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Testimony on Small Business Technology Transfer Act by Wendy Baldwin, Ph.D.
Deputy Director for Extramural Research
National Institutes of Health
U.S. Department of Health and Human Services

Before the House Committee on Science, Subcommittee on Technology
September 4,1997

Madam Chairwoman and Members of the Committee, I am Dr. Wendy Baldwin, Deputy Director for Extramural Research at the National Institutes of Health (NIH). On behalf of the Department of Health and Human Services, I am pleased to testify before you today on the reauthorization of the Small Business Technology Transfer Act of 1992, the enabling legislation for the Small Business Technology Transfer (STTR) program.

Due to the size of our extramural budget, the NIH is the only principal operating component within the Department that -participates in the STTR program. In FY 96, the NIH awarded 109 STTR projects at a cost of $13.9 million.

Reports issued previously by the Small Business Administration (SBA) and the General Accounting Office (GAO) indicate that the Department has experienced the highest success rate among all Federal agencies in commercializing the results of research conducted under the Small Business Innovation Research (SBIR) program. We expect the STTR program to achieve similar results as it matures into the 21 st century.

As you might be aware, the goals of the STTR program focus on bridging the gap between performance of basic science and commercialization of resulting innovations. The program accomplishes its mission by stimulating and fostering scientific and technological innovation through cooperative R&D between small businesses and research institutions; fostering technology transfer between small businesses and research institutions-, and increasing private sector commercialization of innovations derived from federal R&D.

The SBIR and STTR programs fit within the broader range of scientific programs and goals of NIH by contributing to the development of products and methods useful in other research efforts. Such products and processes have succeeded in increasing the productivity of other researchers and decreasing the cost of specific areas of research. (Even those projects that have not realized the goal of commercialization have achieved the equally important purpose of contributing to the knowledge base of science through professional publications.)

Let me describe a few SBIR programs that I feel exemplify the kind of SBIR and STTR research that we see at the NIH. I would use STTR vignettes, but the program is sufficiently new that we have not yet seen as many success stories as we have in the SBIR program. The National Human Genome Research Institute (NHGRI) has one of the smallest SBIR programs at the NIH. Over the past five years NHGRI has funded an average of nine projects per year, with a success rate equivalent to that for their regular research project grants (R01s). At the NIH SBIR conference that we held on our campus in January of this year, a staff member of the NHGR1 described four successful grantees who had produced equipment which either increased the productivity of other researchers, decreased the cost of specific aspects of genetic research, or both. Not only NHGRI, but the scientific community it serves, has benefited from these SBIR projects, and one of the SBIR principal investigators now holds a $5 million regular research project grant which grew out of his early SBIR work.

One of the largest SBIR programs at the NIH is that of the National Heart, Lung, and Blood Institute (NHLBI). The projects of NBLBI illustrate that SBIR/STTR applications address not only hypothesis-driven research but also design-directed research, for development of both 2 products and methods useful in further research efforts. One current NHLBI grantee is in the final stages of commercializing a laser-welding system for anastomosing arteries and veins. This researcher previously commercialized two other products. The first, which was funded through the National Institute of Dental Research, was a temperature-sensitive screening device for detecting periodontal disease. The second, a non-invasive method for detecting lead in the human skeleton, was supported by the National Institute of Environmental Health Sciences. A second NHLBI grantee developed a swallowable electrode used for cardiac monitoring. These products have also contributed to the science and clinical knowledge base, serving as a basis for other research projects and being cited in multiple professional publications.

The largest SBIR program at the NIH resides at the National Cancer Institute. This program is an integral part of the overall research mission of the Institute and benefits portfolios that reach well beyond SBIR. This is illustrated by an NCI grantee who developed a specific assay for detecting telomerase activity in the diagnosis of and screening for certain malignancies, including breast cancer. This enzyme plays an important role in cell division; therefore, the detection of its activity has implications for research in cellular development, cell death and aging. This project also demonstrates the importance of close collaboration with other researchers and with clinicians in developing and testing the product, and a great deal of the work for these projects was performed as part of the Phase I activity.

The distinguishing feature of the STTR program is its partnering concept, in which we not only permit but encourage research that is initiated either by the scientist in the small business or the investigator in the research institution. (For the NTH, a "research institution" most often means a college or university.) These scientists may propose any collaborative research project of their choosing that capitalizes on the ideas, talents, and capabilities of their organizations. When provided with such opportunities, a for-profit company and a research institution are most likely to propose research that they perceive to have the greatest commercial viability, thus increasing the likelihood that the STTR project will generate a product with potential for entering the marketplace,

Our policies under the STTR program mirror those of the SBIR program in several important ways. First, applicant small business concerns are allowed to revise and resubmit Phase I (feasibility studies) and Phase II (research and development) applications twice. Often, although an application may be promising, an applicant fails to provide sufficient details on the research design in a Phase I application or the results of Phase I when applying for the Phase II project. These are weaknesses that can be remedied in a revised application.

Second, we provide multiple receipt dates for the submission of research grant applications. Rather than limit the small business community to a single opportunity each year, the Department has three receipt dates annually. This means that if a small business concern misses one deadline, it need wait only four months, not a year, for the next submission date.

As a part of our continuing innovations in management, in 1996 the NTH instituted a "Fast-Track" parallel review option designed to expedite the decision and award of Phase II funding. Under this option, those who satisfy the criteria may concurrently submit Phases I and II of the project, thus passing through the peer review process at the same time with the intent of reducing or eliminating the funding gap between phases. Initial "Fast-Track" awards are being issued now. Information on SBIR and STTR programs may be found on the NIH Small Business Opportunities homepage at HTTP:/WWW.NIH.GOV/GRANTS/FUNDING/SBIR.HTM on the World Wide Web.

We realize that the "Fast-Track" mechanism will not be appropriate for all types of work or for all applicants. Our standard, non-"Fast-Track" procedures allow Phase I grantees to submit Phase II applications -- on any of our three annual SBIR and STTR receipt dates -- either during or after expiration of the Phase I budget period to allow the grantee to minimize the possibility of a funding gap.

The NIH was the first and is still among the few agencies that include industry scientists, especially those from the small business community, on its scientific review panels. It has always been our belief that participation of scientists and technical experts from small companies brings a unique dimension to and strengthens our peer review of applications. The inclusion of these scientists helps review panels develop an appreciation for the environment in which small firms must carry out research.

In conclusion, let me say that the Department is very pleased with its involvement in the SBIR and the STTR programs. I would be happy to answer any questions that you may have regarding our participation in these programs.

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