[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 417 Introduced in House (IH)]






109th CONGRESS
  1st Session
                                H. R. 417

 To provide incentives for investment in research and development for 
   new medicines, to enhance access to new medicines, and for other 
                               purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            January 26, 2005

 Mr. Sanders introduced the following bill; which was referred to the 
 Committee on Energy and Commerce, and in addition to the Committee on 
   the Judiciary, for a period to be subsequently determined by the 
  Speaker, in each case for consideration of such provisions as fall 
           within the jurisdiction of the committee concerned

_______________________________________________________________________

                                 A BILL


 
 To provide incentives for investment in research and development for 
   new medicines, to enhance access to new medicines, and for other 
                               purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Medical Innovation Prize Act of 
2005''.

SEC. 2. FINDINGS.

    The Congress finds as follows:
            (1) Retail sales of prescription drugs totaled $179.2 
        billion in 2003, up 10.7 percent over 2002 and over 4 times as 
        much as the amount spent in 1990.
            (2) Retail prescription prices, including both manufacturer 
        price changes for existing drugs and changes in use to newer, 
        higher-priced drugs, have increased an average of 7.4 percent a 
        year from 1993 to 2003, nearly triple the average inflation 
        rate of 2.5 percent.
            (3) United States spending for prescription drugs is 
        projected to increase by 10.7 percent annually between 2004 and 
        2013.
            (4) From 1993 to 2003, the number of prescriptions 
        purchased increased 70 percent (from 2.0 billion to 3.4 
        billion), compared to a United States population growth of 13 
        percent. The average number of prescriptions per capita 
        increased from 7.8 to 11.8.
            (5) Prescription drug expenditures rose faster than overall 
        national health spending from 1993 to 2003.
            (6) In 2003, prescription drugs accounted for 11 percent of 
        national health spending, but 23 percent of total out-of-pocket 
        spending by patients.
            (7) Consumers paid 30 percent of prescription drug costs in 
        2003--$53.2 billion of the $179.2 billion spent on prescription 
        medicines.
            (8) Implementation of the new drug benefit in Medicare is 
        likely to increase aggregate drug spending.
            (9) Retail sales of prescription drugs in the United States 
        equaled approximately 1.5 percent of United States gross 
        domestic product in 2003.
            (10) High prices on medicines discourage employers from 
        providing health insurance coverage to workers.
            (11) High prices on medicines lead to restrictions on use 
        because of price barriers and rationing by third parties that 
        subsidize or insure purchases of medicines.
            (12) In a 2003 survey, 37 percent of the uninsured said 
        they did not fill a prescription because of cost, compared to 
        13 percent of the insured.
            (13) According to the Food and Drug Administration, from 
        1993 to 2002, approximately 70 percent of all new drugs 
        approved did not offer significant therapeutic benefits over 
        existing medicines.
            (14) Drug prices are far higher in the United States than 
        in any other developed country because it is the only country 
        that grants pharmaceutical companies a monopoly in the market, 
        based on patent protection, without any corresponding 
        restriction on prices.
            (15) Pharmaceutical manufacturers have distorted the 
        quality of drug research in many instances, such as with the 
        drug Celebrex. Often due to the influence of the funding 
        source, drug research has been shown to suffer from concealed 
        and distorted findings, bias, conflicts of interest, and 
        secrecy.
            (16) There are important gaps in treatments for many severe 
        illnesses.
            (17) The existence of neglected diseases in other regions 
        of the world leads to immense suffering and death, undermines 
        development, shrinks potential markets, and has long-term 
        negative effects for United States security.
            (18) Emerging diseases, viral mutations, and food-borne 
        disease transmitted through international trade have negative 
        effects on Americans and must be combated before they arrive on 
        the Nation's shores.

SEC. 3. PURPOSE.

    The purpose of this Act is to provide incentives to invest in 
research and development of new medicines by establishment of a Medical 
Innovation Prize Fund and to enhance access to such medicines by 
allowing any person in compliance with Food and Drug Administration 
requirements to manufacture, distribute, or sell an approved medicine.

