairman WILLIAMS. The gentleman yields back.
And I now recognize Representative Stauber from the great State
of Minnesota for 5 minutes.
Mr. STAUBER. Thank you, Mr. Chair. Thanks to all the wit-
nesses here.
Mr. Miller, in your comments, you said there is too many admin-
istrators in the FDA. You have been part of the FDA. How do we—
from our standpoint, how do we legislatively reduce the bureauc-
racy? Like, give me—like, is it a congressional action, or is it you,
as experts, placing your own to remove the burdensome redundant
administrators?
Dr. MILLER. I would say it is oversight and then also the user
fee acts.
Mr. STAUBER. And what?
Mr. MILLER. The user fee act. So when PDUFA comes up for
reauthorization, that is a great opportunity to write language to
encourage the FDA to have reviewers as opposed to managers.
Mr. STAUBER. Mr. Eagle, you had—you talked about your expe-
rience as a small provider, you and two other doctors, and then you
were almost forced to be bought up by the large—a larger company.
In one of your statements you said, who is in charge of patient
care? That is a huge problem, we know, in Medicare.
I think the vast majority of Americans would say that the pa-
tient and doctor are in charge. And when the patient and the doc-
tor agree that a 5-night stay in the hospital is needed, rather than
Medicare saying, no, you should only spent two nights there, that
is—there is a huge problem going on in our country where our phy-
19
sicians are undercut by, in this instance, Medicare, telling you that
your patient didn’t need 5 days and we are only paying for two.
And we know you are going to make the best decision for your pa-
tient, not a bureaucrat at a three-letter agency checking off the
boxes.
That—I am hearing that universally around the country. We
must fix that. The patient and the doctor must make those deci-
sions. Thanks for bringing that up. And that is a big lift.
Mr. Newell, you have—you have an interesting story on the re-
search and development of the product. I can tell you right now,
I know a physician within this country that is in the final stages
of his new drug, and I know he used it on a COVID patient the
last—that was the last stretch, this is it, and it saved the patient’s
life.
I can’t imagine—and he has talked to me about the FDA and all
the process and the bureaucracy. I can’t imagine how many COVID
patients it would have saved had it been allowed—FDA allowed it
earlier. We won’t know. But in talking to this physician and others,
it is very concerning.
We talk about safety. I mean, we want it to be safe. But I think
we have to meet a sweet spot here where the research and develop-
ment, there is timing on this, there is certainty. We have to have,
not administrators at the FDA, but people that will look at these
drugs and use their professionalism and experience and yea or nay.
One of the things that frustrates me is, you know, as a small
business owner—you as a small business owner, just the rules and
regulations that they force upon you. It is unnecessary. I want you
and the nurses to have patient care, not pushing paperwork. Thir-
ty-five percent, probably, of your time is pushing paperwork. Would
you agree, Doctor?
Dr. EAGLE. Absolutely. And to give you an example of some of
the things that we—that affects how patients are cared for, there
is a rule in Medicare that they consider it unreasonable for us to
see a patient and give them an injection or an infusion and then
see them for that same related problem the same day. The rule is—
it is termed modifier 25 because that is an exception that insurers
and CMS use to except.
So, for instance, I might have a patient who is getting a shot for
anemia and they need to also have the anemia managed. They
need to follow the doses, they need to make sure it is safe. I can
no longer see that patient on the same day they get their shot. So
the patients—you know, oftentimes their children have to take off
work, their caregivers have to take off extra time from work to
bring them for the visit with me and then bring them on a separate
day to receive the injection, when both could easily be done and it
would be much better for them both to be done at the same day.
That was not a big issue 3 to 4 years ago. But over the last 2
years, we have had to reeducate our entire staff, reorganize our en-
tire office around that rule, and it is absolutely no benefit to the
patient.
Mr. STAUBER. My time is up. I want to thank you all for your
expert testimony, and thanks for what you are doing to your pa-
tients. You are making their lives better.
And I yield back.
20
Chairman WILLIAMS. The gentleman yields back.
I now recognize Representative Scholten from the great State of
Michigan for 5 minutes.
Ms. SCHOLTEN. Thank you so much, Mr. Chair.
Thank you to our witnesses today.
This is such an incredibly important hearing. And I think, if we
have learned anything from the questions today and the testimony,
it is that this is about balance. We need federal regulations to keep
individuals safe. But I can tell you firsthand from a place like west
Michigan where I come from, there are overly burdensome surprise
regulations that are hampering innovation. And I am grateful that
we are having the hearing today to talk about it. Let’s not throw
the baby out with the bath water. But let’s make sure that we have
effective regulations that are doing what they need to do but are
not getting in the way of critical lifesaving drugs and medical de-
vices.
Healthcare is growing the economy and saving lives every single
day in west Michigan, from the production of the COVID vaccine
to innovative cancer research to medical devices that are being cre-
ated right in my home, my backyard.
From 2018 to 2021, our State saw a 41.8-percent increase in the
establishment of research, testing, and medical laboratories. That
is about 6 points higher than the national average. Go blue. I am
committed to ensuring that that we ease the burden for our small
businesses in this critical market while also keeping consumers
safe.
This question is for Dr. Zuckerman. As you have discussed in
your testimony, the FDA has made concerted efforts to assist small
businesses navigating the regulatory process. Can you speak to the
FDA’s ability to ensure new establishments are aware of the serv-
ices that they offer, such as the Center for Drug Evaluation and
Research and SBIA programs. And are there ways that this out-
reach can be improved?
