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tv   Key Capitol Hill Hearings  CSPAN  February 12, 2016 5:00pm-7:01pm EST

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cost -- and cost that are involved. mr. brown: how long typically is that process? ms. yellen: the processes can take years. and especially when there are multiagency rules that have to be put in place. i mean, we we are coming close to completing the dodd-frank agenda of rule making but it's taking a very long time and we have been very actively engaged in trying to do this as rapidly as we possibly can. mr. brown: it's taken half a decade for the regulator, you o.e.c. and the others it's take an decade plus to do dodd frank, can you guess what it would have taken if there'd been a cost-benefit analysis like this? ms. yellen: clearly it would be much more burdensome and take much longer. there's no doubt about it. i can't give you a guess but as
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you indicate, attempting to quantify the benefits of safety and soundness regulation is very difficult. mr. brown: who would have wanted this to take longer? ms. yellen: you indicated that those who are regulated -- mr. brown: don't say what i indicated but who in this town, who in this country wanted this to take long her ms. yellen: we know banking organizations are concerned with regulations and the burdens they impose. mr. brown: let me shift to another question, i think senator shelby will be back in a couple of minutes. some have suggested repealing or limiting the fed's authority to pay excess. i'm concerned this is an attempt by those who are concerned about those who want to limit the fed's monetary tools. what are the implications of
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repealing or eliminating interest on reserves? ms. yellen: it is the most critical tool we have for monetary policy to adjust the level of short-term interest rates and the stance of monetary policy. if we were denied the ability to use that tool, first let me say that it is because we had that tool that our knowledge that we had that tool when the time came to raise interest rates was critical to the decisions we made throughout the financial crisis and thereafter to undertake unconventional policies, including large scale ending programs and then quantitative easing or large scale asset purchases. the knowledge that we, when the time came, would be able to use
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interest on excess reserves to raise the level of short-term interest rates was critical in the decisions that we made that i believe provided great support to the economy and caused us to recover more rapidly. now if congress were to repeal our ability to pay interest on reserves, we would not be able to control short-term interest rates in the way we did before the crisis. so we would be forced to contemplate shrinking our balance sheet, perhaps rapidly, and i would be greatly concerned about the impact that that could have on the economy, on the economic recovery, for example, selling off mortgage-backed securities could raise mortgage rates and have a very adverse impact on the housing market and we purposely decided we will
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shrink our balance sheet in a predictable and gradual manner through diminishing or ceasing reinvestments to avoid the kind of unpredictable impacts on financial conditions that could come from rapidly selling off our portfolio. but without the ability to control short-term interest rates, through using interest on excess reserves, we would be forced to contemplate those steps and i would worry about their consequences and finally if i could just take another second, i'd like to point out that although we are paying banks interest on their accounts with us, the counterpart of those reserves is large asset holdings that we have on our balance sheet on which we earn considerably more interest income than we are paying to the banks and that differential has
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resulted in 2015 in transfers from the fed to the treasury and the american taxpayers of $100 billion for the last two years, $600 billion since 2008. if our balance sheet had to shrink rapidly, those transfers would clearly diminish to the far lower levels that were typical before the crisis. so this is not something that would be a financial winner and that's economic performance, i think our top concern should be what would be the impact on the economy, which would be very negative. but even in the financial sense for the taxpayer, it would not be a positive. mr. brown: thank you, mr. chairman. >> thank you, senator brown. madam chair i have several
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questions, i know it's a long morning and afternoon now. mr. shelby: recently a house passed bill would force the federal reserve and other regulators to consider what you call liquid and readily marketable municipal bonds as level two assets in the calculation of the bank easlick widity coverage ratio. the level 2-a category is my understanding, currently includes g.s.e. securities which are considered very liquid and uniform in structure. in addition, the fed has proposed treating eligible municipal bonds as level 2-b assets for liquidity purposes. my question, do you support the house bill to treat municipal bonds as level 2 assets? and why? or why not? ms. yellen: so, i would not support the legislation to treat hem as level 2-a assets.
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mr. shelby: explain why. ms. yellen: this is a liquidity requirement to make sure banks have sufficient liquid assets to cover the outflow they could see in a stressful situation. the most liquid assets are cash and u.s. treasuries. mortgage backed securities, fannie and freddie mortgage backed securities and level 2-a assets are quite liquid but not as liquid as cash or treasuries, which is why we downgraded them and while we have proposed to include some more liquid municipal securities, they are not as liquid as those included we have tried to recognize that while municipal securities generally are not very liquid, some are sufficiently liquid to include
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them in limited amounts but in category 2-b and i think that this bill would interfere with our supervisory judgments about what constitutes adequate liquidity. mr. shelby: are there two thing well, talk about this up here many times and you've talked about it, there are two things banks need, capital and liquidity. you could have capital and no liquidity and in a stressful environment you could be in trouble, could you not? ms. yellen: yes. mr. shelby: is your statement is dealing with liquidity, you don't want to weak then banking system but strength b it. ms. yellen: absolutely, yes. mr. shelby: in the area of reforming the federal reserve that i talked about in my opening statement, currently members of the board of governors do not have the ability to employ their own staff. instead, relying on a shared
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staff of the board which you head up. i understand that you oppose a policy that would allow a specific member of the board of governors of the federal reserve to employ even a single person to work exclusively for them. what are your reasons for opposing this policy? is it control or what? what is it? ms. yellen: i want to be careful, i think that governors certainly are entitled, they have substantial responsibilities and are entitled to adequate support and as chair i have worked to make sure, and i think this is true that each of the governors has somebody -- mr. shelby: and you were a member of the board of governors before you were chair. ms. yellen: yes, it was important to me when i was a member, i had someone a staff member, not someone from outside, but a staff member
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assigned to work primarily with me to help me with my particular work and most of the governors now have staff members who were working primarily or excuse ily with them to help them undertake their particular job responsibilities and i'm not opposed to that, i have tried to foster it. we have pretty complicated agendas and a lot of work to do and we do need help. mr. shelby: but if you were a member of the board of governors and not a lot of support staff, there's not a lot you could add to a debate within the fed at a crucial time but if you had support, there are many voices down there that should not be just one voice, there should be a healthy debate even within the federal reserve, should it not? ms. yellen: yes, of course there
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should be. and the board staff provides support to all of the governors including their individualized needs. but it's certainly appropriate for governors who want to have staff specially work with them to have that ability. i'm not opposed to that. mr. shelby: in the area of fed transparency and transcript release, you said before that the fed, quote, is one of the most transparent central banks in the world. but also and these are your words too, there is always room for further improvement. i understand that you oppose a policy that would improve fed transparency by shortening the delay the delay in the release of federal open market committee transcripts from five years to three. now, five years to three? ms. yellen: i believe only a few central banks release
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transcripts at all and the next -- we're the shortest lag, i believe the next shortest lag is eight years. when transcripts were first released it was debated what the lag should be and even with the five-year lag, i think the experience was that fewer people were willing to engage actively with others in meetings, expressing their views, rather than read from prepared remarks. and while i'd say we have a reasonable degree of interaction in the meetings, the knowledge that we will be releasing transcripts in five years does lead to less interaction in the meetings. we really need to be able to engage with one another with ive and take where people feel
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protected that their unvanished views and exchanges with their colleagues will not quickly be exposed to the public. we, after all, release very detailed minutes of those iscussions within three weeks. i would simply fear that moving up the release, the timing of the release of verbatim transcripts actually wouldn't add very much, if anything, to what the public already knows about our policies from detailed minutes of the discussions, statements, reports, that actually there wouldn't be much additional information and it would stifle the level of interaction that we have. clearly that's a balancing act but that's my concern. mr. shelby: i can see how a release of transcripts in five months or three months could cause problems in the economy,
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you know the monetary policy and everything else, but three and five years, three years, i don't buy that. i believe that although, and i've said this to you privately and publicly here, i believe the fed should be independent but i don't think that you're totally independent, that we ought to know, we should not be a member of the board of governors. i don't want to be a member of the board of governors. but on the other hand we should know what you're doing and why you're doing it. now, do we need to know that immediately? probably not for a lot of reasons sometimes. but we do need to know and to move it from -- move the transcript release from five years to three years seems overly generous to me, that's my iew. reforming the fed structure in the area there, we've talked about this too, madam chairman.
