II 109th CONGRESS 1st Session S. 1698 IN THE SENATE OF THE UNITED STATES September 14, 2005 Mr. Kerry (for himself and Mr. Lugar) introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To accelerate efforts to develop vaccines for diseases primarily affecting developing countries and for other purposes.

1.

Short title

This Act may be cited as the Vaccines for the New Millennium Act of 2005.

2.

Definitions

In this Act: (1)

AIDS

The term AIDS has the meaning given the term in section 104A(g) of the Foreign Assistance Act of 1961 (22 U.S.C. 2151b–2). (2)

Appropriate congressional committees

The term appropriate congressional committees means the Committee on Appropriations and the Committee on Foreign Relations of the Senate and the Committee on Appropriations and the Committee on International Relations of the House of Representatives. (3)

Developing country

The term developing country means a country that the World Bank determines to be a country with a lower middle income or less. (4)

HIV/AIDS

The term HIV/AIDS has the meaning given the term in section 104A(g) of the Foreign Assistance Act of 1961 (22 U.S.C. 2151b–2). (5)

Global Alliance for Vaccines and Immunizations

The term Global Alliance for Vaccines and Immunizations means the public-private partnership launched in 2000 for the purpose of saving the lives of children and protecting the health of all people through the widespread use of vaccines. (6)

Neglected disease

The term neglected disease means— (A)HIV/AIDS; (B)malaria; (C)tuberculosis; or (D)any infectious disease (of a single etiology), which, according to the World Health Organization, causes more than 1,000,000 deaths each year in developing countries. (7)

World bank

The term World Bank means the International Bank for Reconstruction and Development.

3.

Findings

Congress makes the following findings: (1)Immunization is cheap, reliable, and effective, and has made a profound impact on global health, in both rich and poor countries. (2)During the 20th century, global immunization efforts have successfully led to the eradication of smallpox and the elimination of polio from the Western Hemisphere, Europe, and most of Asia. Vaccines for diseases such as measles and tetanus have dramatically reduced childhood mortality worldwide, and vaccines for diseases such as influenza, pneumonia, and hepatitis help prevent sickness and death of adults as well as children. (3)According to the World Health Organization, combined, AIDS, tuberculosis, and malaria kill more than 5,000,000 people a year, most of whom are in the developing world, yet there are no vaccines for these diseases. (4)It is estimated that just 10 percent of the world's research and development on health is targeted on diseases affecting 90 percent of the world's population. (5)Economic disincentives result in little private sector investment in vaccines for neglected diseases, a situation which disproportionately affects populations in developing countries. (6)Of more than $100,000,000,000 spent on health research and development across the world, only $6,000,000,000 is spent each year on diseases that are specific to developing countries, most of which is from public and philanthropic sources. (7)Infants, children, and adolescents are among the populations hardest hit by AIDS and malaria, but they are at risk of being left behind in the search for effective vaccines against such diseases. (8)Providing a broad range of economic incentives to increase private sector research on neglected diseases, including increased public and private sector funding for research and development, guaranteed markets, tax credits, and improved regulatory procedures would increase the number of products in development and the likelihood of finding effective vaccines for such diseases.

4.