Ms. ZUCKERMAN. I am sure there are ways to improve it. I do
think that most companies would be aware that, because of the
User Fee Act, the FDA is under an obligation to have their sci-
entists meet regularly with companies when the companies request
it. The companies do have to request it. But that really helps level
the playing field because, otherwise, you know, companies that
don’t have access to expensive consultants would not have that
kind of advice that they need of, what do I need to do to get this
across the finish line so to speak?
But I also just want to mention that device regulations are much,
much different than drugs.
Ms. SCHOLTEN. Of course.
Ms. ZUCKERMAN. And something like 98 percent of devices get
on the market without even having clinical trials. And you’d be
surprised what that includes. And I will just say a loved one is try-
ing to decide how to get treatment for a brain tumor. And there
are several products on the market that provide radiation that
have never been tested in clinical trials except after they went on
the market, and those clinical trials are tiny and not very well con-
ducted because they weren’t required by the FDA. So that is the
balance.
21
Ms. SCHOLTEN. Yeah, absolutely.
The regulatory process can be lengthy and expensive for small
businesses, we recognize this, who are willing to bring their prod-
uct to market. This question is for you, Dr. Miller, in your testi-
mony, you discussed different ways to improve clinical trial out-
comes with greater efficiency. You mentioned the FDA’s draft guid-
ance regarding decentralized clinical trials. Are there important
mechanisms or other tools that can be strengthened within the
FDA to assist in the adoption of these practices to support innova-
tive small businesses in communities like mine, keeping in mind
some of the comments that Dr. Zuckerman just made as well.
Dr. MILLER. I think it is operationalizing those guidances, that
has always been the trouble with the FDA. When you are a re-
viewer, you have NDAs. You have INDs. You have all these meet-
ings and everything comes to you. And then you have six layers of
bureaucracy above you telling you to work harder. And the six lay-
ers of bureaucracy also can do your job because they had the exact
same training. So I think it is deburdening the reviewers and mak-
ing more of them by transforming that bureaucracy into more
frontline staff who can interface with companies to help them
operationalize those guidances and principles in their development
programs. So the tools are there. It is primarily a human capital
management challenge.
Ms. SCHOLTEN. Thank you. I yield back.
Chairman WILLIAMS. The lady yields back.
I now recognize Representative Meuser from the great State of
Pennsylvania for 5 minutes.
Mr. MEUSER. Thank you, Mr. Chairman.
Thank you very much to our witnesses. We very much appreciate
you being here. A very interesting subject, very important subject.
I am very glad we are discussing it and has definitely been inform-
ative already.
Dr. Eagle, I would like to ask you, the H.R. 2474, the Strength-
ening Medicare for Patients and Providers Act. I hear all the time
from physicians that the reimbursements levels are a challenge,
prior authorization requirements and everything else that takes
place. Do you think this act will improve things and make it a little
bit more consistent as far as your reimbursement levels?
Dr. EAGLE. Thank you for the question, Congressman. I believe
that is the act that provides the inflation adjustment, so for physi-
cian fee scheduling, and so we fully support that.
Mr. MEUSER. Okay.
Dr. EAGLE. If you look at private physician reimbursements, it
has really been flat or declining over the past 20 years and while
inflation has increased by 26 percent. So there has been an effec-
tive decline for physician payment over the last 20 years. And that
explains much of why private physicians are going away. The hos-
pitals and nursing homes have those inflation adjustments. And I
think we would fully support that legislation to level the playing
field and give the physicians the resources that they need.
Mr. MEUSER. Great.
I come from the home medical equipment industry, formally
DME, powered chairs and mobility equipment and such as that. I
honestly have never been a fan of CMS or the FDA, more so as I
22
have gotten into Congress I guess. It seems that even prior author-
izations are intended for slowing down payments, controlling costs
rather than actually just dealing with it and talking. And I don’t
mean any particular administration. I mean all the way back to W.
Bush and even H. Bush and on through. I just didn’t feel that there
was the right level of understanding of what the results were, of
what their work was, as well as their understanding of what was
the most cost-effective ways of handling things. And they would
tend to beat up on the industries that pushed back the least, if you
will.
So do you feel—Dr. Miller, this is actually for you, do you feel
that CMS is listening these days to pharmaceutical concerns and
physicians’ concerns?
Dr. MILLER. No. And I think that is a longstanding historical
problem. One of the things that I think has happened, though, is
we have had increasing centralization of payment and decision-
making. The IRA created centralized administrative pricing for a
small group of drugs. There is a push to expand that over time.
When we look at physician services, 8,000 physician services are
written and priced by CMS on an annual basis. And that over the
past 60 years has destroyed clinical innovation and service deliv-
ery. In fact, the industry has had flat or negative labor productivity
growth, and so I am really concerned that the IRA is going to drive
that for drugs.
Mr. MEUSER. I can’t help but—why don’t we have people like
you in CMS, you know? I am serious. Or even you, Dr. Eagle?
I would like to ask Dr. Newell, Mr. Newell, on your R&D tax
credit situation where we are phasing—not us, the R&D tax credit
of course is being phased out this year. It is about 80 percent less
of the deduction than it was last year, very significant. How does
that—and we passed a bill by the way to prohibit, to not allow it
to sunset. So it is languishing in Senate right now. So hopefully
that gets resolved. But this of course was part of the Tax Cuts and
Jobs Act of 2016. Can you tell us how that is affecting your busi-
ness?