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when asked yesterday, i believe it was in the house, about the structure of the federal reserve system, you said, and i'll quote, the current structure of the fed is something congress decided after a long debate and weighing of a whole variety of considerations. that's true. like any important thing. while this may be the case, i believe the federal reserve system was established by congress, we've talked, over 100 years ago. since then the country has changed dramatically. our economy has changed dramatically. and as you're aware, the san francisco federal district now includes approximately 65 million people. this is the fed district. while the minneapolis fed district includes just nine million people. why, madam chair, do you oppose instituting any type of review the structure of the fed,
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outside, healthy study? why do you do that? knowing that things are evolving all the time, as i pointed out. ms. yellen: it is, of course, up to congress to consider what the appropriate structure is of the the nd i'm well aware of fact that history plays a great role in deciding what the fed would be probably if we were starting from scratch you would not have the 12th district with 65 million people. i think 20% of the u.s. economy having one federal reserve bank. and congress can, of course, reconsider the appropriate structure. i simply mean to say, i do not regard the structure as broken in the sense that it is failing to put in place good monetary
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policies, failing to collect the information we need about what's happening in the economy to craft good policies, we do have, as congress intended, independent minded people tting around the table crafting policies. of course the structure could be something different and it's up to congress to decide that. i certainly respect that. i simply mean to say, i don't think it's broken the way it is. >> mr. chairman, if i could add, the san francisco fed had a really, really good fed president for a number of years. ms. yellen: oh, yes, thank you. mr. shelby: we understand that. but the fact remains that since 913, or since 1950, you have seen greater population changes in this country, for example, in the south where i come from,
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from virginia to texas and the border states, that's the most heavily populated area of the united states and it's slated to grow even more denser is that correct? ms. yellen: yes. and you know, when i was in san francisco -- mr. shelby: and the west. look at the west. ms. yellen: and we had places like san diego that had no fed branch or reserve representation that are growing faster and far larger than many places that do have branches. so yes, there's an historical legacy that has left the federal reserve system in place where geographically it no longer represents the distribution of economic activity in the country. i'm not arguing that. mr. shelby: when things change, don't you think we should be aware of that to change with it?
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ms. yellen: it's up to congress to decide if changes are necessary. i only mean to say that, for example, when i was the president in the 12th district, i was highly attentive to making sure that even though we have a very large district, that i was aware of developments all around our region and made a big effort to collect information from the various parts, very diverse parts of our district and i think my colleagues do that as well. mr. shelby: thank you. we appreciate your time today. thank you. ms. yellen: thank you for having me. [captioning performed by national captioning institute]
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[captions copyright national cable satellite corp. 2016]
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>> minnesota's cawcasses are on march 1 and the "minneapolis star tribune" writes that democratic candidates hillary clinton and bernie sanders will swoop in tonight. both will speak at a fundraiser hosted by the democratic former labor party, live coverage tonight at 8:30 p.m. ian on c-span. -- eastern on c-span. ♪ >> the most important issue facing america that the candidates should address is education because without proper education of our younger
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generation, we cannot grow as a country, we cannot succeed as a nation, accomplishing the goals and the future as we need to. >> my number one issue is national security but after seeing nine candidates with my 15-year-old son, i decided that chris christie is the most experienced and most able to protect us with his experience of everything he's done as a federal prosecutor and knowing about terrorism. thank you. >> right now, i think the most important issue and i think a candidates vative are not strong enough on climate hange. >> every election cycle, we are reminded how important it is for citizens to be informed. >> it's a home for political junkies and a way to track the goth as it happens. >> it's a way to stay informed. >> there are a lot of c-span fans on the hill. my colleagues will say, i saw
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you on c-span. >> there's so much more c-span does to make sure people outside the beltway know what's going on inside it. >> the u.s. house today approved a bill that the "washington post" reports would slap punishing sanctions on north korea. the overwhelming 408-2 vote came as the world community tries to deal with a nuclear attack in january and the country's fourth despite proiks against such testing, and a launch into space which many feel is enabling them to better use missiles for attack. the bill is waiting for the president's signature. a hearing now on u.s. preparedness for biological threats. a u.s. committee reviews recommendations on biodefense
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including a call for centralized leadership in the vice president's office. this is just over two hours. >> good morning, we'll begin this hearing, we're going to be having votes in a couple of hours so we want to move quickly through this. before i start i want to acknowledge that our good friend and ranking member of the committee, frank pallone is not with us today because his father die. we keep his family in our prayers. mr. murphy: though i didn't personally know frank pallone sr., i know he raised a good son so we thank him for that. and we'll continue on from there. next, i'm joined today also with my colleague who is wearing denver broncos orange, congratulations for super bowl they must be a good team because they beat the steelers. now on with our hearing. good morning, we're reminded on a nearly daily basis that those
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seeking to do us harm through a variety of means including biological attacks. the threat from attacks are growing and ever changing and we're ill prepared to respond to these threats as rapidly as needed. we have been caught flat footed too many times in the past. we face a deadly enemy we cannot see. our methods to find it are woefully inadequate and we may not know it's there until it's too late and this is frightening. the federal government's ambivalence toward biological threats must end. today the biological threats fall into three distinct categories. one, naturally occur, two accidental, and three, intentional acts often associated with terrorism. we must be able to guard against and respond to each of these appropriately. it's easy for nation states and terrorists to obtain the means necessary to produce biological weapons than ever before. given the ease with which one can obtain and trapt these
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materials, it's difficult for the intelligence community to check, analyze and produce information on biological threats. the threat of a biological attack is not as remote as one would hope. at the same time, diseases are occurring more frequently and spreading more quickly throughout the world as human populations put increasing pressure on remote areas and with the ease of global travel we'll see more and more infectious diseases occur. the world has seen outbreck breaks of sars, ebola and now zika. it's a humbling reminder that everyone has a plan until we are punched in the face. we were not prepared for ebola and actions declared to be correct one day were found on wrong the next. so the administration's answer s to appoint a -- an ebola
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czar who served for three months. now with zika, what was thought now relatively mild is showing that it could be much worse. the administration's current requests leaves funding gaps in project bioshields, special reserve fund and pandemic flu countermeasures. over the last three years this subcommittee has examined the impacts of and our preparedness for accidental and natural biological incidents. we have held hearings on the flawed response to the ebola cry sthirks need for preparedness for pan democrat exs and seasonal influenzas. the handling of live anthrax and the broken biowatch system. in the coming weeks we'll examine the response to the zika virus. each of these has a commn deno,
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ma'am gnator, the federal government wasn't repaired. for years we have lunged from crisis to crisis working on what just occurred instead of planning for the next crisis. i'm concerned that the federal government lacks an overall plan for biodefense. instead of being reactionary we must be proactive. last fall the blue ribbon study panel published its national blueprint for biodefense. the panel examined the current examinedbiodefense and issues related to prevention, deterrence and response to name a few. this is not a book that sits dusty on a shelf but one people should read. i'm pleased that two distinguished commission members, donna shillelagh and congressman greenwood are here to speak on the panel. we thank you. the panel's findings that we are, quote, dablingsly vulnerable, unquote, to a biological event because we lack leadership and overall strategy are frightening. the panel made many