Sense of Congress on support for neglected diseases

It is the sense of Congress that— (1)the President should continue to encourage efforts to support the Global HIV Vaccine Enterprise, a virtual consortium of scientists and organizations committed to accelerating the development of an effective HIV vaccine; (2)the United States should work with the Global Fund to Fight AIDS, Tuberculosis and Malaria, the Joint United Nations Programme on HIV/AIDS (UNAIDS), the World Health Organization, the International AIDS Vaccine Initiative, and the World Bank to ensure that all countries heavily affected by the HIV/AIDS pandemic have national AIDS vaccine plans; (3)the United States should support and encourage the carrying out of the agreements of the Group of 8 made at the 2005 Summit at Gleneagles, Scotland, to increase direct investment and create market incentives, including through public-private partnerships and advance market commitments, to complement public research in the development of vaccines, microbicides, and drugs for HIV/AIDS, malaria, tuberculosis, and other neglected diseases; (4)the United States should support testing of promising vaccines in infants, children, and adolescents as early as is medically and ethically appropriate, in order to avoid significant delays in the availability of pediatric vaccines at the cost of thousands of lives; (5)the United States should continue supporting the work of the Global Alliance for Vaccines and Immunizations and the Global Fund for Children’s Vaccines as appropriate and effective vehicles to purchase and distribute vaccines for neglected diseases at an affordable price once such vaccines are discovered in order to distribute them to the developing world; and (6)the United States should work with others in the international community to address the multiple obstacles to the development of vaccines for neglected diseases including scientific barriers, insufficient economic incentives, protracted regulatory procedures, lack of delivery systems for products once developed, liability risks, and intellectual property rights.

5.

Public-Private Partnerships

(a)

Findings

Congress makes the following findings: (1)Creative partnerships between governments and organizations in the private sector (including foundations, universities, corporations including pharmaceutical companies and biotechnology firms, community-based organizations and other nongovernmental organizations) are playing a critical role in the area of global health, particularly in the fight against neglected diseases, including HIV/AIDS, tuberculosis, and malaria. (2)Public-private sector partnerships increase local and international capacities to improve the delivery of health services in developing countries and to accelerate research and development of vaccines and other preventive medical technologies essential to combating infectious diseases that disproportionately kill people in developing countries. (3)These partnerships maximize the unique capabilities of each sector while combining financial and other resources, scientific knowledge, and expertise toward common goals which cannot be achieved by either sector alone. (4)Public-private partnerships such as the International AIDS Vaccine Initiative, the Malaria Vaccine Initiative, and the Global TB Drug Facility are playing cutting edge roles in the efforts to develop vaccines for these diseases. (5)Public-private partnerships serve as incentives to the research and development of vaccines for neglected diseases by providing biotechnology companies, which often have no experience in developing countries, with technical assistance and on the ground support for clinical trials of the vaccine through the various stages of development. (6)Sustaining existing public-private partnerships and building new ones where needed are essential to the success of the efforts by the United States and others in the international community to find a cure for these and other neglected diseases. (b)

Sense of Congress

It is the sense of Congress that— (1)the sustainment and promotion of public-private partnerships must be a central element of the strategy pursued by the United States to create effective incentives for the development of vaccines and other preventive medical technologies for neglected diseases debilitating the developing world; and (2)the United States Government should take steps to address the obstacles to the development of these technologies by increasing investment in research and development and establishing market and other incentives. (c)

Policy

It is the policy of the United States to accelerate research and development for vaccines and microbicides for neglected diseases by substantially increasing funding for public-private partnerships that invest directly in research, such as the International AIDS Vaccine Initiative, the Malaria Vaccine Initiative, and the Global TB Drug Facility, and for partnerships such as the Vaccine Fund that incentivize the development of new vaccines by purchase existing vaccines.

6.

Comprehensive Strategy for Accelerating the Development of Vaccines for Neglected Diseases

(a)

Requirement for strategy

The President shall establish a comprehensive strategy to accelerate efforts to develop vaccines and microbicides for neglected diseases such as HIV/AIDS, malaria, and tuberculosis. Such strategy shall— (1)expand public-private partnerships and the leveraging of resources from other countries and the private sector; (2)include initiatives to create economic incentives for the research, development, and manufacturing of vaccines for HIV/AIDS, tuberculosis, malaria, and other neglected diseases; (3)include the negotiation of advanced market commitments; (4)address intellectual property issues surrounding the development of vaccines and microbicidies for neglected diseases; (5)maximize United States capabilities to support clinical trials of vaccines and microbicidies in developing countries; (6)address the issue of regulatory approval of such vaccines, whether through the Commissioner of the Food and Drug Administration, or the World Health Organization or another internally-recognized and agreed upon entity; (7)expand the purchase and delivery of existing vaccines; and (8)address the challenges of delivering vaccines in developing countries in advance so as to minimize historical delays in access once vaccines are available. (b)

Report

Not later than 270 days after the date of enactment of this Act, the President shall submit to the appropriate congressional committees a report setting forth the strategy described in subsection (a) and the steps to implement such strategy.