Mr. NEWELL. As I explained in my testimony, thank you, Con-
gressman, for your question. It is very expensive to develop new
medicines, particularly cancer medicines. And I take every dollar
that we are able to receive from investors or from our partners and
reinvest them in the people, the technology and the research and
development effort that we do. And here we are 21 years, and we
are still not yet at a first approval of a medicine. So that tells you
how much investment we have been putting into this effort since
2003.
This year, for the first time, because of a collaboration arrange-
ment or arrangements that we made with other companies, we
paid $15 million in taxes to the federal government for the first
time ever. That was a remarkable amount of money that did not
go to cancer research and development. That would have been the
equivalent of two trials, two phase 1 clinical trials to study new
medicines in patients. And that is really remarkable to me that,
after 80 years, where there was certainty about R&D deductibility
now it has gone away, as you have indicated. So it is a problem
not only for me but for a lot of other companies as well.
23
Mr. MEUSER. I yield back, Mr. Chairman.
Chairman WILLIAMS. The gentleman yields back.
I now recognize Representative Glusenkamp from the great State
of Washington for 5 minutes.
Ms. GLUESENKAMP PEREZ. Thank you.
Dr. Eagle, I wanted to focus on some of the structural factors
that you mentioned in your testimony that impact cost in patient
care. You note that vertical and horizontal consolidation among in-
surers and PBMs in particular is a particular challenge to pro-
viding quality care for your patients. I represent a rural district in
southwest Washington State, and I hear from my independent
pharmacists all the time that this is literally causing them to close
their doors. Can you explain more about how it is also negatively
impacting independent medical practitioners?
Dr. EAGLE. Absolutely. Thank you for your question. So, as you
mentioned, there has been tremendous vertical integration, par-
ticularly among the PBMs. The PBMs are typically part of the in-
surance company, and they also have their own specialty phar-
macies and independent pharmacies. So they have a motivation to
use those pharmacies. So they use different tools like restrictive
networks and contracting terms that are less favorable to either
independent pharmacies or pharmacies like ours that provide medi-
cations for patients. So we provide oral cancer medications for pa-
tients, but the way we do it is through medically integrated dis-
pensing. So our pharmacy team is located in or clinics. We are con-
nected to the EMR. We know what is happening to the patients.
We never supply 90 days of drugs because we know that those ex-
pensive medications need to be held or the doses changed. But the
PDMs frankly try to do everything they can to get those prescrip-
tions routed to their own specialty pharmacies.
Ms. GLUESENKAMP PEREZ. So how has that impacted, like,
an independent physician? Is this kind of going to cause them to
close or, I mean, have to join a bigger practice?
Dr. EAGLE. When I was part of a smaller practice in North
Carolina, we simply couldn’t have a pharmacy, it was just too com-
plicated to do that. As part of my practice in New York, we have
six free-standing pharmacy sites that provide tremendous value to
patients.
Ms. GLUESENKAMP PEREZ. So what do you advise Congress
to do about this?
Dr. EAGLE. Well, I think absolutely with the PBMs there has
to be transparency. I think that is the first step. That it is going
to take far more than transparency. I think that the fact that they
can refer to their own—give referrals to their own in-house phar-
macies needs to be looked at. We are also seeing problems now
with below water drug reimbursement. So pharmacies are now re-
imbursing less than the amount of the drug, and nobody can con-
tinue to operate that way. I—there are rules already that preclude
that, but we need CMS to enforce those rules.
Ms. GLUESENKAMP PEREZ. Okay. Hospital systems too have
grown significantly consolidated, as you mentioned in testimony.
Can you explain the impact that that level of consolidation has on
patients and healthcare costs for the country as a whole? Often we
hear that the hospital consolidation is justified because it is more
24
cost-effective or efficient. But do patients end up bearing the cost
of that?
Dr. EAGLE. No. Thank you for that question also. They abso-
lutely do. Hospitals charge more through the facility fees so they
have a different set of charges. They cost more than Medicare be-
cause they are paid under a different fee schedule than private of-
fices. They are able to negotiate much higher commercial contract
rates with private insurers, and so patient copayments can be very
high. And just the entire insurance plan costs can be higher be-
cause those costs have to be borne by the plans as well also.
Ms. GLUESENKAMP PEREZ. How do we work to help encour-
age more competition in the system and help independent practices
thrive again?
Dr. EAGLE. Yeah. I thank you for that question also. I think
payment parity is a nice little—is an excellent place to start. I
mean, there is no reason that we should be paying one system
more for providing the exact same service as another. I think 340b
is another driver as well also. Some hospitals do need 340b, but a
lot of hospitals are making tremendous profits off of that program
that don’t necessarily provide the energy and care that that pro-
gram, you know, would imply. That is another factor that is driving
consolidation in healthcare. In fact, that was one of the motivators,
you know, for hospitals to want to acquire oncology practices be-
cause the profits from that program are very desirable.
Ms. GLUESENKAMP PEREZ. Thank you very much.
We know that we just saw the last Medicare trustee report a few
days ago, which warns that Medicare will face shortfalls in 12
years that will require higher premiums and limits on services or
both.
Dr. Zuckerman, how can innovation reduce such shortfalls, or
other policy changes we can help ensure Medicare coverage is sus-
tainable for those who count on it?
Ms. ZUCKERMAN. Thank you for that question.
In the ideal world, of course innovation would save money in
terms of healthcare, but that is not what has been happening. So
many—well, we did a study of cancer drugs and found that many
cancer drugs that had been approved actually were never proven
to save people’s lives, to help people live longer, or to improve the
quality of life. So, in fact, the opposite seems to be true that, when
Medicare is a little bit more careful or when the FDA is a little bit
more careful about what products are approved, that saves money,
and that can save a lot of money.