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recommendations many of which fall in the jurisdiction of the energy and commerce committee and impact work the subcommittee has done and will continue to do the need for improved leadership echoes throughout the report and is a theme we've heard far too often. without leadership there's no coordination of biodefense research and other issues. without leadership there's no strategy. the panel also makes a number of specific recommendations. we must improve our biosurveillance and biodetection capabilities. we need to detect pathogens in air in hours or minutes, not days. agencies already collecting surveillance data should share it not squirrel it away. we need a platform that allows for rapid diagnostic development and vaccine development that applies not only to diseases we know about but also the ones we haven't yet discovered. the energy and commerce committee and this subcommittee must take the lead in understanding and improving our biodefense capabilities. i thank our witnesses for being
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with us today. we look forward to hearing our testimony. i now recognize the ranking member of the subcommittee, ms. degette, for fife minutes. ms. degette: i too want to welcome our witnesses, in particular former congressman greenwood who sat in the chair you're sitting in for many years and who sat next to me while we had a lot of the hearings on these issues that you mentioned in your opening statement today. and i know he's just as frustrated as you and i are about the fact that we still continue to lurch from crisis to crisis in this country without any kind of unified or comprehensive response to some of these issues. when i was listening to your opening statement, mr. chairman, i thought to myself, who says bipartisanship is dead? because my opening statement mirrors your opening statement to the point of talking about some of the exarms you discussed. so i won't read the whole opening statement because i do not subscribe to the adage that
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everything has been said but hasn't been said by everybody. so i'll put it into the record. i just want to highlight a couple of issues. we've got the zika virus going on, as you mentioned, right now and we're scrambling once again after the fact to deply the appropriate resources to prosect our citizens as it spreads. last year, it was the ebola outbreak. to that ally respond and we're still trying to put the systems in place to make sure that ebola doesn't spring up again. this national blueprint for biodefense made a number of important findings on how to respond to these natural occurring threats but also how to respond to deliberate attacks. as you mentioned, mr. chairman, the panel made three dozen recommendations to better posture our government to respond to these emerging
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biothreats. now, for those of us who were here during the fall of 2001, we remember vividly those little few envelopes of anthrax that arrived on capitol hill and the chaos that it caused within congress. offices were closed, buildings were fumigated, congressional business was suspended, thousands of staffers and members of congress lined up to get tested for exposure and even worse, of course, some of the workers in the postal center died. now this is a relatively small attack. so imagine what would happen if we had a large attack in a major metropolitan area or someplace else. that's why we have to be organized to deal with these things and that's what brings us back to the findings of this panel. you know, there are a number of really important recommendations and i recommend to every member of this panel and every member of the audience that you read,
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you read the actual blueprint because it is sobering. but i think that the top observation that's made in this blueprint is that the nation is underprepare forward bioattack because we still lack centralized biodefense leadership. the panel recommends appointment of a single national leader under which preparedness for and response to biological threats could be consolidated. the panel recommends this authority be institutionalized in the office of the vice president of the united states. and what the panel says is that this will, quote, ensure that biodefense will be addressed by every administration at the highest levels with adequate access to the president. i think this is a very unique recommendation and one we should explore. and i just want to say one more thing, mr. chairman. one of the grand traditions of the oversight and investigation
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subcommittee is to shine light on issues like this. and to actually move the dialogue forward. so i was really gratified to hear you saying in your opening statement that you don't just intend to have this hearing today and let this go. i think if we really have a series of hearings diving deeply into the recommendations of the committee and take the recommendation that we have some of these hear well, actually can make a long-term difference in how this nation is prepared. and that may be the very best legacy that not only this blue ribbon committee but also this subcommittee of energy and commerce can leave. with that, i'll put my full statement in the record but i'd also like to ask unanimous consent to put ranking member pallone's full statement in the record due to his inability to be here with his father's death. thank you very much and i yield back. mr. murphy: i ask unanimous consent that any other members written opening statements be in the record and without objection they will be entered and i believe you don't have an
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opening statement and given the rush we want to make sure we hear everything and every member gets a chance to ask questions before vote. so i'll introduce our witnesses. first witness is the honorable onna shillelagh. over the course of her career, she's demonstrated a long commitment to public service from the peace corps to the department of housing and urban development. she serves as presidented on c.e.o. of the clinton foundation. we appreciate your time here today. next my friend and colleague, the honorable jim greenwood, former congressman from the eighth district. she's a member of the blue ribbon study panel of biodefense and tembed -- served as resident and c.e.o. of the biotech.
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we look forward to your insights. next, dr. terry o'toole who serves as senior fellow at a nonprofit strategic investment firm that two facile tit connection and cooperation between venture backed technology startups with the u.s. intelligence community. dr. o'toole formerly served as undersecretary of science and technology at the department of we look security forward to hearing from you. i yield to mr. flores who will introduce our next witness from texas. mr. flores: thank you, mr. chairman. i thank you for holding this hearing today and for the urtesy of allowing me to ntroduce dr. jerry parker. texas a&m has the largest public-private partnership with
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the biomedical authority commonly referred to as barta. for vaccine development. prior to his current role he had a distinguished career in public and military service including serving as deputy secretary of he served as deputy principal secretary in the office of preparedness and response and a similar role at the department of homeland security. again, mr. chairman, thank you for allowing me the time to introduce dr. parker, his senior leadership positions at the texas a&m health science center, h.h.s. and d.h.s. are critical to the popic of -- topic before the committee and thank you, dr. parker, for being with us today. yield back. mr. murphy: thank you. if there's no more statements, we'll continue.
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this committee is holding an investigative hearing and when doing so has the practice of taking testimony under oath do any of our witnesses have objection to giving testimony under oath? seing in objections, the chair advises you under the ruse they have house you are entitled to be advised by counsel? do you desire to be advised by counsel? all witnesses say no. if you rise and raise your right hands i'll swear you in. do you swear the testimony you're about to give is the truth, the whole truth and nothing but the truth? thank you. all the witnesses said i do. you are now under oath and subject to the penalties set forth in title 18, section 1001 of the eyes code. we will now entertain each of you with a five-minute summary of your opening statement. we will begin with ms. shalala. turn the microphone on and pull it close to you. >> good afternoon, mr. chairman.
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congressman degette and members of the subcommittee. ei submitted a lengthy testimony for the record. ms. shalala: thank you for inviting us here to present our views and recommendation of the bipartisan blue ribbon study panel. i'm pleased to be joining former representative jim greenwood. we're here on behalf of our co-shares -- co-chairs former senator lieberman and governor tom ridge and the other members of our panel, former senate majority leader tom daschle and former homeland security advisor ken wine steyn. it's also good to see dr. jerry parker, one of our ex-oficios as well as dr. tara o'toole who advises all of us on this important subject. we are deeply concerned about the biological threat whether intentionally induced, naturally occurring or accidentally released and i want to emphasize those three issues.