7.

Advanced market commitments

(a)

Purpose

The purpose of this section is to create incentives for the private sector to invest in research, development, and manufacturing of vaccines for neglected diseases by creating a competitive market for future vaccines through advanced market commitments. (b)

Authority to negotiate

(1)

In general

The Secretary of the Treasury shall enter into negotiations with the appropriate officials of the World Bank, the International Development Association, and Global Alliance for Vaccines and Immunizations, the member nations of such entities, and other interested parties for the purpose of establishing advanced market commitments to purchase vaccines and microbicides to combat neglected diseases. (2)

Report

Not later than 180 days after the date of the enactment of this Act, the Secretary shall submit to the appropriate congressional committees a report on the status of the negotiations to create advanced market commitments under this section. (c)

Requirements

The Secretary of the Treasury shall work with the entities referred to in subsection (b) to ensure that there is an international framework for the establishment and implementation of advanced market commitments and that such commitments include— (1)legally binding contracts for product purchase that include a fair market price for a guaranteed number of treatments to ensure that the market incentive is sufficient; (2)clearly defined and transparent rules of competition for qualified developers and suppliers of the product; (3)clearly defined requirements for eligible vaccines to ensure that they are safe and effective; (4)dispute settlement mechanisms; and (5)sufficient flexibility to enable the contracts to be adjusted in accord with new information related to projected market size and other factors while still maintaining the purchase commitment at a fair price. (d)

Trust fund

(1)

Authority to establish

On the date that the Secretary of the Treasury determines that a vaccine to combat a neglected disease is available for purchase, the Secretary shall establish in the Treasury of the United States a fund to be known as the Lifesaving Vaccine Purchase Fund consisting of amounts appropriated pursuant to paragraph (4). (2)

Investment of fund

Amounts in such Fund shall be invested in accordance with section 9702 of title 31, United States Code, and any interest on, and proceeds from any such investment shall be credited to and become part of the Fund. (3)

Use of fund

The Secretary is authorized to expend amounts in such Fund for the purchase of a vaccine to combat a neglected disease pursuant to an advanced market commitment undertaken on behalf of the Government of the United States. (4)

Authority to accept contributions

The President may accept and use in furtherance of the purposes of this Act contributions from nongovernmental organizations, international health agencies, the United Nations, the Global Fund to Fight AIDS, Tuberculosis and Malaria, private nonprofit organizations that are organized to support public health research and programs, and any other organizations willing to contribute to the Lifesaving Vaccine Purchase Fund. (5)

Appropriations

(A)

In general

For each fiscal year beginning after the date that the Secretary determines that a vaccine to combat a neglected disease is available for purchase, there are authorized to be appropriated out of any funds in the Treasury not otherwise appropriated such sums as may be necessary to carry out the purposes of such Fund. (B)

Transfer of funds

The Secretary shall transfer the amount appropriated under paragraph (1) for a fiscal year to such Fund. (C)

Availability

Amounts appropriated pursuant to this paragraph shall remain available until expended without fiscal year limitation.

8.

Credit for medical research related to developing vaccines against neglected diseases

(a)

In general

Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to business related credits) is amended by adding at the end the following new section:

45J.