Ms. GLUESENKAMP PEREZ. Thank you very much for your re-
sponse.
Chairman WILLIAMS. The gentlelady yields back.
I now recognize Representative Van Duyne from the great State
of Texas for 5 minutes.
Ms. VAN DUYNE. Thank you very much, Mr. Chairman.
And, Dr. Miller, it is great to see you again.
Last July, the Oversight Subcommittee, which I Chair, held a
hearing on the overregulation in healthcare and the impact that it
has on small businesses. And I am glad to see that we are holding
this hearing with the full committee today, given the level of bipar-
25
tisan concern regarding how this overregulation is hurting our
healthcare system.
In Texas’ 24th District, I have hosted a number of roundtables
with doctors. And I have always made it a point to ask them how
much of their time is spent in front of a computer on a screen as
opposed to talking to their patients, as opposed to actually doing
the job that they signed up for, that they studied for. And their an-
swers are always astonishing to me; anywhere between 65 and 90
percent of their time is spent checking boxes that CMS has put in
front of them. It is not helping their patients. It is not decreasing
costs. It is not increasing quality. It is spent on regulatory issues.
And it is just shocking to hear that. And this is time that they
would obviously rather prefer to spend with their patients, and
guarantee you it is time that patients would rather, you know,
spend talking to their doctors.
And I will never forget a meeting with a doctor who was forced
to sell her own practice because she said she just couldn’t afford
to do it anymore. And she said now that she is basically not prac-
ticing medicine, but she is just filling in boxes, that she just feels
like a monkey could do her job because she is only following regula-
tions, not practicing medicine.
And, where regulatory costs reached the point that it is no longer
feasible for small private healthcare practices to keep the doors
open, it only leads to one thing, which is consolidation. And this is
decreasing the quality of care. It eliminates competition, which in-
creases costs. And it limits the possibility of physicians owning
their own businesses. And that restricts access to care, and it hurts
patients. We can’t continue to allow overregulation to shut the
doors of small care providers. And I am glad our committee is fo-
cused on finding solutions to better provide better and more afford-
able quality care, patient care.
But, not only are this administration’s policies hurting solo and
small physician practices, but they are also hampering our ability
to be able to provide much-needed new pharmaceuticals and drugs
into the market that are produced by our highly regulated U.S.
manufacturers. And, at the same time, though, these policies seem
to be actually—policies like the Inflation Reduction Act, which Dr.
Miller, you were speaking of earlier, but they are actually enrich-
ing and empowering some of our most adverse foreign agents.
So, Dr. Miller, I am going to ask you, can you tell us how China
is using the Inflation Reduction Act against us when it comes to
new drugs?
Dr. MILLER. Thank you for the question.
China views the biopharmaceutical industry as a place where it
wants to completely dominate. The IRA sent a massive negative
signal to all entrepreneurs, small companies and large companies
basically saying that you are going to undergo centralized adminis-
trative price regulation. That, plus the inability for the FDA to
modernize clinical trials means that the cost of developing drugs
and doing trials in the U.S. and manufacturing is very high.
I know people who are building companies, developing new
therapies, and they are looking at lower cost sites. And they always
ask me about China. They want to manufacture products in China.
They want to do clinical trials in China. So that scientific knowl-
26
edge, that technical knowledge that manufacturing knowledge, the
clinical knowledge, in addition to all of the jobs which are highly
paid and created a great innovative economic and scientific eco-
system, those ecosystems are leaving for China. And we just passed
a law that sent—and told the pharmaceutical industry to do more
development in China where it is lower cost. So we essentially
functionally supported our greatest adversary.
Ms. VAN DUYNE. Wow. Look, it has been almost a year or two
since you testified in this committee about overregulation in
healthcare. Do you think things have gotten better, or do you think
things have gotten worse?
Dr. MILLER. Worse. I would say that I spend most of my time
typing. And I remember one of my professors in medical school said
I would be an excellent physician because I was a very fast typist.
Ms. VAN DUYNE. Dr. Eagle, I am going to ask you the same
question.
Dr. EAGLE. Things have clearly gotten worse. And thank you for
the question. Your point about EMR could not be more on target.
That is kind of where the rubber meets the road between a lot of
the regulatory requirements and how physicians spend their time,
and it is a huge burden for physicians to kind of spend all day
checking boxes in the electronic medical record.
A lot of EMRs are really—involve the billing systems, so, you
know, the priorities of the EMRs are check-the-box documentation
requirements and billing and not true medical decisionmaking that
actually benefits patients, you know. I will get 5-page documents
from other physicians with a list of diagnosis codes, a list of medi-
cations, a list of previous diagnosis, but very little about what they
are actually thinking about what the patient needs and what the
plan of care should be. And that is a lot of how a lot of these regu-
latory issues get transferred to physicians is through the EMR. It
is a major source of burnout for physicians, and I thank you for
making those points.
Ms. VAN DUYNE. Thank you very much.
I yield back.
Chairman WILLIAMS. The lady yields back.
I now recognize Representative Alford from the great State of
Missouri for 5 minutes.
Mr. ALFORD. Thank you, Mr. Chair and Ranking Member, for
holding this. And thank you of course to our witnesses today.
I represent 772,047 people in a very rural district of Missouri.
The Fourth Congressional District. And rural healthcare is kind of
at a crisis point I think in America. Facing the continuing
healthcare crisis, providers are being forced to shut down or with-
hold the vital services that they provided to communities they
serve.
