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Mr. PACKARD. Maybe that is saying something else also.
Mr. REIMERS. Yes.

Mr. PACKARD. Maybe the real big money is in law and litigation instead of in research and scientific development.

Mr. VOLKMER. If the gentleman would yield on that?

Mr. REIMERS. An element of rewarding the creators, too, there is some concern about the scientists being involved. They are the people who are creating this knowledge, and I think the Constitution even recognizes that in the Patent Act-

Mr. PACKARD. I would be happy to yield to the chairman.
Mr. REIMERS [continuing). Of rewarding inventors and authors.

Mr. VOLKMER. Well, I would like to know which part of this research community are we losing? In other words, are we losing the top researchers, the ones who have the full professorships at the universities, et cetera, the ones that are going to lead the way to develop traditional researchers, or are we losing the graduate students and the instructors, or is there any specificity that you can say in where we are losing them?

Mr. REIMERS. I don't think it's really in the top ranks. I think there is a difference between Stanford and MIT and a lot of the other schools where there is a tremendous problem in retaining faculty, where the salaries of industry are so much higher. It's particularly true in engineering. It is a serious national problem, how to retain these top engineers.

But when you move to the biological sciences, I think the really top scientists find a greater reward staying in the university.

Dr. RATHMANN. We have 135 scientists, 63 Ph.D.'s, and only 1 was a professor. The rest were graduate students, postdocs. Some came right out of school.

Mr. PACKARD. Of course, that does not address the seedcorn problem.

Dr. RATHMANN. No, but it does--
Mr. PACKARD. Some of those may have stayed at--

Dr. RATHMANN. Some would have continued as postdocs and would possibly have taken on teaching appointments had we not attracted them. That's absolutely true.

Mr. PACKARD. Mr. Reimers, you alluded, and the chairman asked, regarding the net, the way you distribute the net, et cetera, of proceeds on either patent products or the results of research that can be commercialized. And I agree with Dr. Rathmann, I don't think we ought to make commercialization of research a bad name or give it a bad reputation. I certainly don't. I think, in fact, we ought to do a better job of that. The question, of course, of this committee is, How do you go about doing that in an ethical, legal, and appropriate way?

But in the distribution of that net-and I sit on other subcommittees of this committee where we discuss products of research, the ramjet automobile engines that the Government is funding research on, and we have now implemented a process, or are in the process of implementing, where at least Government funding will be reimbursed of any net proceeds coming back to a private industry, which I think is a very appropriate thing. In other words, we become a partner in the process.

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Now, as a partner-and I would not be a good partner if I were to simply just say I want my money back. If I were a private enterprise partner, I would want to share in the proceeds, in the profits over and above cost. But the Government is only asking—at least I am only asking-in those instances of a reimbursement of our investment in that research that has produced a marketable product and that the reimbursement only be on the basis that if there is a profit out of those products, we would want to be reimbursed as a part of the cost.

What would your reaction be to that if that were implemented? And I see little difference in doing it with a ramjet engine as I would a marketable product in biomedical research.

Mr. REIMERS. Well, it's not clear to me that that's the role of Government, to invest its resources in funding industry research.

But assuming that that's considered appropriate to do, I would think that the return to the Government should be calculated on the basis of the taxes it receives, the 50 percent of the profits that the company might make, plus the taxes received on the salaries of all the employees of the corporation, and the contribution to the balance of payments.

Mr. PACKARD. You are aware, as I am aware, I am sure, that the Government is borrowing the money, or at least a good portion of the money, to provide for these kinds of research projects, and we are simply looking at ways to reduce deficits.

Mr. REIMERS. Surely.

Mr. PACKARD. And this is certainly not an uncommon area for us to look at, and my comments are not in any way critical of the need or the desire to provide the funding for the research. But we're going to look more and more in the area of reimbursements when we find commercial-I see little sense in the Government funding programs of any nature, whether it be biomedical or in the aerospace industry or any other industry, and then let private enterprise industry is able to capitalize on that research and to make huge profits unto themselves without a reimbursement arrange ment back, at least to the provider of some of the funds.

But, nevertheless, I was just curious to see how that would affect research programs in the university and the funding mechanisms for university research, because they use those funds now. They come back to the university to enhance, I presume, additional re search programs.

Mr. REIMERS. Yes, that's true. And I put a plug in for university research as opposed to other research in the Federal laboratories and what have you, is that the yield you get of that graduated student that goes out to society. And that's one of the principal reasons of doing research in the university, and that is not a yield that comes from some of the other research endeavors of the Government.

Dr. RATHMANN. I think I could agree with that.
Mr. PACKARD. Thank you, Mr. Chairman.

Mr. VOLKMER. I think the gentleman from Ohio has one additional question.

Mr. TRAFICANT. A brief question. I know we have to get on with the other panel, Mr. Chairman.

Just briefly, if either of you members, or both, would respond. Where is the bulk of the money coming from now for R&D now? What is the comparison between the private industry and the Government participation in providing for this type of continuing R&D in this particular area?

Mr. REIMERS. At the universities?

Mr. TRAFICANT. Yes. How do you rate the private industry involvement in this particular pursuit versus the Government investment in this pursuit?

Mr. REIMERS. Nationally, I believe the numbers are on the order of 6 percent of research funding is from industry. At Stanford, I believe the number is about 7 or 8 percent; I haven't seen the recent numbers. Then there is perhaps 10 percent of funding from foundations, American Heart and American Cancer Society and that sort of thing, individual gifts of funding. And then the balance is all by the Government.