Credit for medical research related to developing Vaccines for neglected diseases

(a)

General rule

For purposes of section 38, the vaccine research credit determined under this section for the taxable year is an amount equal to 30 percent of the qualified vaccine research expenses for the taxable year. (b)

Qualified vaccine research expenses

For purposes of this section— (1)

Qualified vaccine research expenses

(A)

In general

Except as otherwise provided in this paragraph, the term qualified vaccine research expenses means the amounts which are paid or incurred by the taxpayer during the taxable year which would be described in subsection (b) of section 41 if such subsection were applied with the modifications set forth in subparagraph (B). (B)

Modifications; increased incentive for contract research payments

For purposes of subparagraph (A), subsection (b) of section 41 shall be applied— (i)by substituting vaccine research for qualified research each place it appears in paragraphs (2) and (3) of such subsection, and (ii)by substituting 100 percent for 65 percent in paragraph (3)(A) of such subsection. (C)

Exclusion for amounts funded by grants, etc

The term qualified vaccine research expenses shall not include any amount to the extent such amount is funded by any grant, contract, or otherwise by another person (or any governmental entity). (2)

Vaccine research

The term vaccine research means research to develop vaccines and microbicides for— (A)HIV/AIDS (as that term is defined in section 104A(g) of the Foreign Assistance Act of 1961 (22 U.S.C. 21516–2)), (B)malaria, (C)tuberculosis, or (D)any infectious disease (of a single etiology) which, according to the World Health Organization, causes more than 1,000,000 human deaths each year in developing countries. (c)

Coordination with credit for increasing research expenditures

(1)

In general

Except as provided in paragraph (2), any qualified vaccine research expenses for a taxable year to which an election under this section applies shall not be taken into account for purposes of determining the credit allowable under section 41 for such taxable year. (2)

Expenses included in determining base period research expenses

Any qualified vaccine research expenses for any taxable year which are qualified research expenses (within the meaning of section 41(b)) shall be taken into account in determining base period research expenses for purposes of applying section 41 to subsequent taxable years. (d)

Special rules

(1)

Limitations on foreign testing

No credit shall be allowed under this section with respect to any vaccine research (other than human clinical testing) conducted outside the United States. (2)

Pre-clinical research

No credit shall be allowed under this section for pre-clinical research unless such research is pursuant to a research plan an abstract of which has been filed with the Secretary before the beginning of such year. The Secretary, in consultation with the Secretary of Health and Human Services, shall prescribe regulations specifying the requirements for such plans and procedures for filing under this paragraph. (3)

Certain rules made applicable

Rules similar to the rules of paragraphs (1) and (2) of section 41(f) shall apply for purposes of this section. (4)

Election

This section (other than subsection (e)) shall apply to any taxpayer for any taxable year only if such taxpayer elects to have this section apply for such taxable year. (e)

Credit To be refundable for certain taxpayers

(1)

In general

In the case of an electing qualified taxpayer— (A)the credit under this section shall be determined without regard to section 38(c), and (B)the credit so determined shall be allowed as a credit under subpart C. (2)

Electing qualified taxpayer

For purposes of this subsection, the term electing qualified taxpayer means, with respect to any taxable year, any domestic C corporation if— (A)the aggregate gross assets of such corporation at any time during such taxable year are $500,000,000 or less, (B)the net income tax (as defined in section 38(c)) of such corporation is zero for such taxable year and the 2 preceding taxable years, (C)as of the close of the taxable year, the corporation is not under the jurisdiction of a court in a title 11 or similar case (within the meaning of section 368(a)(3)(A)), (D)the corporation provides such assurances as the Secretary requires that, not later than 2 taxable years after the taxable year in which the taxpayer receives any refund of a credit under this subsection, the taxpayer will make an amount of qualified vaccine research expenses equal to the amount of such refund, and (E)the corporation elects the application of this subsection for such taxable year. (3)

Aggregate gross assets

Aggregate gross assets shall be determined in the same manner as such assets are determined under section 1202(d). (4)

Controlled groups

A corporation shall be treated as meeting the requirement of paragraph (2)(B) only if each person who is treated with such corporation as a single employer under subsections (a) and (b) of section 52 also meets such requirement. (5)

Special rules

(A)

Recapture of credit

The Secretary shall promulgate such regulations as necessary and appropriate to provide for the recapture of any credit allowed under this subsection in cases where the taxpayer fails to make the expenditures described in paragraph (2)(D). (B)

Exclusion of certain qualified vaccine research expenses

For purposes of determining the credit under this section for a taxable year, the qualified vaccine research expenses taken into account for such taxable year shall not include an amount paid or incurred during such taxable year equal to the amount described in paragraph (2)(D) (and not already taken into account under this subparagraph for a previous taxable year).