Rural Americans are uniquely vulnerable to the downstream ef-
fects of regulatory burden being forced upon the healthcare indus-
try. That is why I am glad we are having this hearing today, Mr.
Chairman.
We have visited numerous hospitals in our district. We have
heard firsthand the impact regulations have had on small busi-
nesses in our district. When rural providers are forced to shut
down, it can leave their patients stranded hours away from the
27
healthcare that they need and that they deserve. While telehealth
is helping meet some of those needs, only 22 percent of our con-
stituents in our district have high-speed internet that is capable of
taking part in this technology.
So, Dr. Eagle, I want to start with you. You talked about how
difficult it was to maintain your independent practice, that you
eventually was forced to join a large hospital system. It is some-
thing I hear from my constituents well. They are worried they
won’t be able to continue their small practices that serve rural
Americans. Why is it so difficult to maintain a small practice, espe-
cially in rural America?
Dr. EAGLE. I think the two primary drivers—thank you for the
question—are economics and regulations, you know. I think that
the practice I had in North Carolina was more suburban than
rural, but I think the problems are largely similar. I think rural
practices suffer from all the same problems that the other practices
do, but regulation is harder to manage in those situations. And re-
imbursement has been declining for the private offices, the same as
for everybody else.
I can’t speak as an expert on rural medicine in that regard be-
cause I never have practiced in a true rural setting. But I think
the problems are the same; it is just harder to solve.
Mr. ALFORD. Thank you.
Dr. Miller, another concern I have heard about from my constitu-
ents is about CMS’ efforts on this great idea of decarbonization. We
have got to decarbonize healthcare at a time when rural hospitals
are struggling to keep their doors open. CMS—I was being flippant
there, if you don’t know that—is releasing guidance asking hos-
pitals and healthcare providers to monitor and address their emis-
sions. This is a slap in the face to rural hospitals in my district.
In fact, the Golden Valley Memorial Hospital in Clinton, Henry
County, told me that to replace a single boiler with a clean alter-
nate that the CMS wants is going to be $3 million bucks, $3 mil-
lion. Do you think that CMS is fulfilling their statutory duties in
attempting to browbeat hospitals into decarbonizing?
Dr. MILLER. Absolutely not. That is completely out of scope for
CMS.
Mr. ALFORD. It is kind of crazy, isn’t?
Dr. MILLER. Yeah, there is a long history of using the conditions
of participation in Medicare to attach a favored regulation. And
CMS’ primary goal is—should be to assist in running the State
Medicaid programs and to run Medicare.
Mr. ALFORD. Should be.
Dr. MILLER. It is not an environmental regulator and should
not be.
Mr. ALFORD. Thank you.
Dr. Eagle, back to you. I have often heard from small rural hos-
pitals that are really struggling this year. I visited the Bates Coun-
ty Memorial Hospital, a great crew there, a small facility in Butler,
Missouri. And they told me that, in 2022, they lost nearly $2 mil-
lion providing for Medicare patients. I know we have some bills out
there that is going to help with their reimbursements. But what do
we do in the meantime? How can these small hospitals and doctors
28
who want to serve—truly it is almost a ministry to them out in the
rural communities—how do they stay alive?
Dr. EAGLE. I know. Thank you for that question. I cannot speak
as an expert on hospital administration. But I think that programs
like 340b are designed to support, you know, programs, hospitals
like those. And I think that, you know, redesigning that program
to actually truly meet the hospitals that need the funds would be
a step in the right direction.
Mr. ALFORD. Well, thank you. I truly think this is a very impor-
tant hearing that we are having today. And I thank you for being
here.
And, with that, Mr. Chair, I yield back.
Chairman WILLIAMS. The gentleman yields back.
I now recognize Representative Thanedar from the great State of
Michigan for 5 minutes.
Mr. THANEDAR. Thank you, Chairman Williams and Ranking
Member, for hosting this important discussion.
And I thank all the witnesses here.
Look now, I came here as an immigrant, got a Ph.D. in chem-
istry, did my post doc at the University of Michigan, and shortly
thereafter started a small innovation research company. So this
feels like something that I have done for 25 years. A lot of what
we did was develop pharmaceutical formulations, made clinical
trial materials for small startup businesses. Many startup busi-
nesses, very innovative, you know. A lot of innovation, as you
know, happens in small Pharma companies. But often they don’t
have the resources to do all of the drug development process, do all
of the regulatory QAQC testing, all of that. So I had a facility that
had 65 scientists at one time, Ph.D. scientists, equipment, formula-
tion, a CGMP facility. So I could provide these kind of services and
do innovation. And that helped, because often, you know, some
small segments of population that has a rare disease doesn’t get
noticed by large Pharma because there is just not enough profits
in there. And so a lot of small innovative companies are working
on that. And what I have noticed is the burden from FDA, the
delays getting responses, and overall not having the resources, fi-
nancial resources to be able to develop these drugs. And my ques-
tion to you all is that, what can Congress do to facilitate such inno-
vation? What can Congress do to keep our scientific community at
the top of innovation, discoveries, and keep our leadership in this
area? As a pharmaceutical scientist, I am very interested in your
answers here. Anybody.
