[House Hearing, 118 Congress] [From the U.S. Government Publishing Office] 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 __________ [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 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 VELAZQUEZ, 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 C O N T E N T S OPENING STATEMENTS Page Hon. Roger Williams.............................................. 1 Hon. Nydia Velazquez............................................. 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, Washington, 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. Velazquez 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 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, Velazquez, 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, indivisible, 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 overregulation 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 preventing some of our best and brightest entrepreneurs from innovating and trying new things. We have heard this from many different 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 ensuring 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 balance 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 extremely high price tag. Unfortunately, on top of the cost of development, 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 hamper 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 requirements. 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 undergoing 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 hearing 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. Velazquez. Ms. VELAZQUEZ. 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 economy, but that is especially the case in healthcare, where small companies are at the forefront of technological innovation and are developing 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 medical 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 circumvent 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 effectiveness. 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 patients 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 recognizing 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. Miller is an assistant professor of medicine at the Johns Hopkins University School of Medicine located in Baltimore, Maryland. In addition to being an assistant professor of medicine, Dr. Miller is a nonresident fellow with the American Enterprise Institute where he focuses 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 administration from the Kenan-Flagler Business School at the University of North Carolina at Chapel Hill, a master of public health 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 forward 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 Oncology 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 Alliance 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 cancer 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 Biotechnology 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 conversation ahead. And I now recognize the Ranking Member from New York, Ms. Velazquez, to briefly introduce our last witness appearing before us today. Ms. VELAZQUEZ. 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 University of Pennsylvania Center for Bioethics and the first nonphysician 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., ASSISTANT PROFESSOR OF MEDICINE, JOHNS HOPKINS UNIVERSITY SCHOOL OF MEDICINE; DR. DAVID ANTHONY EAGLE, M.D., MEDICAL ONCOLOGIST & CHAIR OF LEGISLATIVE AFFAIRS AND PATIENT ADVOCACY, COMMUNITY ONCOLOGY ALLIANCE; MR. WILLIAM J. NEWELL, J.D., CHIEF EXECUTIVE 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 Velazquez, and distinguished Members of the Committee. I am a practicing physician at Hopkins, an internist, a nonresident 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 Commission, 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 innovation. 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 remember her hands being red and swollen. Then I remember one year she baked a pie again, and I remember that year because that was the year the first TNF alpha inhibitor 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 pharmaceutical 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 need based upon a surrogate end point. There has been a lot of critique 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 personal. My father died of glioblastoma 2 weeks before I moved to Chicago and started medical school, and he was 58. For me, innovation 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 Parkinson'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 innovative 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 director, 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 administration, 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 entrepreneurs. 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 everyday Americans. And I thank you. 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 Velazquez, 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 businesses in healthcare. I am a practicing medical oncologist with New York Cancer & Blood Specialists, and serve as Chair of legislative affairs and patient 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 scientific 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 patients 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 providers, increasingly were fighting. Barriers to care, both large and small, sometimes incidental, other times intentional, popped up all over the place and were almost always far too much to bear for patients facing the battle for their lives. Over time, our small practice, operating as a small business, encountered significant pressures from large, well- funded hospital oligopolies 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. Furthermore, 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 practice that had served the community for over 19 years was gone. Hospital clinics operate under stifling bureaucracies, and as a result, almost immediately I was unable to see the same number of patients that I was able to see daily in my own independent practice. As devastating, the hospital later switched over its billing system and was able to charge significantly more for the same services. 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. 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 markets, and were recently named the number one physician practice in New York by Castle Connolly, a rating system based on physician 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 treatment 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 decisions 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 latter. In my written testimony, I touch upon some of the other significant forces pressuring medical practices, including utilization management 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 Velazquez, 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 Biotechnology Innovation Organization and Chair BIO's capital formation work group. Sutro Biopharma focuses on research and development and manufacturing for next-generation cancer medicines; primarily, antibody drug conjugates commonly referred to as ADCs. Our company is 21 years old, and we are still a pre-commercial company, meaning we have yet to secure FDA approval for a medicine we have developed. I was employee number 19, and today we have over 300 employees and a market cap of approximately $300 million. Like many U.S.-based biotechs, Sutro has seen substantial domestic job creation with about 40 percent of our workforce in or supporting our U.S.-based manufacturing facility. This is the world's only manufacturing 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 reimbursements for R&D collaborations and our licensing product candidates. 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 earlier 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 typical of the small biotech experience in bringing a product to market. 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 reauthorize the pediatric priority review voucher program. The current program expires September 30 of this year, and Sutro and our industry partners strongly support the Creating Hope Reauthorization Act of 2024. This bipartisan bill provides critical incentives to promote research and development for drugs to treat rare diseases impacting 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 either 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 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 ecosystem 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 associated 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 answering your questions. Chairman WILLIAMS. Thank you very much. And I now recognize Dr. Zuckerman for her 5-minute opening remarks. STATEMENT OF DR. DIANA ZUCKERMAN Ms. ZUCKERMAN. Thank you. Chairman Williams, Ranking Member Velazquez, and distinguished 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 hospital, 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. 