SEC. 4. ELIMINATION OF EXCLUSIVE RIGHTS TO MARKET DRUGS AND BIOLOGICAL 
              PRODUCTS.

    (a) No Right of Exclusive Marketing.--No person shall have the 
right to exclusively manufacture, distribute, sell, or use a drug, a 
biological product, or a manufacturing process for a drug or biological 
product in interstate commerce, notwithstanding title 35 of the United 
States Code, relevant provisions of the Federal Food, Drug, and 
Cosmetic Act, as amended by the Drug Price Competition and Patent Term 
Restoration Act of 1984 (Public Law 98-417; 98 Stat. 1585; also 
referred to as the ``Hatch-Waxman Act'' ) and the Medicare Prescription 
Drug, Improvement, and Modernization Act of 2003 (Public Law 108-173; 
117 Stat. 2066), such as the exclusive rights to rely on health 
registration data or the 30-month stay-of-effectiveness period for 
Orange Book patents, and any other provision of law providing any 
patent right or exclusive marketing period for any drug, biological 
product, or manufacturing process for a drug or biological product, 
such as pediatric extensions or orphan drug marketing exclusivity.
    (b) Remuneration.--A person eligible for prize payments from the 
Fund for Medical Innovation Prizes under section 9 shall receive such 
payments--
            (1) in lieu of any remuneration the person would have 
        received (but for the operation of subsection (a)) by reason of 
        the exclusive marketing, distribution, sale, or use of the 
        drug, biological product, or manufacturing process involved; 
        and
            (2) in addition to any remuneration the person receives by 
        reason of the nonexclusive marketing, distribution, sale, or 
        use of the drug, biological product, or marketing process.
    (c) Application.--This section applies only with respect to the 
marketing, distribution, sale, or use of a drug, a biological product, 
or a marketing process that occurs on or after October 1, 2007.

SEC. 5. FUND FOR MEDICAL INNOVATION PRIZES.

    (a) Establishment.--There is hereby established in the Treasury of 
the United States a revolving fund to be known as the Fund for Medical 
Innovation Prizes, which shall consist of amounts appropriated to the 
Fund and amounts credited to the Fund under subsection (c).
    (b) Availability of Funds.--Amounts in the Fund shall be available 
to the Board, subject to section 16(b), for the purpose of carrying out 
this Act.
    (c) Amounts Credited to Fund.--The Secretary of the Treasury shall 
credit to the Fund the interest on, and the proceeds from sale or 
redemption of, obligations held in the Fund.

SEC. 6. BOARD OF TRUSTEES FOR THE FUND FOR MEDICAL INNOVATION PRIZES.

    (a) Establishment.--There is hereby established (as a permanent, 
independent establishment in the executive branch) a Board of Trustees 
for the Fund for Medical Innovation Prizes.
    (b) Duties.--The Board shall--
            (1) award prize payments for medical innovation in 
        accordance with this Act; and
            (2) submit a report to the Congress under section 14.

SEC. 7. MEMBERSHIP AND STAFF OF BOARD.

