[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[S. 2210 Introduced in Senate (IS)]







110th CONGRESS
  1st Session
                                S. 2210

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


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            October 19, 2007

  Mr. Sanders introduced the following bill; which was read twice and 
  referred to the Committee on Health, Education, Labor, and Pensions

_______________________________________________________________________

                                 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 
2007''.

SEC. 2. FINDINGS.

    Congress makes the following findings:
            (1) Current incentives for research and development for new 
        medicines that involve market exclusivity lead to high prices.
            (2) High prescription drug prices create hardships on 
        patients, employers, and taxpayers who pay for medicines, as 
        well as increasing restrictions on access to medicines, through 
        limited availability of high priced medicines by health 
        insurance plans.
            (3) In addition, when marketing exclusivity is the reward 
        for successful research and development efforts, companies have 
        incentives to invest enormous sums in marketing of products, 
        and in the development of medicines that do not offer 
        significant incremental medicinal benefits over existing 
        products.
            (4) According to the Food and Drug Administration, of the 
        1,284 new drug approvals from 1990 to 2004, only 289, or 22.5 
        percent, were for ``priority'' reviews (defined as a product 
        that has ``significant improvement compared to marketed 
        products in the treatment, diagnosis, or prevention of a 
        disease''). Of these, only 183 (14.3 percent of the total) were 
        new molecular entities classified as priority products.
            (5) Thus, there are important gaps in treatments for many 
        severe illnesses.
            (6) 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.
            (7) 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.
            (8) Exclusive rights to market products are one way to 
        reward successful product research and development, but not the 
        only way. Prize funds are another way and have been used 
        successfully to stimulate inventions and solutions to difficult 
        problems.
            (9) Awards to companies through a prize fund mechanism that 
        reward successful product research and development can de-
        couple the reward for product research development from the 
        price of the product.
            (10) Awards to pharmaceutical companies for successful 
        product research and development can be targeted at products 
        that improve health care outcomes, and can stimulate research 
        and development in the areas of greatest need.
            (11) The implementation of a prize fund and the elimination 
        of exclusive rights to sell new medicines will lead to entry by 
        generic manufacturers, and lower prices for prescription drugs. 
        This will eliminate the need for price sensitive formularies, 
        and reduce other barriers to access to new medicines.
            (12) At present, generic products represent more than 63 
        percent of pharmaceutical prescriptions, but only 20 percent of 
        the money spent on prescription drugs, for an average cost 
        saving of 85 percent for generic prescriptions.
            (13) The combined cost to the Federal Government of 
        purchases, reimbursements, and subsidies for medicines, 
        including Federal outlays relating to Medicare, Medicaid, 
        purchases of medicines by the Department of Defense and the 
        Department of Veterans Affairs, and outlays related to the 
        Federal Employees Health Benefits Program, is expected to 
        exceed $100,000,000,000 in 2007, and grow faster than the 
        overall rate of growth in the Gross Domestic Product.
            (14) The cost of total United States outlays for 
        pharmaceutical drugs was more than $274,000,000,000 in 2006, 
        measured at manufacturer's prices, an increase of more than 82 
        percent since 2000.
            (15) The substitution of prize fund awards to companies for 
        successful product research and development in place of 
        marketing exclusivity for new medicines will lead to more 
        competition, greater utilization of generic products, lower 
        prices, and savings to Federal, State and local governments, 
        private employers and individual consumers of more than 
        $200,000,000,000 per year. Savings in governmental expenditures 
        alone would be more than sufficient to fund the prize fund 
        established through this legislation.
            (16) Basing the level of funding for innovation prizes on a 
        share of Gross Domestic Product will ensure a sustainable and 
        forward looking commitment to stimulate innovation for new 
        medicines.
            (17) Current United States outlays on pharmaceutical drugs 
        are more than 2.2 percent of Gross Domestic Product.
            (18) By funding innovation prizes at 0.6 percent of Gross 
        Domestic Product, the United States will provide an incentive 
        for innovation that would be more than $80,000,000,000 in 2007, 
        an amount that is more than 5 times the average rate of 
        royalties for patent owners, and more than 4 times the level of 
        private sector research and development spending that would be 
        assigned to the United States market, based upon the United 
        States share of global Gross National Product.
            (19) The 2007 cost of the innovation prizes will be much 
        lower than the $200,000,000,000 in reduced United States 
        outlays for pharmaceutical drugs, it will vastly expand access 
        to medicines, and it will ensure that future research and 
        development for new medicines is targeted at treatments that 
        improve health care outcomes and address public health 
        priorities.