Dr. MILLER. So I think, moving more towards decentralization
of pricing, as opposed to centralization, which is what we did with
the IRA. I think another thing, as I said, is clinical trial reform,
because the small companies need guidance. If a small the com-
pany gets one meeting on Zoom 6 months into their development
program and they have lots of questions that they need answered
in those first 3 or 6 months as they are setting up trials and mak-
ing decisions, they need to be able access the brain. They can’t pay
someone $2,000 an hour who has been doing this in the space for
30 years. They need the FDA reviewer brain who has been in the
space for 15, 20 years and sits in that entire area and has seen 15
to 20 years of development programs through INDs, NDAs, sNDAs,
29
et cetera. So, we need to make sure that the FDA is a partner to
the small companies and entrepreneurs. Those SBIA programs are
great, but they are not a substitute for having that scientific, clin-
ical, and technical guidance available at the fingertips for those en-
trepreneurs.
Mr. THANEDAR. Anybody else?
Mr. NEWELL. Thank you, Congressman.
As a CEO of a company that is developing new medicines start-
ing at the 19th employee and now 300 employees, with our CGMP
manufacturing facility, I know a lot of what you talk about. The
hurdles that we have from a regulatory standpoint are enormous.
And that requires a tremendous amount of capital and expertise.
In the development process for our lead program, we started clin-
ical development in 2019. Here we are in 2024, and we are still 2
to 3 years away from having the data set that will be satisfactory
for FDA.
One of things that we have had to do is to satisfy a new initia-
tive within FDA called Project Optimus where they are trying to
get companies to not identify the most effective dose for the pa-
tient, but the lowest, most effective dose for the patient. And so,
while we were prepared to start our pivotal trial about a year ago,
we had to first study two doses of our drugs in 50 patients, and
that will delay our trial about a year. So there are actions that
Congress can take to allow and incentivize FDA I think to accel-
erate development rather than hinder development.
Mr. THANEDAR. Thank you so much. I am out of time, but I
would love to work with you, all of you. Thank you.
Chairman WILLIAMS. The gentleman yields back.
I now recognize Representative Maloy from the great State of
Utah for 5 minutes.
Ms. MALOY. Thank you, Mr. Chairman. I have been sitting here
listening to your testimony. I had a whole list of questions I want-
ed to ask, and most of them have already been asked. That is one
of advantages of being junior on a committee; you get to learn to
think on your feet. But it seems clear that we need to do a better
job at trials and approvals. It seems like we are hearing a lot of
that.
And, as a Member of Congress, I am nervous about this con-
versation because having Congress get involved isn’t always helpful
when we are trying to get things to be more efficient and quicker,
but we do have oversight responsibilities with FDA. And I just
want to ask, what can we do that would help with the efficiency
of approvals and trials without adding more bureaucracy and mak-
ing it more cumbersome? I want to start with Dr. Miller. I know
you have covered this, but I just want to be really clear, how can
we help without getting in the way?
Dr. MILLER. So the specific things to ask is, how many staff are
in each center, and what are the tasks that they are doing? An-
other thing is, how long does a company have to wait to get a meet-
ing? How long do they have to wait to get an in-person meeting?
How frequently are the staff in the office? I realize some work can
be done remotely, but when you are doing intellectual collaborative,
frankly, highly creative and interdisciplinary work, you need to be
able to walk down the hall. We had a guy in our group whom we
30
called the grand mentor. He had been there 30 years. We bought
him a seersucker jacket. He had basically seen everything. You
would just walk down the hall and ask him questions because he
had been there forever. That doesn’t happen if you are all working
remotely at home 30 minutes to hours away from the agency. So
I would say making sure also people get back to the office.
Ms. MALOY. Dr. Eagle?
Dr. EAGLE. I can’t speak as an authority on clinical trials the
way Dr. Miller can. But I will just tell you, in 40 percent of the
FDA-approved therapies in oncology—or 40 percent of the FDA-ap-
proved therapies are oncology drugs and is how we make progress.
It is critical to be able to do these trials in the community, and we
do those in our practice. It is a lot of work, though. But the trials
are better when they are, you know, in communities because the
results are more accurate. You get better diversity of trial partici-
pants, and the trial results translate into the real world better
than if they are all done at academic centers.
Ms. MALOY. Mr. Newell?
Mr. NEWELL. Thank you for your question.
I would like to build on what Dr. Miller said. When we go
through the regulatory process with the FDA, we have a number
of meetings. Some of them are on what are called CMC, chemistry
manufacturing and control subjects, basically how we make our
medicine. Some of them are on the design of the trial. Some of
them are on the statistical plans that underpin the design of the
trials. Even though we are in California, we would welcome the op-
portunity for in-person meetings. I don’t think we have had an in-
person meeting in the 6 years that we have been in clinical devel-
opment at Sutro Biopharma. We do get Zoom meetings. They usu-
ally occur at the very end of the time period at which they have
to grant the meeting. And not everyone is on camera during the
Zoom meetings themselves. So there is a huge barrier I think to
the proper exchange of information and getting to the right an-
swers for the company and for the regulatory system and being in-
person and or being on camera would be a great step forward for
us in terms of that communication efficiency.
Ms. MALOY. Thank you.
Dr. Eagle, I want to come back to you. Sorry, I am going to skip
Dr. Zuckerman for a minute. My colleague from Washington cov-
ered a lot of this, but I also hear a lot of frustration from inde-
pendent pharmacists and independent healthcare providers about,
you know, the vertical integration that is making their lives harder
and making it harder for them to compete. And, when you were an-
swering questions about that earlier, you said we need more trans-
parency in PBMs. Do you want to just quickly tell us what that
would look like?