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 million 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 approval. 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 patient 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 companies 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 questions. 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 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 hurdles might be in place that are slowing this down and what the effect on patient outcomes may be. So, Dr. Miller, you worked at the FDA and are currently practicing 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 patient 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 management and making sure that the primary task of the FDA is focusing on review of products to make sure that they are safe and effective, because the FDA-- CDER, for example, has 5,800 employees. 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 marketplace, 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 medicines 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. Particularly in the IRA, we see that there are substantial disincentives 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 patients. 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 beyond 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 community better, you know, have better processes, and provide lower cost care for patients and more affordable and more convenient format. Chairman WILLIAMS. Thank you. I yield back. And I now recognize the Ranking Member for 5 minutes of questions. Ms. VELAZQUEZ. Thank you, Mr. Chairman. Dr. Zuckerman, the FDA has strict standards for approving new drugs and devices to prove their effectiveness. Is there any evidence 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 devices 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. VELAZQUEZ. 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 research 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 there really isn't any evidence that, although this could have an effect on which drugs companies invest in but not--it shouldn't have a chilling effect on innovative drugs. Ms. VELAZQUEZ. Thank you. Dr. Eagle, you mentioned that utilization management presented barriers to care for doctors and their patients. Do you think the increased use of these practices is a function of the market power of insurance companies? Dr. EAGLE. Thank you for the question, Congresswoman Velazquez. 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 different 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 decisionmaking. You know, we look at the literature, we present with colleagues, 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 fairly 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. VELAZQUEZ. 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 assurance that something is likely to work for at least some patients. And that is really what FDA has been doing, as well as making exceptions when a drug is urgently needed for a very serious disease. Ms. VELAZQUEZ. 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? Mr. NEWELL. As I have explained earlier--thank you for the question. As I have explained earlier, capital is extremely important to allow us to do the work that we do developing new medicines. 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. VELAZQUEZ. 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 stymieing 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 important 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 therapy. 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 phenomenal. They have these little molecules that go circulating 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 Committee 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 economics. 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 adjust 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 developing drugs. I saw the other day where artificial intelligence actually developed a drug for a disease. They put in there the parameters 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 learning to help us identify better targets for our medicines and, perhaps 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. Miller. You know, the administration is working on descheduling cannabis 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 research 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 cannabis to ensure that is safe and effective for the average consumer. Mr. LUETKEMEYER. Thank you very much. My time has expired. 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, something 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 sickness. 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 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 bigger 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 patents--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 alternatives 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 better. 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 witnesses here. Mr. Miller, in your comments, you said there is too many administrators in the FDA. You have been part of the FDA. How do we--from our standpoint, how do we legislatively reduce the bureaucracy? 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 experience 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 patient and doctor are in charge. And when the patient and the doctor 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 physicians 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 patient, 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 decisions. Thanks for bringing that up. And that is a big lift. Mr. Newell, you have--you have an interesting story on the research 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 development, 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. Thirty-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 entire 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 patients. You are making their lives better. And I yield back. 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 devices. 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 created 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 services that they offer, such as the Center for Drug Evaluation and Research and SBIA programs. And are there ways that this outreach 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 scientists 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 trying 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 conducted because they weren't required by the FDA. So that is the balance. Ms. SCHOLTEN. Yeah, absolutely. The regulatory process can be lengthy and expensive for small businesses, we recognize this, who are willing to bring their product to market. This question is for you, Dr. Miller, in your testimony, you discussed different ways to improve clinical trial outcomes with greater efficiency. You mentioned the FDA's draft guidance 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 innovative 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 reviewer, you have NDAs. You have INDs. You have all these meetings and everything comes to you. And then you have six layers of bureaucracy above you telling you to work harder. And the six layers of bureaucracy also can do your job because they had the exact same training. So I think it is deburdening the reviewers and making 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 informative already. Dr. Eagle, I would like to ask you, the H.R. 2474, the Strengthening 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 physician 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 effective decline for physician payment over the last 20 years. And that explains much of why private physicians are going away. The hospitals 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 have gotten into Congress I guess. It seems that even prior authorizations 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 delivery. 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 business? Mr. NEWELL. As I explained in my testimony, thank you, Congressman, 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 arrangement 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. 