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because this is not a report ust on intentionally induced biological threats. it also covers the naturally occurring ones or the accidently released. i want to take a moment to address the threat now but let me recommend that you get a classified briefing at your earliest opportunity. make no mistake, we've been told that our enemies are seriously considering the use of biological weapons. during the invasion of afghanistan, the united states uncovered evidence that al qaeda was trying to develop biological weapons. more recently, isil has gained control of enough land, physical infrastructure, scientific expertise and professional military personnel to potentially create and deploy biological ep wes and they have expressed their intent to use them. additionally the verification protocols associated with the
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biological weapons and toxin convention are weak and do not do what the world needs them to do, differentiate between legitimate and malicious activities. we're equally concerned about the threat of naturally occurring diseases with catastrophic pandemic potential. it's often very difficult for our scientists to guess the correct combination of viruses that will even make up the strain of influne shah that will circulate the following year. nevertheless, diseases do not have to kill millions to produce impact. there are a number of diseases that have affected my state of florida and breek and -- and puerto rico and u.s. virgin islands and american samoa over the last two years. now zika virus is on the move as resulting me cases pholy in newborns
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who contracted it from their mother. it's the first transmission in the united states is in dallas. it was sexually transmitted. imagine the devastating societal consequences if we cannot stop the spread of this disease. accidental releases also contribute to biological risk. i'm sure you're awear of the recent laboratory biosecurity and mishaps at a number of high level laboratories. the organisms in which these laboratories work are too serious, too infectious and too deadly for taos react indignantly only to forget after a few months and move on to the next challenge. our change must be institutionalized and sustained and that is our fundamental message today. our attention span tends to increase and decrease cyclically as different event e-- events
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occur and their impacts fade over time. since i was secretary of health and human services, i have seen teleadministrations increase and decrease their emphasis on biological threats usually in response to and after recovering from incidents such as the sars, events of 2001, h1n1, and ibo in a. -- ebola. and now we're gearing up again for the zika virus. woe need those at the highest level of government to take responsibility and develop a comprehensive strategy and unified budget and lead the whole government along with nongovernmental partners to improve our national biodefense and do so atent ily and consistently. we recommend that that person be the vice president of the united states. one of the few who gets the government agencies and the nongovernmental partners to work
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together. we are not necessarily talking about new programs or funding. instead, we believe we can build on existing programs and infrastructure and let me give you a few examples. we ought to be able to take an environmental biodetection system that was originally designed for the battlefield, for example, evaluate it and if it seems useful, then modify it to fulfill our needs domestically. we should see how we could build on our pre-existing, pervasive and familiar system of community pharmacies to get pharmaceuticals to localities in the midst of a biological incident and maybe create smaller caches in advance. we cannot depend solely on a federally driven public point of dispensing model. or take our hospital which meet accreditation criteria associated with funding provided
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by the centers for medicare and medicaid service. we can use that to address various specialties like trauma, for example. doing the same for biodefense would cultivate better hospital preparedness for major infectious disease events. in doing so we could create a stratified hospital system in advance of a biological event knowing exactly which facilities are best positioned to handle dayses. the funding we could get is far greater than what is currently available through the hospital preparedness program. while we support this grant program it is simply never going to be resourced enough to meet the needs. mr. murphy: could you just give a wrapup because you're over by a couple of minutes. ms. shah la la: i want to note --
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ms. shalala: in closing we need all of you to consider these recommendations and move forward and now after you've heard from jim greenwood we'd be happy to answer any questions you have. mr. murphy: thank you. recognized.d you're mr. greenwood: i'm tempted to ask unanimous consent to insert your opening state and ms. degette's as the opening to our report. i'm especially honored to be testifying here today. this hearing is quite timely not because a catastrophic biological event has recently occurred babu because one has not occurred in the u.s. whether it's a dirty bomb or an influential outbreak, we are
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underprepeared to respond to these threats and we must take immediate steps to be better prepared. it's been a great privilege to serve on the study panel with my esteemed colleagues. the biological threat is real and it is growing. while we are prepared, bet prepared today than a decade ago due to federal and private sector investment this efact is we are still dramatically underprepared. our report outlines 33 recommendations and the sec -- and as the secretary stated we all strongly support the first recommendation, calling for centralization of leadership over biodefense in the office of vice president. i would like to further focus on the recommendations related to strengthening the public-private partnership as industry plays a key role in protecting our nation. consider a company with a novel technology aplikeable to the biothreats of emerging diseases identified by h.h.s. this company wants to partner with the government but there are so
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many unique market challenges. unlike products with a viable commercial market, the market for most medical countermeasures are -- or m.c.m.'s is to find and support it solely by the federal government, making it a major source of research funding and the primary purchaser of vaccines, therapies and diges noics against these unique threats. many companies begin research at their own risk, conducting r&d even before receiving federal government funds. over the last few years a government funding for m.c.m. r&d has been decreasing just as the numb of threats have been increasing. the investor community views these products as risky and a distraction from similar product that was a clear commercial value. making it difficult to raise the necessary r&d funds for m.c.m.'s in the private capital markets. the regulatory pathway is not always clear.
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lastly, industry has seen a precipitous drop in the level of funds for the purchase of the final m.c.m.'s. for many companies, the biggest risk is that they will invest significant internal funds and time, developing a product only to find there is no clear procurement strategy from the u.s. government due to sudden shifts in priorities or dearth of funds. given all this, we strongly support the need for comprehensive, multiyear strategic plan and unified budget that clearly outlines the priorities for r grand d and procurement of medical countermeasures and pandemic influenza products. such a document would provide much needed transparency on governmental priorities and projected requirements thus helping companies to -- companies determine what products to pursue in this pr partnership. the enterprise must be fully funded. the project bioshield special reserve fund was created to provide companies with a guaranteed market for m.c.m.'s by establishing a 10-year
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advanced appropriation of $5.6 billion. the s.r.f. has indeed proved successful in attracting companies to invest in m.c.m. r&d. 12 m.c.m.'s were precured in a 50-year period and there are over 200 in the pipeline. the progress made to congress' initial investment is now in jeopardy. the s.r.f. was re-authorized at $2.8 billion for 2014 through 2018 but rather than a set-aside sum of money, the program has been funded through annual appropriations and much lower than the authorized amount. unless funding increases, we are risking a $600 million to $1 billion shortfall. such a sustained deficit endangers the proguess we have made and puts the 200 product candidates many pipeline at risk. similarly, pandemic influenza has been woefully underfunded the last few years. pandemic influne shah is -- zha
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is a known threat -- influenza is a known threat that is challenging. it is imperative that our preparedness include advance preparation of vaccines, anti-virals and the replenishment of vaccine and anti-viral stockpiles. our plan calls for congress to provide legislate every authorization to define and guide pandemic influenza programs to ensure they receive funding needed. novel incentives could demonstrate the government's commitment to m.c.m. development. one of the most important incentives is the preity review voucher for pathogens designed as material threats. the p.r.v. is a proven and valuable incentive that has helped to spur investment in neglected areas of r&d like tropical disease. an extension of the program to include material threats is viewed by many as a way to offset the traumatic decline and
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procurement funding for m.c.m.'s. adding m.c.m. targets to the p.r.v. program may help convince investors the government is committed to this endeavor and provide increased certainty that m.c.m.'s have value. imprufmente must be made in the contracting process as well. in addition to robust, sustained funding the public-private partnership must be strengthened in the contracting process to make it more efficient and predictable. streamlining is key to ensure thrrg not excessive the lays in the implementation of vital research. i call on congress to swiftly pass h.r. 3299, strengthening the public health emergency response ability of 2013. this retchts a strong initial toward implementing the recommendations of the panel this subcommittee plays abintegral role through your oversight of federal biodefense programs. i commend the committee's recent attention to pandemic
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influential preparedness and the letters the committee sent to the administration about flu vaccine supply and development and strategic plans. i hope the energy and commerce committee and subcommittee continue to examine the issues of biopreparedness further. the threats facing our nation are real and many. having products to support our national preparedness relies on the work of a few dozen biopharmaceutical company. the only way these companies can continue vital r&d and capacity building is if the u.s. government demonstrates a strong commitment to them by providing clear priorities, sustained funding and real incentives. if we invest well now in the broader set of known threats, we will be better prepared to pivot and respond when faced with an unknown threat. thank you again for the opportunity to testify and the work of the blue ribbon commission. i commend the committee and look forward to your questions.