. (b)

Inclusion in general business credit

Section 38(b) of the Internal Revenue Code of 1986 is amended by striking plus at the end of paragraph (18), by striking the period at the end of paragraph (19) and inserting , plus, and by adding at the end the following new paragraph: (20)the vaccine research credit determined under section 45J. . (c)

Denial of double benefit

Section 280C of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection: (e)

Credit for qualified vaccine research expenses

(1)

In general

No deduction shall be allowed for that portion of the qualified vaccine research expenses (as defined in section 45J(b)) otherwise allowable as a deduction for the taxable year which is equal to the amount of the credit determined for such taxable year under section 45J(a). (2)

Certain rules to apply

Rules similar to the rules of paragraphs (2), (3), and (4) of subsection (c) shall apply for purposes of this subsection. . (d)

Deduction for unused portion of credit

Section 196(c) of the Internal Revenue Code of 1986 (defining qualified business credits) is amended by striking and at the end of paragraph (11), by striking the period at the end of paragraph (12) and inserting , and, and by adding at the end the following new paragraph: (13)the vaccine research credit determined under section 45J(a) (other than such credit determined under the rules of section 280C(e)(2)). . (e)

Technical amendments

(1)Section 1324(b)(2) of title 31, United States Code, is amended by inserting or from section 45J(e) of such Code, after 1978,. (2)The table of sections for subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new item: Sec. 45J. Credit for medical research related to developing vaccines against widespread diseases. . (f)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2005. (g)

Study

(1)

In general

The National Institutes of Health shall conduct a study of the extent to which the credit under section 45J of the Internal Revenue Code of 1986, as added by subsection (a), has stimulated vaccine research. (2)

Report

Not later than the date that is 5 years after the date of the enactment of this Act, the National Institutes of Health shall submit to Congress the results of the study conducted under paragraph (1), together with recommendations (if any) to improve the effectiveness of such credit in stimulating vaccine research.

9.

Credit for certain sales of lifesaving vaccines

(a)

In general

Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to business related credits), as amended by section 4, is amended by adding at the end the following new section:

45K.

Credit for certain sales of lifesaving Vaccines

(a)

In general

For purposes of section 38, the lifesaving vaccine sale credit determined under this section with respect to a taxpayer for the taxable year is an amount equal to the amount of qualified vaccine sales for the taxable year. (b)

Qualified vaccine sales

For purposes of this section— (1)

In general

The term qualified vaccine sales means the aggregate amount paid to the taxpayer for a qualified sale. (2)

Qualified sale

(A)

In general

The term qualified sale means a sale of a qualified vaccine— (i)to a nonprofit organization or to a government of any foreign country (or instrumentality of such a government), and (ii)for distribution in a developing country. (B)

Developing country

For purposes of this paragraph, the term developing country means a country which the Secretary determines to be a country with a lower middle income or less (as such term is used by the International Bank for Reconstruction and Development). (3)

Qualified vaccine

The term qualified vaccine means any vaccine and microbicide— (A)which is described in section 45J(b)(2), and (B)which is approved as a new drug after the date of the enactment of this paragraph by— (i)the Food and Drug Administration, (ii)the World Health Organization, or (iii)the appropriate authority of a country included in the list under section 802(b)(1) of the Federal Food, Drug, and Cosmetic Act. (c)

Limit on amount of credit

The maximum amount of the credit allowable under subsection (a) with respect to a sale shall not exceed the portion of the limitation amount allocated under subsection (d) with respect to such sale. (d)

National limitation on amount of credits

(1)

In general

Except as provided in paragraph (3), there is a lifesaving vaccine sale credit limitation amount for each calendar year equal to— (A)$100,000,000 for each of years 2006 through 2010, and (B)$125,000,000 for each of years 2011 through 2012. (2)