    (a) Membership.--The Board shall be composed of 13 members as 
follows:
            (1) The Administrator of the Centers for Medicare & 
        Medicaid Services.
            (2) The Commissioner of Food and Drugs.
            (3) The Director of the National Institutes of Health.
            (4) The Director of the Centers for Disease Control and 
        Prevention.
            (5) Nine members, appointed by the President, with the 
        advice and consent of the Senate, as follows:
                    (A) Three representatives of the business sector.
                    (B) Three representatives of the private medical 
                research and development sector, including at least one 
                representative of the nonprofit private medical 
                research and development sector.
                    (C) Three representatives of consumer and patient 
                interests, including at least one representative of 
                patients suffering from orphan diseases.
    (b) Terms.--
            (1) In general.--Except as provided in paragraph (2), each 
        member appointed to the Board under subsection (a)(5) shall be 
        appointed for a term of 4 years.
            (2) Terms of initial appointees.--As designated by the 
        President at the time of appointment, of the members first 
        appointed to the Board under subsection (a)(5)--
                    (A) 5 shall be appointed for a term of 4 years; and
                    (B) 4 shall be appointed for a term of 2 years.
    (c) Vacancies.--Any member of the Board appointed to fill a vacancy 
occurring before the expiration of the term for which the member's 
predecessor was appointed shall be appointed only for the remainder of 
that term. A member of the Board may serve after the expiration of that 
member's term until a successor has taken office.
    (d) Basic Pay.--Members of the Board shall each be paid not less 
than the daily equivalent of level IV of the Executive Schedule for 
each day (including travel time) during which they are engaged in the 
actual performance of duties vested in the Board.
    (e) Travel Expenses.--Each member of the Board shall receive travel 
expenses, including per diem in lieu of subsistence, in accordance with 
applicable provisions under subchapter I of chapter 57 of title 5, 
United States Code.
    (f) Chairperson; Officers.--The members of the Board shall elect 
the Chairperson and any other officers of the Board. The Chairperson 
and any such officers shall be elected for a term of 2 years.
    (g) Staff.--The Board may appoint and fix the pay of such 
additional personnel as the Board considers appropriate. The staff of 
the Board shall be appointed subject to the provisions of title 5, 
United States Code, governing appointments in the competitive service, 
and shall be paid in accordance with the provisions of chapter 51 and 
subchapter III of chapter 53 of that title relating to classification 
and General Schedule pay rates.
    (h) Experts and Consultants.--The Board may procure temporary and 
intermittent services under section 3109(b) of title 5, United State 
Code.

SEC. 8. POWERS OF BOARD.

    (a) Hearings and Sessions.--
            (1) In general.--The Board may, for the purpose of carrying 
        out this Act, hold hearings, sit and act at times and places, 
        take testimony, and receive evidence as the Board considers 
        appropriate.
            (2) First meeting.--Not later than 30 days after the 
        initial 9 members of the Board under section 7(a)(5) have been 
        appointed and confirmed, the Board shall conduct its first 
        meeting.
    (b) Policies and Procedures.--
            (1) In general.--Not later than 1 year after the initial 9 
        members of the Board under section 7(a)(5) have been appointed 
        and confirmed, the Board shall establish such policies and 
        procedures as may be appropriate to carry out this Act.
            (2) Majority vote.--The policies and procedures of the 
        Board shall require that any determination of the Board be made 
        by not less than a majority vote of the members of the Board.
            (3) Administrative procedures.--The policies and procedures 
        of the Board shall comply with subchapter II of chapter 5 of 
        title 5, United States Code.
            (4) Transparency.--The policies and procedures of the Board 
        shall--
                    (A) comply with sections 552 and 552b of title 5, 
                United States Code (commonly referred to as the 
                ``Freedom of Information Act'' and the ``Government in 
                the Sunshine Act'', respectively); and
                    (B) ensure that the proceedings and deliberations 
                of the Board are transparent and are supported by a 
                description of the methods, data sources, assumptions, 
                outcomes, and related information that will allow the 
                public to understand how the Board reaches its 
                criteria-setting and award decisions.
    (c) Expert Advisory Committees.--To assist the Board in carrying 
out this Act, the Board shall establish independent expert advisory 
committees, including committees on the following:
            (1) Economic evaluation of therapeutic benefits.
            (2) Business models and incentive structures for 
        innovation.
            (3) Research and development priorities.
            (4) Orphan diseases.
            (5) Financial control and auditing.
    (d) Powers of Members and Agents.--Any member or agent of the Board 
may, if authorized by the Board, take any action which the Board is 
authorized to take by this Act.
    (e) Mails.--The Board may use the United States mails in the same 
manner and under the same conditions as other departments and agencies 
of the United States.

SEC. 9. PRIZE PAYMENTS FOR MEDICAL INNOVATION.