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mr. murphy: dr. o'toole, you're recognized for five minutes. ms. oy toole: thank you, mr. chairman, ranking member degette. naung, mr. chairman. -- thank you, mr. chairman. i'm happy to be here today to discuss this topic, which has been a preoccupation of mine for most of my professional career. i want to thank you for your kind introduction and emphasize the views i express are my own, n-q-tel.e of i i want to commend the panel on their report which i hope will be highly influential. i share their sense of urgency about repairing the country's vulnerability to highly consequential bio events. i want to emphasize the nature
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and significance of biological weapons threats and explain why it's a first tier national security problem. second, i want to describe why naturally occurring epidemics almost certainly will increase in frequency and impact in the coming years. natural epidemics, it is important to understand, are different from deliberate bioattacks. the latter would be faster, fiercer and it may be that many victims are beyond rescue. but if we cannot handle natural outbreaks more effectively and efficiency tissue efficiently, we have no defense against biological weapons. thirdly, there's a major revolution in our understanding of how the biological world works and our ability to manipulate it. the advances in bioscience and biotechnologies should be part of the foundation of u.s. biodefense against both natural and deliberate epidemics. these advances are going to be
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extremely beneficial to human kind across many different fields that go beyond biomedicine. but it also means that we now have created a world in which there is wide access to advanced biological knowledge and the materials needed to build and disseminate biological weapons. as the defense science board said , in 2001, an age ago in terms of scientific advances, there were no technical barriers to nonstate actors including terrorist groups and lone wolves carrying out devastating bioattacks that could kill millions and cost billions. but, these advances in science and in biotechnology also for the first time give us powerful tools that could allow us to prevent and to rapidly detect and quench epidemics, whatever their cause.
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i'm going to give you some examples of critical technologies which might help realize the panel's assertion that innovation is a key ingredient and that dramatic improvements in biodefense are within reach. first of all, the potential destructive power of biological weapons is akin to that of nuclear weapons. in 1993, the congressional office of technology assessment estimated that a kilogram of anthrax dropped on washington, d.c. in ideal weather conditions would result in one million to three million deaths. that's about the same total as a one mega ton hydrogen bomb. these statements are not based on speculation but decades of development and field testing by the u.s. military in the offensive biological weapons program of the united states which was ended by president nixon in 1969. has ao know that the ussr
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massive program created after they signed the biological weapons convention in 19 2. these were both ambitious and there's in the case of the u.s. highly successful programs. during the cold war the u.s. field tested many different bioweapons in realistic conditions, including releases from air, boats, ship and subways. declassified u.s. documents from the 1960's clearly recognize the strategic power of bioweapons. we do not now know the fate of the soviet effort. in the half century since the u.s. ended its offensive b.w. program there's been a revolution in bioscience. advances in many fields including pharmacology and air sol biology and our ability to read, write and edit d.n.a., the code of life, have resulted in tremendous beneficial achievements, but these advances have also meant the global spread of biolodge and access to sophisticated biotechnologies.
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the materials and know how needed to build a bioweapon have many legitimate uses. these are duel-use tech -- dual use technologies and this makes the task of collecting intelligence about covert bioweapons programs exceedingly difficult. increase ng to see an in the tempo of naturally occurring epidemics which we can talk about in the discussion. i want to end by saying that there are two critical technologies that have not gotten sufficient attention in our biodefense program. the first is rapid diagnostics upon which we spent very little money and for which there is a very big market problem that makes it difficult for private companies to pursue diagnostics, and the second is vaccines. i see that i'm out of time, mr. chairman, so i'll await your questions. mr. murphy: thank you. i recognize dr. parker for five minutes. mr. parker: thank you for the
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invitation to appear before you today. it's an honor to be here with secretary shalala and representative greenwood and undersecretary o'toole who is one of our highest regarded biodefense leaders. for my part, i have been involved in biodefense since 1982 to the present. rom the cold war to the rise ae isk of naturally occurring disease. i have been at the eye of the storm witnessing the biological threat over my career. today, i'm more concerned about he risk of biological threats, including warfare and terrorism. biological threats are serious and naturally occurring from an attack or accidental release.
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the american people are starting to realize it following ebola and zeeka. the threat of biological warfare and terrorism, it is well less nderstood. and their scenarios are no longer limited to military targets. today, the risk from a terror attack from extremist groups or individuals on civilian populations is a reality. biological weapons are called the poor man's atom bomb because biological weapons have the
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potential to cause mass casualties on the scale of a nuclear weapon. a simple terror attack as we heard today can have devastating consequences such as the anthrax letter attacks in 2001 that took five lives and sickened 17 more and over 32,000 people took medicine because of potential exposure. some question the seriousness of the risk today because further bioattacks have not followed and additional attacks have not occurred which i attribute to strategies. why have they not occurred? coupled with our vulnerability is up for debate. i do not want to overstate and underestimate the threat and risk of a biological attack and i cannot predict the future, but we cannot ignore that extremists
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intend to do us harm by any means and they are not constrained in the methods they use. the intent to acquire and use weapons of mass destruction of the likes of al qaeda, ayes i will and -- isil and others are known. we should not take the lack of intelligence as lack of threat. the discovery of a computer containing plans of a plague should give us pause. just this week, the director of national intelligence confirmed reports that the islamic state used a chemical warfare state. it is growing rapidly, has resources and controls safe havens and is recruiting scientists that could have are biological weapons. it may be only a matter of time before a biologist becomes an
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extremist. we must assume the threat is real and serious. in addition to this, nationally occurring emerging and infectious diseases continue to happen. others and viruses and are real experiences that we are on the verge of a pandemic. our response must also be ready any time. biological threats are not new, but we seem to pay attention only when an outbreak occurs or an attack occurs and ignore between outbreaks. the time between outbreaks are the period is precisely when urgent actions are needed to optimize resources to hone our resources. before closing, i would like to add initiatives are critical, too and they enable work on the
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prevention side. i would like to thank the members of the subcommittee for this opportunity and i'm happy to answer any questions you may have, thank you. mr. murphy: this is pretty sobering testimony. so let me start off and recognize -- first dr. o'toole, this is the first tier national security problem and bioattacks are faster and fiercer. it seems like these natural outbreaks, these are test runs how we handle ebola and zika and gives an opportunity to respond. but i don't think we are where we need to be. are we more concerned or less concerned about the threats of ioterrorism?
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>> it should be seen as test runs. everyone here as lived through a and we can al contemplate the strategy of creating a foundation such that we could rapidly design and build, for example, a vaccine suitable for a particular threat and a much shorter time than is now the case. and we do have to prepare for a whole array of threats which we aren't going to be able to predict. the other issue that dr. shalala mentioned is that a lot of our response depends on the state and local public health departments. they have lost almost 50,000 people since 2008. and so one could argue that our
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capacity to respond to an epidemic has diminished compared to they then and that is a problem. mr. murphy: would it be fair to say that bipartisan panels, general concern is that biological threats are increasing while important as pebts of the biodefense preparedness are deling or inadequate. is that a conclaugs? honorable shalala: that is fair. our infrastructure for dealing with these has gotten weaker, starting with the state and local response. one of the things we forgot in the ebola discussion, the states are our first line of defense. we have been building the public health infrastructure for years with block grants from the c.d.c. and those have been weakend and if you don't have a state and local response, think
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about the outbreak of diseases caused by food poisoning. that is the first line of defense for these -- for these biological issues that we're talking about. if we don't have a strong state role with their laboratories and tracking systems that it is difficult for us to pick up omething that's going to reoccur over a long period of time. that's why we talk about the vice president, because it's very difficult for anyone else to pull in all the actors, the private sector actors. mr. murphy: chairman greenwood, as we have increasing number of these naturally occurring bioattacks, is our diminished capacities because we have
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constrained or lost ground overall? honorable greenwood: absolutely yes. if you think about isis and what they have been able to do with rifles and assault weapons and so forth. it's clear that their intention is to kill as many as they possibly can and do a lot of that using chemical and biological weapons. they want to do that. and there is evidence that they are trying to figure out how to use bue bonnic plague. nd have a plan to poison the turkish water system. while that is happening, the same technology, synthetic biology, gene -- companies
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developing new drugs and new products is making it easier to formulate these new weapons. the threat is growing and to see that in the face of all of that. the federal government's funding is diminishing and it's frightening. the hearing you don't want to have is the one that happens after tens of thousands of people have lost their lives and you are sitting here asking yourselves why we weren't ready. mr. murphy: i recognize ms. degette for five minutes. ms. degette: you are exactly right and this is what keeps me up at night is the responsibility that this subcommittee has to actually move the ball forward, not just to have these hearings every so
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often. and the chairman will tell you, every year, like in about july, i start nagging to have a aring on pandemic flu before we are in the middle of the flu season. what the blue ribbon panel is saying we need to go further than that. we need to have a system in place that's not based on response after the fact. would that be your assessment, too? honorable greenwood: let me describe to you what that system is. the only thing that stands tween these pandemic viruses and intentional by h bioterror attacks it is a handful of private companies who are willing to take the risk of developing countermeasures.