Dr. EAGLE. Well, I think, if you look at the economics of PBMs,
there is—it is a little misunderstood about how—where the money
goes. They are truly the only entity in the entire process, and when
they contract, it really sees all contracts and really knows how the
money flows. So I think that would be a first step.
So, if you look at where drugs rebates go, whether those savings
really get passed on to the patients in the plans, that is just not
entirely clear. It is stated that that happens, but we just don’t
31
know that. So I think transparency would be a first start, but I
think the legislation after that would need to follow as well.
Ms. MALOY. Okay. Mr. Newell, last question for you, and I am
almost out of time so really quick answer. But how important—it
is troubling to me that you are 21 years old and still not commer-
cial. How important is the timing of reimbursements for small
businesses that develop breakthrough technologies from Medicare?
Mr. NEWELL. It is vital. You know, when we do this work, we
want to get a medicine to a patient, and we need to ensure that
the patient has no barrier to getting that. So reimbursement is
vital to the whole ecosystem.
Ms. MALOY. Thank you.
I yield back.
Chairman WILLIAMS. The gentlelady yields back.
I now recognize Representative Molinaro from the great State of
New York for 5 minutes.
Mr. MOLINARO. Thank you, Mr. Chairman. Although, every
time you say ‘‘the great State of New York,’’ I always have chuck-
led that not only, obviously, are small businesses overburdened by
federal regulations—I talked a great deal about that, and we are
going to get into that in a little bit—but it is even worse in the
State of New York. Sadly the federal/state regulatory regime has
not only used overregulation as an enforcement mechanism, but
sadly, absent both Congress and even the State legislature’s in-
volvement, enforcement and regulation is used as policymaking.
And that is a frightening recipe and, quite frankly, has led to so
much consolidation and smaller businesses, smaller practices, and
smaller providers leaving the community.
For rural communities like the ones I represent in upstate New
York, without question, small independent providers serve as a
critical lifeline for patients in connecting them with high-quality
and affordable medical services. We acknowledge this. From sky-
rocketing regulatory compliance cost to labor shortages, it is clear
our small providers, especially those in rural communities, are
struggling to stay afloat. It is one of the reasons I sponsored the
Healthcare Workforce Innovation Act to ensure qualified medical,
behavioral, and oral health professionals can practice in medically
underserved and rural communities. We, in upstate New York,
sadly live in medical deserts.
As healthcare consolidation has accelerated over the past two
decades, the number of independent practices continues to shrink.
You have all acknowledged this. And, according to the American
Independent Medical Practice Association, from 2019 to 2022, the
share of physicians working hospital health systems or other large
corporations grew from 62 to 74 percent. And I worry that that has
accelerated even more so in communities throughout New York.
Dr. Eagle, I want to return to some of your testimony where you
elaborate a bit on how CMS regulation enacted during COVID-19—
which, by the way, I lived on the front line of public health as a
county executive during COVID-19. When we didn’t know what we
didn’t know, we made decisions that made sense. And then we
knew a lot and started to make even more decisions that made no
sense. One such regulation barred the independent medical prac-
tices from delivering to patients medications via mail or similar de-
32
livery means, which of course made no sense during COVID. It
makes even less sense now. I joined 53 of my colleagues in issuing
a letter urging HHS and CMS to reconsider this regulation to help
ensure patients’ and their medical providers’ needs are accounted
for in the regulator process.
Dr. Eagle, if you could, just share a little bit more about your ex-
perience as a small provider—modest provider, not so small but
small provider, navigating the burdens of the regulatory environ-
ment and the impact this particular order had on patient care.
Dr. EAGLE. Thank you so much for the question.
As I mentioned previously, what we do in our practice is medi-
cally integrated dispensing so it is different when patients get their
oral drugs from us than when they do from a PBM, because the
PBMs, they don’t do the same patient support, financial support.
There is a loss of—they don’t know the critical record.
The new CMS regulation is a massive burden, and it was issued
through an FAQ, which is not the typical rulemaking process. So
that in itself was problematic. But we can no longer mail these
drugs to patients. Only the PBMs can mail drugs to patients. So
sick cancer patients now have to physically come into the office to
pick up their medications. It is not even allowed that the patient’s
family members can come to the office and pick up the medications.
The patients themselves who are battling cancer have to make
these trips. In rural areas, in New York, that can be a huge bur-
den, but just getting around the Long Island area and New York
City can be a challenge as well also. So that is prime issue that
really needs scrutiny. And it would be very easy for CMS to reverse
this requirement, but we are very disappointed that they seem to
be dug in on this.
Mr. MOLINARO. As are many of us. And if we think the
healthcare system—and, again, I try to localize it a bit, the
healthcare system in New York is a bit on life support as it is; The
mental healthcare system is relatively nonexistent. And access to
medications in a more fluid and accessible way for those dealing
with mental illnesses is critically important.
I just want to very quickly reference, in my district, there are
several small domestic pharmaceutical companies and manufactur-
ers, including Alvogen, that experience extreme challenges working
with federal bureaucracy. Lacking certainty in matters involving
the government is a challenge for any business of any size. It is one
of the reasons this committee exists, but it is especially challenging
for small companies that lack financial resources to stay afloat dur-
ing periods of time while they wait on government to act.
For any of you, if you would, in my 20 seconds, how does that
uncertainty in the bureaucratic red tape impact the ability in par-
ticular to small biotech companies to meet providers’ needs?
Mr. NEWELL. Congressman, maybe I will answer that quickly.
Mr. MOLINARO. Please.