    (a) Award.--For fiscal year 2007 and each subsequent fiscal year, 
the Board shall award to persons described in subsection (b) prize 
payments for medical innovation relating to a drug, a biological 
product, or a new manufacturing process for a drug or biological 
product.
    (b) Eligibility.--To be eligible to receive a prize payment under 
this section for medical innovation relating to a drug, a biological 
product, or a manufacturing process, a person shall be--
            (1) in the case of a drug or biological product, the first 
        person to receive market clearance; or
            (2) in the case of a manufacturing process, the holder of 
        the patent.
    (c) Criteria.--The Board shall determine by regulation criteria for 
selecting recipients, and determining the amount, of prize payments 
under this section. Such criteria shall include consideration of the 
following:
            (1) The number of patients who benefit from a drug, 
        biological product, or manufacturing process including (in 
        cases of global neglected diseases, global infectious diseases, 
        and other global public health priorities) the number of non-
        United States patients.
            (2) The incremental therapeutic benefit of a drug, 
        biological product, or manufacturing process, compared to 
        existing drugs, biological products, and manufacturing 
        processes available to treat the same disease or condition.
            (3) The degree to which the drug, biological product, or 
        manufacturing process addresses priority health care needs, 
        including--
                    (A) current and emerging global infectious 
                diseases;
                    (B) severe illnesses with small client populations 
                (such as indications for which orphan designation has 
                been granted under section 526 of the Federal Food, 
                Drug, and Cosmetic Act (21 U.S.C. 360bb)); and
                    (C) neglected diseases that primarily afflict the 
                poor in developing countries.
            (4) Improved efficiency of manufacturing processes for 
        drugs or biological processes.
    (d) Requirements.--In awarding prize payments under this section, 
the Board shall comply with the following:
            (1) In cases where a new drug, biological product, or 
        manufacturing process offers an improvement over an existing 
        drug, biological product, or manufacturing process and the new 
        drug, biological product, or manufacturing process competes 
        with or replaces the existing drug, biological product, or 
        manufacturing process, the Board shall continue to make prize 
        payments for the existing drug, biological product, or 
        manufacturing process to the degree that the new drug, 
        biological product, or manufacturing process was based on or 
        benefited from the development of the existing drug, biological 
        product, or manufacturing process.
            (2) The Board may not make prize payments based on the 
        identity of the person who manufactures, distributes, sells, or 
        uses the drug, biological product, or manufacturing process 
        involved.
            (3) The Board may award prize payments for a drug, a 
        biological product, or a manufacturing process for not more 
        than 10 fiscal years, regardless of the term of any related 
        patents.
            (4) For any fiscal year, the Board may not award a prize 
        payment for any single drug, biological product, or 
        manufacturing process in an amount that exceeds 5 percent of 
        the total amount appropriated to the Fund for that year.
            (5) For every drug or biological product that receives 
        market clearance, the Board shall determine whether and in what 
        amount to award a prize payment for the drug or biological 
        product not later than the end of the fourth full calendar-year 
        quarter following the calendar-year quarter in which the drug 
        or biological product receives market clearance.

SEC. 10. PRIZES FOR PRIORITY RESEARCH AND DEVELOPMENT.

    (a) Minimum Levels of Funding.--For fiscal year 2007 and each 
subsequent fiscal year, the Board shall establish and may periodically 
modify minimum levels of funding under section 9 for priority research 
and development.
    (b) Initial Minimum Levels.--Of the amount appropriated to the Fund 
for a fiscal year, the Board shall use (subject to establishment or 
modification of an applicable minimum level of funding under subsection 
(a)) not less than--
            (1) 4 percent of such amount for global neglected diseases;
            (2) 10 percent of such amount for orphan drugs; and
            (3) 4 percent of such amount for global infectious diseases 
        and other global public health priorities, including research 
        on AIDS, AIDS vaccines, and medicines for responding to 
        bioterrorism.
    (c) Public Input; Recommendations.--The advisory committee on 
research and development priorities (established pursuant to section 
8(c)) shall--
            (1) solicit public input on research and development 
        priorities; and
            (2) periodically recommend to the Board changes in the 
        minimum levels of funding for prizes for priority research and 
        development.
    (d) Procedures.--The Board shall adopt procedures to establish and 
periodically modify minimum levels of funding under section 9 for 
priority research and development.

SEC. 11. SPECIAL TRANSITION RULES.