I believe that some schools that industry funding is quite a bit higher, I don't know of any schools where it's much more than 10 percent.

So the bulk is still provided by the Government.

Mr. TRAFICANT. I don't want to belabor the panel, Mr. Chairman, but I believe that in excess of 85 percent looks to be Federal money in pursuit of this R&D, and perhaps that could be a situation addressed by the committee in the future.

I yield back to you.

Dr. RATHMANN. I think there is one comment that should be made. That is, if I recall correctly, the funding of the NIH in this broad field that we call advanced biotechnology is about $500 million a year, and the funding of the biotechnology companies alone, the smaller biotechnology companies, is probably about twice that per year. So when you're talking research, his numbers, your ideas are correct. If you're talking about what it takes to get products, then you're talking about a very substantial amount of the money coming from the private sector.

Mr. REIMERS. I think you ought to look at the value of the bounce for the ounce you get from the university funding. I think that people have noted that what was it Lincoln said when he freed the slaves, “Don't worry, there will always be graduate students." (Laughter.]

And they get a very small amount of money. And the indirect cost rate is relatively small because most of the facilities are already in place. And I think there is a great yield, great national yield, from a funding of university research.

Mr. VOLKMER. I want to thank you both for your information and assistance. This will conclude our first panel.

Our second panel will be Dr. William F. Raub, Deputy Director of Extramural Research and Training, National Institutes of Health; Dr. David A. Blake, associate dean for research at Johns Hopkins School of Medicine; Dr. Robert J. Levine, chairman, institutional review board, Yale School of Medicine; and Dr. Thomas H. Murray, associate professor, ethics and public policy, institute for the medical humanities, University of Texas Medical Branch.

If all four gentleman would come forward at the witness table. Your statements will be made a part of the record, and you may either review your statement in full or summarize, however you so desire.

Dr. Raub.

STATEMENT OF WILLIAM F. RAUB, DEPUTY DIRECTOR, EXTRA

MURAL RESEARCH AND TRAINING, NATIONAL INSTITUTES OF HEALTH, BETHESDA, MD

Dr. RAUB. Thank you very much, Mr. Chairman. I appreciate this opportunity. As requested, I will comment on the translation of research results into practical applications, especially those university-industry relationships that may transform the results of NIH-funded research into commercial products or services.

Having been privileged to participate in previous hearings before this subcommittee and discuss subject matter closely related to the focus of this proceeding, I will complement rather than reiterate those earlier discussions. In general, virtually all of the substantive information provided in my statements on June 8, 1981, and June 17, 1982, still obtain.

I, of course, will be pleased to provide for the record an updated account of any previous testimony that the subcommittee would find helpful as a supplement to my current statement. For the remainder of my comments now, I will highlight the items in my prepared statement today.

As the committee knows, the NIH exists to improve human health through research. A major part of that responsibility is to ensure that the results of those studies are disseminated broadly. The targets of these dissemination efforts are not only other scientists and engineers but also health professionals, educators, commercial organizations, policymakers, and the public at large.

The keystone of the knowledge transfer process in biomedicine is the refereed scientific literature. Indeed, in many instances, perhaps most, publication in the refereed literature is all that is needed to ensure that knowledge transfer in biomedicine occurs in a timely and effective way.

But as important as the literature is to commercialization, it is not sufficient in all cases. Some biomedical research achievements are not likely to be transformed into a useful product or service unless the performers of the research or their institutional associates make a special effort to exercise their rights to the invention involved.

This means that, in general, the patent processes need to be effected, and NIH is an active promoter of those activities. The patent policy of the NIH is rooted in the Patent and Trademark Amendments of 1980, the Trademark Clarification Act of 1984, and the President's Memorandum on Government Patent Policy issued in February 1983.

The statutorily based approach that we follow to promoting commercialization of research results is modeled to a considerable degree upon the institutional patent agreements pioneered by the NIH in the 1960's and the 1970's.

Turning now to the commercialization of biological materials, NIH-funded inventions that involve such materials, including cells

and tissues removed from human subjects in research, are administered within essentially the same statutory and regulatory framework as other types of inventions. The principal special condition is the requirement, when a patent is based in some material way on a particular microorganism or cell line, that a sample of the cells be placed and maintained in an appropriate repository such as the American Type Culture Collection in Rockville, MD.

Such repositories not only provide invaluable resources for use in reassessing patent claims should they subsequently come into dispute but also ensure that samples of the cells are available readily for research, education, and other noncommercial purposes. This requirement to deposit samples of cells applies both to naturally occurring cells—that is, bacteria and human cell lines—and to cells that have been modified significantly by laboratory procedures, that is, hybridomas and genetically engineered bacteria.

The NIH has offered special guidance to the scientific community at large with respect to microorganisms and cell lines that might have commercial significance.

With your permission, Mr. Chairman, I offer two documents for inclusion in the record. The first is the notice published last year in the NIH Guide for Grants and Contracts, entitled "NIH Policy Relating to Reporting and Distribution of Unique Biological Materials Produced With NIH Funding.” The second is an excerpt from an NIH article in the Journal of the Tissue Culture Association, entitled “NIH Policies on Hybridomas.”

Mr. VOLKMER. They will be included in the record.
Dr. RAUB. Thank you, sir.

Moreover, the subcommittee may be assured that the NIH maintains close contact with cognate developments throughout the scientific community, especially those at the university-industry interface, and that we will be alert to opportunities to refine and extend our policy guidance as necessary.

I hope these comments are helpful to the subcommittee, and I will be pleased to respond to whatever questions you may have.

[The prepared statement of Dr. Raub follows:]

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