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 insurers and PBMs in particular is a particular challenge to providing 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, particularly among the PBMs. The PBMs are typically part of the insurance company, and they also have their own specialty pharmacies 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 medications for patients. So we provide oral cancer medications for patients, but the way we do it is through medically integrated dispensing. So our pharmacy team is located in or clinics. We are connected to the EMR. We know what is happening to the patients. We never supply 90 days of drugs because we know that those expensive medications need to be held or the doses changed. But the PDMs frankly try to do everything they can to get those prescriptions 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 complicated 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 pharmacies needs to be looked at. We are also seeing problems now with below water drug reimbursement. So pharmacies are now reimbursing less than the amount of the drug, and nobody can continue 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 cost-effective or efficient. But do patients end up bearing the cost of that? Dr. EAGLE. No. Thank you for that question also. They absolutely do. Hospitals charge more through the facility fees so they have a different set of charges. They cost more than Medicare because they are paid under a different fee schedule than private offices. 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 because those costs have to be borne by the plans as well also. Ms. GLUESENKAMP PEREZ. How do we work to help encourage 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 program, 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 because 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 sustainable 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 response. 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 bipartisan 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 answers 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 practicing medicine, but she is just filling in boxes, that she just feels like a monkey could do her job because she is only following regulations, 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 increases 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 focused on finding solutions to better provide better and more affordable 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 enriching 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 administrative 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 knowledge, 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 ecosystem, 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 medications, 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 regulatory 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 withhold the vital services that they provided to communities they serve. Rural Americans are uniquely vulnerable to the downstream effects of regulatory burden being forced upon the healthcare industry. 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 businesses in our district. When rural providers are forced to shut down, it can leave their patients stranded hours away from the healthcare that they need and that they deserve. While telehealth is helping meet some of those needs, only 22 percent of our constituents 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 something 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, especially 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 reimbursement 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 because 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 constituents 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 hospitals and healthcare providers to monitor and address their emissions. 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 alternate that the CMS wants is going to be $3 million bucks, $3 million. 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 hospitals that are really struggling this year. I visited the Bates County Memorial Hospital, a great crew there, a small facility in Butler, Missouri. And they told me that, in 2022, they lost nearly $2 million 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 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 important 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 chemistry, 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 businesses, 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, formulation, 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, financial resources to be able to develop these drugs. And my question to you all is that, what can Congress do to facilitate such innovation? 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 company 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 making 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, 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, clinical, and technical guidance available at the fingertips for those entrepreneurs. Mr. THANEDAR. Anybody else? Mr. NEWELL. Thank you, Congressman. As a CEO of a company that is developing new medicines starting 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 clinical 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 initiative within FDA called Project Optimus where they are trying to get companies to not identify the most effective dose for the patient, 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 accelerate 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 wanted 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 conversation 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 making 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? Another thing is, how long does a company have to wait to get a meeting? 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 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-approved 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 participants, 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 opportunity 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 development at Sutro Biopharma. We do get Zoom meetings. They usually 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 answers 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 covered a lot of this, but I also hear a lot of frustration from independent 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 answering questions about that earlier, you said we need more transparency 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 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 commercial. 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 chuckled 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 involvement, 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 skyrocketing 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 practices from delivering to patients medications via mail or similar delivery 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 experience as a small provider--modest provider, not so small but small provider, navigating the burdens of the regulatory environment 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 medically 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 burden, 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 manufacturers, 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 during 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 particular 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. 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. Chairman. 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 overregulation affects small practices. The matter of cancer, we have heard it from several of our Members today, is a personal one to us and our constituents. Me in particular, 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 patients who use Medicaid? Dr. EAGLE. Thank you for the question. To the best of my knowledge, that is true, you know. We participate 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 believe 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 million 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 accepting 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 community 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 started every Monday at 8 o'clock in the morning with a 30- minute meeting with the entire staff, talking about clinic operations, how 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 physician 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 hospital oncology programs and nonprofit hospitals can drop substantial profits from that program. They derive higher commercial contract 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 disadvantaged 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 decent amount of things. We have produced a fair amount of legislation 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 testimony, 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 additional materials and written questions for the witnesses to the Chair, which will be forwarded to the witnesses. I ask the witnesses 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.] A P P E N D I X [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] [all]