    (a) In General.--A drug or biological product that is already on 
the market by October 1, 2007, shall remain eligible for prize payments 
for not more than 10 fiscal years, consistent with section 9(d)(3).
    (b) Determination of Value.--In determining the amount of a prize 
payment for a drug or biological product described in subsection (a), 
the Board shall calculate the incremental value of the drug or 
biological product as of the date on which the drug or biological 
product was first introduced in the market.
    (c) Maximum Amount.--For drugs and biological products described in 
subsection (a), the Board may award--
            (1) of the amount appropriated to the Fund for fiscal year 
        2007, not more than 90 percent of such amount; and
            (2) of the amount appropriated to the Fund for each of the 
        succeeding 9 fiscal years, not more than a percentage of such 
        amount that is 9 percent less than the percentage applicable to 
        the preceding fiscal year under this subsection.

SEC. 12. ARBITRATION.

    In the case of a drug that is already on the market by October 1, 
2007, and subject to patents owned by a party other than the person who 
first received market clearance for the drug, the Board shall establish 
an arbitration procedure to determine an equitable division of any 
prize payments among the patent owners and the person who first 
received market clearance for the drug.

SEC. 13. ANNUAL AUDITS BY GAO.

    (a) Audits.--The Comptroller General of the United States shall 
conduct an audit of the Board each fiscal year to determine the 
effectiveness of the Board--
            (1) in bringing to market drugs, vaccines, other biological 
        products, and new manufacturing processes for medicines in a 
        cost-effective manner; and
            (2) in addressing society's medical needs, including global 
        neglected diseases that afflict primarily the poor in 
        developing countries, indications for which orphan designation 
        has been granted under section 526 of the Federal Food, Drug, 
        and Cosmetic Act (21 U.S.C. 360bb), and global infectious 
        diseases and and other global public health priorities.
    (b) Reports.--The Comptroller General of the United States shall 
submit a report to the Congress each fiscal year on the results of each 
audit conducted under subsection (a).

SEC. 14. REPORT TO CONGRESS.

    Not later than 1 year after the date of the enactment of this Act, 
the Board shall submit to the Congress a report containing the 
findings, conclusions, and recommendations of the Board regarding the 
implementation and administration of this Act, including 
recommendations for such legislative and administrative action as the 
Board determines to be appropriate.

SEC. 15. DEFINITIONS.

    In this Act:
            (1) The term ``biological product'' has the meaning given 
        to that term in section 351 of the Public Health Service Act 
        (42 U.S.C. 262).
            (2) The term ``Board'' means the Board of Trustees for the 
        Fund for Medical Innovation Prizes established by section 6.
            (3) The term ``drug'' has the meaning given to that term in 
        section 201 of the Federal Food, Drug, and Cosmetic Act (21 
        U.S.C. 321).
            (4) The term ``Fund'' means the Fund for Medical Innovation 
        Prizes established by section 5.
            (5) The term ``market clearance'' means approval of an 
        application under section 505 of the Federal Food, Drug, and 
        Cosmetic Act (21 U.S.C. 355) or approval of a biologics license 
        application under subsection (a) of section 351 of the Public 
        Health Service Act (42 U.S.C. 262).

SEC. 16. FUNDING.

    (a) Appropriations.--
            (1) Start-up costs.--For fiscal year 2006, there are 
        authorized to be appropriated to the Fund for Medical 
        Innovation Prizes such sums as may be necessary to carry out 
        this Act.
            (2) Program implementation.--For fiscal year 2007 and each 
        subsequent fiscal year, there is appropriated to the Fund for 
        Medical Innovation Prizes, out of any funds in the Treasury not 
        otherwise appropriated, an amount equal to the amount that is 
        0.5 percent of the gross domestic product of the United States 
        for the preceding fiscal year (as such amount is determined by 
        the Secretary of Commerce).
    (b) Availability.--Funds appropriated to the Fund for Medical 
Innovation Prizes for a fiscal year shall remain available for 
expenditure in accordance with this Act until the end of the 3-year 
period beginning on October 1 of such fiscal year. Any such funds that 
are unexpended at the end of such period shall revert to the Treasury.
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