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as has been said. this is unique. you don't sell those countermeasures at wal-mart. the only potential procurer of those is the federal government. and those companies rely on investors and they can put their them into a company and looking for a return on investment. and if they see a system that is uncertain due to lack of certainty that these products will be procured. they will put the money elsewhere. ms. degette: we have seen this in the pandemic inplus ensa program and trying to prepare for that and with these cuts and secretary shalala you can talk bout how the funding cuts have hampered. honorable shalala: i wouldn't underestimate those very fragile biotech companies, the
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importance of the national institutes of health. because if you don't have that, you wouldn't have the companies. it's a combination of things. ms. degette: you need to get the basic research. and then you also need to have the robust pandemic flu program and support development of the vaccine. honorable shalala: vaccines have not been a major priority. they don't make enough money from them. particularly when the government is the only purchaser. as was pointed out here, they don't have a lot of confidence that we are going to give them the kind of margins. this is the real challenge. health as a national defense issue is relatively new. 20 years ago, no one was thinking about a national security issue related to some aspect of health. so think of this as the cutting
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edge of a dramatic, new -- newspaper conceptalization of our defense. we are talking about defense of the nation and the health aspects of that. ms. degette: let me ask you why is it that the panel recommends centralized leadership in the vice president's office to coordinate all of this? honorable shalala: in the major agency responsible for many of the issues and we now have a homeland security agency, the fact is that the responsibilities for different aspects of this are spread across the government and even the lead agency concept will not solve that or in my judgment, a czar sitting in the white house. the czars work best when there
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is an emergency. you have to have a powerful person and can't have that in a cabinet agency, which is a peer of all the other cabinet agencies. the vice president is the only person who can cut through that. talk to the private sector and at the same time talk to state and local governments and put all those pieces together and the only person who can band the budget. ms. degette: this was a bipartisan recommendation. honorable shalala: it was a bipartisan recommendation. i hesitated. someone who sat in a powerful government agency, i hesitate to translate power to a vice president. cabinet agencies have a certain amount of tension with white houses. but at the end of the day, this is one of the days that you have to have a unified budget. and it is in intelligence. so this is a parallel to that, to pull all the pieces together.
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and it's important enough to identify the vice president and vice-presidents have some time to take on other esponsibilities.
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dr. parker: implementation plan. this is the closest example that has happened to date that kind
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of reflects the centralized leadership on strategy that we actually did that accompanied an appropriation that really covered almost all of the department agencies, state, local, private sector that were involved in preparedness back at that time. this implementation plan contained over 300 action items. it identified lead department agencies and supporting department agencies. it was very detailed. in my own department at the time, h.h.s., there was a lot of complaints that it was micro managing and maybe superseding department authorities. maybe it was. but we got stuff done. it allowed us to accomplish things things that we wouldn't have been able to do. i offer that as an example of
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something that we have already done -- let me also add that we very -- we were responsible for meeting our milestones and metrics that were part of this implementation plan, both in the executive branch and to congress, because all congressional committees that had the appropriate oversight for the department agencies were regularly being updated. hearings were happening on progress of that plan. i just offer that up as an example in the past that i think is in the spirit of what the panel has recommended that would drive us a long way forward doing what we need to do in that epidemic period and before an attack occurs. >> i congratulate you. sflors flores dr. o'toole, the potential impact of synthetic
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biology on smallpox preparedness and control and the who scientific group found that the ergens and how to create the smallpox virus. the brsp focused heavily on the threats we face today. can you tell me what's possible given the rapid advances in synthetic biology and how have these advances escalated the hreat? honorable o'toole: smallpox is a huge virus. a functional smallpox virus. there are many other choices available. we know that the soviets created a vaccine. new gene editing techniques make
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at kind of creation of resistant virus uses quite forward and nonresistant can do a great deal of damage. i'm not sure it can go through the trouble of making it. but what we are missing is the opportunities on the upside that advances allow. i mean, we are in a revolutionary ell biological science and none of this is being leveraged against our biodefense needs. we need more contracting procedures in barta and we need a commitment. same thing with diagnose no, sir particulars. we can do that and shift it but we can't do it with incremental
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tweaks on the programs we have now in my opinion. we need a much more investment. mr. flores: i yield back. mr. murphy: i recognize mr. tongo. mr. tonko: dr. o'toole, in your testimony, you speak of the need to take advantage of recent developments in bioscience to rapidly tests and manufacture accines against infectious diseases. that speak to the role technology plays in this process and is this program indicative of the public-private partnerships that we should be ursuing? the centers for innovation and technology. honorable o'toole: they can play
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a critical role. new diagnose no, sir particulars have a difficult time getting paid for. that discourges company from making them. magine the test and we could very clearly say you are infected, what is the outcome of your pregnancy or you are not infected. same thing for ebola and we could tell someone is infected. the technologies for a whole host of new diagnose gnostics are out there. the path out there is very troubled from a regulatory point of through. and the return on investment is not nearly as great and also from the payment mechanisms. the center has a tremendous role to play. mr. tonko: how does the first
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recommendation that you shared with us today get off the ground should there be a congressional mandate to have the executive branch explore and implement if experts agree it's needed? what are the next steps to take us forward? honorable shalala: i'm not sure what the answer to that question is, whether congress can designate the vice president of the united states is a different branch. you could make a recommendation in this area. and i think the facts that this will committee would make a recommendation as part of a more integrated piece of authorizing legislation would have an effect. it is a new recommendation. if you look through all the other commission reports, this is the first time this has been elevated to this level.
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so i think both a combination of the visibility and some enthusiasm from congress and this committee in particular, would convince the next president of the united states to look at it very seriously. and of course there are budget implications in that, particularly tying it to an integrated budget approach, which i think we all think is extremely important. and which there have been very few examples at a very high level of intelligence being the major one, the defense can kinds of ones, the defense agencies usually leads. it would take some identification that would make a difference. mr. murphy: i'm not a constitutional lawyer, but the congress can provide the authorization to the vice president and perhaps it's up to the president and vice president
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. but it's probably the way it would work. mr. tonko: thank you to both of you. and secretary shalala, given the transferance from an innovator company do you believe it would be beneficial to establish ar single location where in the complete process from innovation to manufacture can take place quickly in order to rapidly respond to the various emerging threats. honorable shalala: periodly, the leaders of government in both parties having looked at that process and seen whether we can fast track it. so we can get products faster to market. there are so many jurisdictional issues. if a product has to go through the f.d.a. process, for example, if it's exempted from the f.d.a.