Mr. NEWELL. In order to raise capital, we need to chart a path
for the medicines that we are developing. And we need to persuade
investors that we know that that path is achievable. When there
is uncertainty from a regulatory standpoint, investors sense that
uncertainty, and they are less likely to invest. And, without capital,
we are not able to bring new medicines to the market.
33
Mr. MOLINARO. Thank you. Thank you, Mr. Chairman.
Chairman WILLIAMS. The gentleman yields back.
I now recognize Representative LaLota from the great State of
New York for 5 minutes.
Mr. LALOTA. The great State of New York, Mr. Chairman.
Chairman WILLIAMS. That is what I said.
Mr. LALOTA. Yes, sir. It is easy to agree with you, Mr. Chair-
man.
Dr. Eagle, it is always nice to welcome a fellow New Yorker, a
fellow Long Islander, to Washington. You have more than 20 years’
experience in healthcare, with specialized training in diagnosing
and treating cancer. Additionally, you are the past president of the
Community Oncology Alliance and are acutely aware of how over-
regulation affects small practices.
The matter of cancer, we have heard it from several of our Mem-
bers today, is a personal one to us and our constituents. Me in par-
ticular, in March 2006, I lost my father after a yearlong battle to
lymphoma. He died in Mather Hospital in Port Jefferson. He was
a big, strapping, strong Italian man. And the disease ate him away
in many different ways. My three daughters born after never got
to meet him.
And, before I ask you a few questions, I want to commend you
for your lifetime of dedication to work in this field to try to bring
comfort to many families, to try to treat and end this disease. It
is commendable that you have spent your professional life on this
endeavor.
Specifically and switching gears a little bit, one thing that stood
out to me in your written testimony is that your practice treats all
patients, including Medicaid. Are you telling me or are you saying
that other hospital systems in the New York area do not treat pa-
tients who use Medicaid?
Dr. EAGLE. Thank you for the question.
To the best of my knowledge, that is true, you know. We partici-
pate in all insurance plans in New York. That is a rarity in New
York, frankly. We participate in all the Medicaid plans. I don’t be-
lieve the nonprofit hospitals do participate in all the Medicaid
plans. So, you know, we really try to take care of the community.
I think, when a lot of people look how to build healthcare and who
provide subsidies to, they look to nonprofit hospitals. But I think,
in New York, it is notable that our practice, which is 80-plus mil-
lion oncologists, we accept all the insurance plans and work very
hard to stay in all networks.
Mr. LALOTA. What do you think is the impact of others not ac-
cepting Medicaid?
Dr. EAGLE. Well, you can’t help a patient unless you see them.
The only way you can help a cancer patient is being in their com-
munity and give them access to your clinic and their care.
Mr. LALOTA. Great, thanks. And can you describe how oncology
care has changed for patients, doctors, and staff after your practice
transitioned from your small private practice to your large regional
health system?
Dr. EAGLE. When we were a three-physician practice, we start-
ed every Monday at 8 o’clock in the morning with a 30-minute
meeting with the entire staff, talking about clinic operations, how
34
to do little things right. When you are in small private practice, the
only thing you can do is win on quality and service. We had no
other structural advantages. So it was just critically important to
make sure that all the staff was involved with every part of the
clinic and making it operate as efficient as it possibly could and
welcoming to the patients as it possibly could. Unfortunately, with
the transition to the hospital, we lost a quarter of our employees
before the changes even happened. They just did not want to work
for a hospital system. I think today maybe even less than one-third
are left. So much of the efficiencies, so much of the personalized
care, so much of the things that we personally enjoyed about taking
care of cancer patients just became harder to do.
Mr. LALOTA. Yeah. We want to take care of patients. We want
to take care of constituents. Can you describe to the committee the
difference between how a hospital does this or how a private physi-
cian office like yours approaches this? And, specifically, is there an
unlevel playing field between the two?
Dr. EAGLE. Structurally there is a tremendously unlevel playing
field. Particularly in oncology, there is the 340b program. So hos-
pital oncology programs and nonprofit hospitals can drop substan-
tial profits from that program. They derive higher commercial con-
tract reimbursement. But they also get paid facility fees under the
Medicare program and just higher payments generally across the
board for Medicare for the same services.
Mr. LALOTA. And the dynamic that seems to favor the large
hospitals, is that hurting patient care, or are the patients dis-
advantaged with the unlevel playing field?
Dr. EAGLE. You know, when I transitioned into the hospital, I
was able to see about one-third fewer patients. So I think patients
begin to wait longer for appointments. They are paying higher costs
both commercially and through facility fees on Medicare. So I think
it has tremendous patient impacts.
Mr. LALOTA. Great. Thank you so much. Appreciate all of your
feedback today. This is one of the more functional committees in
Congress. The Republicans and Democrats seem to agree on a de-
cent amount of things. We have produced a fair amount of legisla-
tion subsequent to testimony from folks like you. So I want to say
thanks so much for being here.
Mr. Chairman, I yield back.
Chairman WILLIAMS. The gentleman yields back.
And I would like to thank our witnesses today for their testi-
mony, for you appearing. It has been a good hearing, and one—I
think we love to have people come up and go before our committee
because, most of the time, we are pretty bipartisan. We see things
as they should be and try to get something done.
Without objection, Members have 5 legislative days to submit ad-
ditional materials and written questions for the witnesses to the
Chair, which will be forwarded to the witnesses. I ask the wit-
nesses to please respond promptly if that happens. And I have no
further business.
Without objection, the committee is adjourned.
[Whereupon, at 11:48 a.m., the committee was adjourned.]
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