Allocation of limitation

(A)

In general

The limitation amount under paragraph (1) shall be allocated for any calendar year by the Administrator of the United States Agency for International Development (referred to in this section as the Administrator) among organizations with an application approved by the Administrator in accordance with subparagraph (B). (B)

Application for allocation

The Administrator shall prescribe the procedures for an application for an allocation under this subsection and the factors to be taken into account in making such allocations. Such applications shall be made at such time and in such form and manner as the Administrator shall prescribe and shall include a detailed plan for distribution of the vaccine. (3)

Carryover of unused limitation

If the limitation amount under paragraph (1) for any calendar year exceeds the aggregate amount allocated under paragraph (2), such limitation for the following calendar year shall be increased by the amount of such excess. No amount may be carried under the preceding sentence to any calendar year after 2024. (e)

Special rules

For purposes of this section, rules similar to the rules of section 41(f)(2) shall apply.

. (b)

Inclusion in general business credit

Section 38(b) of the Internal Revenue Code of 1986 (relating to current year business credit), as amended by section 4(b), is amended by striking plus at the end of paragraph (19), by striking the period at the end of paragraph (20) and inserting , plus, and by adding at the end the following new paragraph: (21)the lifesaving vaccine sale credit determined under section 45K. . (c)

Clerical amendment

The table of sections for subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986, as amended by section 2(c), is amended by adding at the end the following new item: Sec. 45K. Credit for certain sales of lifesaving vaccines. . (d)

Effective date

The amendments made by this section shall apply to sales of vaccines after December 31, 2005, in taxable years ending after such date.

10.

SBIR and STTR program funding for vaccine development

(a)

Pilot program

Section 9 of the Small Business Act (15 U.S.C. 638) is amended by adding at the end the following: (x)

Required expenditures for the development of vaccines for neglected diseases

(1)

SBIR expenditures

Each agency required to make expenditures under subsection (f)(1) or under subsection (n)(1), that is determined by the Administrator to have a mission related to global health or disease prevention shall expend with small business concerns, in addition to any amounts required to be expended under subsections (f) and (n), not less than $10,000,000 for fiscal year 2006 and each fiscal year thereafter, specifically in connection with SBIR and STTR programs which meet the requirements of this section, policy directives, and regulations to carry out this section, to carry out the pilot program established under this subsection. (2)

Pilot program

During the 4-year period beginning on the date of enactment of the Vaccines for the New Millennium Act of 2005, the Administrator shall establish and carry out a program to encourage the development of vaccines and microbicides to combat a neglected disease, including outreach activities to raise awareness of such program. (3)

Administrative costs

The limitations in subsection (f)(2) and (n)(2) shall not apply to agency expenditures under the pilot program established under this subsection. (4)

Report

Six months before the date of expiration of the pilot program established under this subsection, the Administrator shall submit to the Committee on Small Business and Entrepreneurship of the Senate and the Committee on Small Business of the House of Representatives a report containing an assessment of whether the pilot program is meeting the objective of providing incentives to small business concerns to research the development of vaccines and microbicides to combat a neglected disease, and an accounting of the expenditures for the pilot program. (5)

Definitions

As used in this subsection and subsection (j), the terms neglected disease and developing country have the same meanings as in section 2 of the Vaccines for the New Millennium Act of 2005. . (b)

Policy Objectives

Section 9(j) of the Small Business Act (15 U.S.C. 638(j)) is amended by adding at the end the following: (4)

Additional modifications for the development of vaccines for a neglected disease

Not later than 90 days after the date of enactment of the Vaccines for the New Millennium Act of 2005, the Administrator shall modify the policy directives issued pursuant to this subsection to ensure that agencies participating in the SBIR and STTR programs develop an action plan for implementing the pilot program for the development of vaccines and microbicides to combat a neglected disease under subsection (x), including outreach to raise awareness of the pilot program. .