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process. i think that's an example where a vice president, looking at the process and making recommendations about the integration, because it's a piece of the larger strategy where that would make a difference. we certainly did that when we looked at fast tracking aids drugs for example and take different elements in a way that protected safety and also moved the needle very quickly in that area. but that's why, because there are so many agencies of jurisdiction, you need someone to think it through. mr. tonko: thank you. and mr. chair, i yield back. mr. murphy: i now recognize ms. brooks. mrs. brooks: thank you for being here today. i was a u.s. attorney in 2001
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and was part of the response in the anthrax attacks and actually had an office where that powder was sent to multiple government offices were receiving powder which terrified that employee who opens the mail and not knowing if it was anthrax or just powder. and i was in federal service until 2007 and felt like we were moving forward but i have to tell you, until this report came out and seen the lack of adequate response to ebola, i really do believe we have stepped back and moved from crisis to crisis. and this is an outstanding report with 33 recommendations. it is a road map and blueprint and the basis on which angresswoman eshoo introduced
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bill. and i want to talk about that because i really appreciate all of these recommendations and i encourage my colleagues throughout congress to read this book, because you as experts as well, it's not just the people on the panel. a lot of work went into this. mr. greenwood, can you please share with us, the merits you see in returning the contracting authority back to barta, which is in my bill and can you talk about the importance of that and what has happened and why we are not able to get vaccines and our countermedical measures in the pipeline as fast as we need them. honorable greenwood: the contracting authority was with barta. it was moved to the office and office called the acquisitions management contracts and grants office. the problem is that the
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technical experts are not there and they are in fact at barta. and because of certain regulations, there's a firewall between the two and they actually cannot speak to one another. imagine how frustrating it is for a company to get a contract and talking to folks who know a lot about contracts but don't know about medical countermeasures. it makes all the sense in the world to eliminate that level of bureaucracy so the experts in the field can talk to the experts in the field who they are attempting to get contracts. mrs. brooks: with the companies trying toll get vaccines can you talk about the fact that we don't have a sufficient coording mechanism in our strategic stockpile?
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so we don't even have the right coordination between c.d.c. and barta to have the right vack evens in our stockpile. can you talk about that? honorable shalala: we made recommendations in that regard because the system is weak now and needs to be strengthened and thank you for your leadership on his issue as well. honorable greenwood: we are not organized as a government to effectively and quickly respond to either pandemics or bioterror because of the authorities are diffused. don't always talk to one another and that is why a central unified plan, a central budget and giving the authority to the vice president makes the sense. mrs. brooks: citizens know and
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believe we have these stockpiles and they are adequately -- that they are add equal filled with the types of vaccines. would anyone like to comment, dr. o'toole? honorable o'toole: i'm the chair of the national committee on the strategic national stock bile right now and they have made tremendous progress. the problem with the stockpile, the new drugs going into it are largely biological and expensive and expire in two, three years. so there is a pipeline of new countermeasures coming in that increases the cost of the stockpile and everybody's budget is staying flat. so the limitations on the countermeasures we have in the stockpile, first of all are budgetary limitations. this is an expensive
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proposition. it holds $7 billion and having to cover multiple cities with the very expensive drugs and vaccines and we need a cheaper way to do it. they will never create a stockpile that has everything you want in it. we have to move to a strategy to quickly design and manufacture its scale, what we need. mrs. brooks: i yield back. mr. murphy: i recognize mr. mullen for five minutes. . . mulvaney: thank you, shalala and nk ms. mr. greenwood for this report. the more i learn about it, the more i wish i wouldn't read it. i'm serious. it's very troubling when you understand the false security
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that we have, even from something as simple and dangerous as the flu and the most serious threats we face today. in a previous hearing, i was talking about our c.d.c.'s national stockpile that we have and in particularly, the weaknesses that we have there. and following ms. brooks here, i want to get more in depth of what you see is maybe our biggest weakness or the biggest two weaknesses and some of the biggest threats we have with the stockpile and some recommendations. just maybe one or two we can start working on in the committee here. honorable shalala: dr. o'toole is the expert on the stockpile issue and she has outlined what the challenges are. it doesn't cover everything.
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it's expensive to maintain because they have a short shelf life. it was a good idea at the time but constantly haveing to renew it is our biggest challenge. i think most of us think there are other issues we could address. we certainly and certainly scientific issues that would give us a longer life in some of these areas and i think on the production side, our ability to produce something faster and not being dependent on the stockpile is probably where your i.o.m. commission -- >> i had a meeting with biodefense individuals and they could extend the shelf life to maybe a dry freeze, is that correct? and also, the retesting that was designed and will go two or
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three years and will last 15 years and scaptly retesting. how do we dispense it? aving it in a stockpile is ok. >> one of the recommendations was to use the pharmacy and use the v.a. because they are spread across the country and keep a certain amount of supply and well located. honorable shalala: the government has also contracted with i think we fed ex, move pallets around the country and the reason for that is because the military is not well situated to do that and there are strategies of moving drugs -- i think the contract with the fed ex system to move pallets around the country when there are outbreaks.
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honorable o'toole: the big problem with the stockpile is traversing what is called the last mile. it is not delivering the stockpile but getting it in the hands of people. as you can imagine that is complex. washington state is going through pharmacies and that won't work in rural states, although most americans live within reach of a pharmacy. and they can move very, very quickly to dispense, such as new york city. one thing that would definitely help is more money for state health departments and local health departments to do drills on dispensing. these are invaluable but very time consuming and expensive and don't have the money to do them. new york city does them. some of the big municipalities
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does them. but making those a more viable way to practice would i think ake an appreciable difference. dr. parker: it comes back to leadership. we are talking about vaccines. the last model of dispensing countermeasures, that is the hardest challenge. there was an executive order in 2009-2010. and i was discussing this with one of my colleagues in chicago yesterday, it seems that that work has disappeared. with centralized leadership, focus work on how to dispense the countermeasures would go on. and we need that. it's one thing to have a stockpile and one thing to be able to get it to an urban
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center but getting it into people's hands is an unsolved problem. mr. murphy: i recognize ms. castor for five minutes. ms. castor: good morning and thank you to the panel for your terrific work on this important subject. and ms. shalala, the folks at the university of miami are so appreciative and everyone across the country. they miss you there and great to see you continue on in your service. i warranted to focus on hospital preparedness. during the ebola outbreak in africa in 2014, we looked at hospital preparedness and its important role to our nation's response to a biological event. in response to that, the president requested emergency supplemental funding for owe bowla.
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and the congress responded. and now with seeka. this isn't the most efficient way to prepare for emergencies. i would like to ask a few questions about this, about what we can do to assist hospitals hroughout the country. emory university, what a terrific job they did and n.i.h. was at the forefront. some did not do quite as well. and there's no mystery that if that had been more serious, a lot of hospitals across the country would have struggled. what lessons do you think we have learned from the ebola outbreak in africa and the few cases that came to the u.s.? i would like to ask mrs. o'toole
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first. honorable o'toole: hospital preparedness is very important. between 2002 and 2008 it did improve for two reasons. disaster response drills are required by the office of hospital crediting facility. for hospitals doing those kinds of drills is expensive and difficult. there also was a c.d.c.-h.h.s. flow of money to hospitals to help them with buy h buy o'terrorism and flu preparedness. and they started forming coalitions. in my city in 2001, baltimore, the mayor got the c.e.o.'s of the hospitals in one room. this is a private sector competitive industry. they don't necessarily cooperate
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and those c.d.c. funds made a real difference. these regional collaboration of hospitals indicated how they were going to share information. that funding has been cut in half since 2010. that makes a big difference. ms. castor: the panel's report mention that disseed preparedness funding is the most costly. what are the alternatives to disease-specific programs especially since many states have frayed their public health infrastructure? how can we respond better and give the hospitals and our local hospitals the tools they need? honorable shalala: we have a steady stream of funding and recommend it be done. we recommended a tiered system.
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every hospital in this couvent try cannot be prepared for every complex disease. so both the regional coordination and identifying those hospitals that can have special rooms set aside. in florida, for example, all of us look at particularly at the great public hospital in miami, whether we could build separate rooms with separate access to handle ebola patients and went through an exercise to make it possible. a great public hospital that sees all sorts of diseases is probably the best place to do that as well as academic hospitals crooned around the country. creating a tiered system in which we know we could send patients once they are stabilized, that would have the capacity and the separation to be able to handle these disease
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go. e way to in particular on creating a tiered system in this country that would give us coverage cross the country as there are outbreaks. ms. castor: that is an important recommendation and i would encourage the committee to act on it. mr. murphy: i recognize mr. kramer for five minutes. mr. cramer: what about to do is little dangerous and you aren't going to adequately inform and educate me in five minutes. so you have to come to my office and help me work through this office because you have done a great job as well as the blue ribbon panel in scaring me to
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death. i'm adequately prepared to understand the threat. and i think that's very important. but in a political world when it comes to the appropriation fs process, part of why i think you don't seekonk acting or the government acting proactively is because we respond to the people we represent. they will blame us when we spent money foolishly and finding a way to invest in something that we hope is never needed. and that's our political dilemma. starting with congressman greenwood and others, maybe elaborate a little bit how we can help pharmaceuticals, the private sector feel comfortable
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with the investment and innovation. and we have talked about it -- if there was a way to better understand -- and i might also emphasize is there a way to put a cost benefit analysis on this? ms. castor was talking about emergency responding. that's a cost. that's a cost that could be avoided if we are better prepared. is there work in that arena to assure my constituents that we're not just appropriating but we are efficiently and effectively governing? honorable greenwood: thank you for admitting that we have frightened you. and obviously your constituents are not clammering for this because it's a leaper. no one is thinking this is going to happen. the hearing you don't want to have is the one about why we were unprepared for the event
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that was so tragic. to some extent leadership involves informing your constituents. this threat is real. and i calculate when it comes to bioterror, the terrorists have the motive and trying to acquire the means and despite our best efforts to deflect that, over time, the likelihood of that happening is one over one. it's going to happen. you have to believe that. the threat is real. in terms of what works to be prepared, we talked about the contracting. that is a minor thing and congresswoman brooks is a leader and need for sufficient funding to procure these mcm's when they develop. the secretary was correct when she said not underestimate the
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research at the n.i.h. when it comes to other medicine that we develop, when it comes to developing the product and manufacturing the product, the private sector is the only place where that is done. to invest money in that -- the companies are willing to take the risk that maybe they will fail with the science but the investors aren't willing to take the risk if they succeed the federal government isn't going to reward them. so that's critical and you need enough money and money over time to be certain so there is a certainty that when you get to the end of the road and your product approved that congress hasn't moved the money around and it is no longer there. mr. cramer: i was thinking a lot about, we spend billions of dollars on weapons we never use. they have the benefit of being a
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deterrent, understandably, but isn't dissimilar. we have to make this case. and the centralized leadership as well. i'm struggling with the whole vice president as well. the more you talk about. is there anything else that anybody would add to what the -- dr. parker: i would like to add on the contracting itself. many of the companies that are contributing to biodefense and those that are bringing the notify solutions are struggling themselves and the typical golf contract is contrary to the bio defense industry itself. i have been couraged with sole pronouncements by d.o.d. to begin to start using authorities that they have like other
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transaction authorities. taking a look at what other things and just the basics of contracting that could make it more readily accessible that the -- vative by technology biotechnology companies would do themselves. mr. cramer: that would be a cost benefit analysis. mr. murphy: mr. gene of texas. mr. green: if we could solve it, we probably could have them audited. i want to welcome. he blue ribbon panel rticularly drug resist ant infections which could cause life. without greater investment we face a future that resembles the days before these drugs were
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developed and people died of common infections and surgery, chemo and organ transplantation, the challenges for which we have no effective treatments represents the challenges we face. the market forces do not work and fail to have the pipeline we need. in 2012, this committee passed and congress passed the gain act and again in this current session in the 21st century cures we worked to move the regulatory br years. secretary shalala, can you talk about developing the medical countermeasures for emerging diseases, specifically please explain why there is a need for a government leadership role in this.
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honorable shalala: it is pretty straightforward that the only purchaser will be the government. there's not a private sector bilet for these particular call and therefore the -- biological and the government has to incentive the companies financially and i think the other thing you have to understand and jim can explain this better, these are relatively small companies often with a small number of products. we have known a lot about the biotech industry. they are fragile so unless they ow that they are going to be and i don't know how we're going
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to move very quickly in this area. e had some experience. we had a lot of -- we had a lot f diseases and the congress in its wisdom passed legislation that are encouraged companies to vest in creating drugs and treatments for a very small part of the population. our problem here is that we start small but we made a production line that is huge at the end of the day. i don't know how to do it without financial incentives. i just don't know -- i think everything we learned -- it's just from our view at a public policy issue, where the market is going to be the government,
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there is no other way to get a very small number of industry people to invest unless they know there's going to be a market at the end of the day. honorable greenwood: one of the proposals we have is the priority review. p.r.v. and the beauty of it -- you if look at congress looked at tropical diseases and we knew there was no financial pull that these diseases that occur in africa, the countries are so poor, they can't afford to buy the products, and congress created the priority review voucher, it says to a company, if i can get a drug approved if i don't make enough return on my investment, another -- maybe a
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large pharmaceutical company will pay me and these things are sold and go for $400 million and doesn't cost a taxpayer money. it gives them for a shortened review period. and that doesn't cost the taxpayers any money either. they pay the fee and get the product approved. but if they do, it gets approved and gets on the market and goes off patent any way. it doesn't have any cost to society. mr. green: we have legislation that is in the senate that would fast track because we recognize the government has to be the one that can do it because free enterprise can invest that money and hopefully the senate will deal with cures and our committee dealt with overwhelmingly. mr. murphy: recognize the chair
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of the full committee -- -- i'm sorry. mrs. blackburn: that woman from tennessee. dr. parker, i'm so happy to see an aggie on the panel. and i have them in my family and they bring good common sense wisdom to the table. happy to see you there. and of course, mr. greenwood, and how much we appreciate your insight and your dedication to the biotechnologies and the work that you have done here. just a couple of things that i want to touch base on. in talking with some of my research centers and in tennessee we have such an aggressive biotechnology group.
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and when i was in the state senate, i helped to formulate that group and they have a great good underpinning. they talked to me a good bit about the right balance between government and regulatory oversight. mr. greenwood, i'm so pleased that you just mentioned the priority review voucher for the m.c.m.'s. i just think this is -- when you look at these countermeasures, that is just so important that we have that. and it doesn't matter if it is a material threat, if it is something like zika, we have to have a way to go about this, but i want to come to something that dr. o'toole mentioned and then congressman greenwood, if you will kind of answer to that. basically her point is you move
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products to a scale of accountability and then if you need something, you are ready to move with it and can push that quickly. so let's go back to that voucher, mr. greenwood. and if you'll continue that conversation and build on the importance of that, how you would address that for something that is a material threat or like the seeka virus and there is not a vaccine, why didn't you know this was a problem. the olympics are coming to brazil. people have been vacationing for months in the zone that is affected, et cetera. so let's go back to the importance of having that priority review process for this type of occurrence. honorable greenwood: there is great uncertainty for a company
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-- we have seen our companies and proudly jumping into the zika issue and trying to do some issue on it very quickly to develop products. remember a member company of bio and looked like they were having something close to ebola. they didn't want to talk about. and another company was doing something and people would pull out and created volatility. so it's an example of how the norms of economics don't work in this field. so the priority review voucher takes away one of the uncertainties and doesn't take away the uncertainty of can we make this product and will it be safe and be effective and that is always a risk and doing that is harder than putting a man on the moon. most companies fail and most
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projects fail. so hugely risky to even bother trying. if you do try and do hon. greenwood: your investors are giving you the leeway to go and do that is because that they think that somehow they will get a return, a fair return on that investment. one way to do that is to have enough money and the reserve -- not just year by year, but have multiple years that companies can know and their investors can know, if we succeed here, they will buy the product and we will get our investment back. the priority batch review is an entirely different way to do that. because they have become so driver, ait is a huge huge incentive, because if you can succeed, let's say right now that we had a priority review voucher for zika. companies would know that if they could suc,

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