SEC. 3. PURPOSE.

    It is the purpose of this Act to provide incentives to encourage 
entities to invest in research and development of new medicines through 
the 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. DEFINITIONS.

    In this Act:
            (1) Biological product.--The term ``biological product'' 
        has the meaning given such term in section 351 of the Public 
        Health Service Act (42 U.S.C. 262).
            (2) Board.--The term ``Board'' means the Board of Trustees 
        for the Fund for Medical Innovation Prizes established under 
        section 7.
            (3) Drug.--The term ``drug'' has the meaning given such 
        term in section 201 of the Federal Food, Drug, and Cosmetic Act 
        (21 U.S.C. 321).
            (4) Fund.--The term ``Fund'' means the Fund for Medical 
        Innovation Prizes established under section 6.
            (5) Market clearance.--The term ``market clearance'' means 
        the approval of an application under section 505 of the Federal 
        Food, Drug, and Cosmetic Act (21 U.S.C. 355) or the approval of 
        a biologics license application under subsection (a) of section 
        351 of the Public Health Service Act (42 U.S.C. 262).

SEC. 5. ELIMINATION OF EXCLUSIVE RIGHTS TO MARKET DRUGS AND BIOLOGICAL 
              PRODUCTS.

    (a) In General.--Notwithstanding title 35, United States Code, 
relevant provisions of the Federal Food, Drug, and Cosmetic Act (21 
U.S.C. 301 et seq.) (including amendments made by the Drug Price 
Competition and Patent Term Restoration Act of 1984 (Public Law 98-417; 
referred to as the ``Hatch-Waxman Act'')), the Medicare Prescription 
Drug, Improvement, and Modernization Act of 2003 (Public Law 108-173), 
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 
under section 505A of the Federal Food, Drug, and Cosmetic Act (21 
U.S.C. 355a) or orphan drug marketing exclusivity under subchapter B of 
chapter V of such Act (21 U.S.C. 360aa et seq.)), 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, including the exclusive 
right to rely on health registration data or the 30-month stay-of-
effectiveness period for Orange Book patents under section 505(j) of 
such Act (21 U.S.C. 355(j)).
    (b) Remuneration.--A person that is eligible for prize payments 
from the Fund as provided for in section 10 shall receive such 
payments--
            (1) in lieu of any remuneration the person would have 
        otherwise received for the exclusive marketing, distribution, 
        sale, or use of a drug, biological product, or manufacturing 
        process for a drug or biological product but for the 
        application of subsection (a); and
            (2) in addition to any other remuneration that such person 
        receives by reason of the nonexclusive marketing, distribution, 
        sale, or use of the drug, biological product, or manufacturing 
        process for a drug or biological product.
    (c) Application.--This section shall apply only with respect to the 
marketing, distribution, sale, or use of a drug, a biological product, 
or a manufacturing process for a drug or biological product that occurs 
on or after October 1, 2007.

SEC. 6. 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 the 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. 7. BOARD OF TRUSTEES FOR THE FUND.

    (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) Membership.--The Board shall be composed of 13 members, 
including--
            (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; and
            (5) nine individuals to be appointed by the President, with 
        the advice and consent of the Senate, of which--
                    (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; and
                    (C) three representatives of consumer and patient 
                interests, including at least one representative of 
                patients suffering from orphan diseases.
    (c) 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 members shall be appointed for a term of 4 
                years; and
                    (B) 4 members shall be appointed for a term of 2 
                years.
    (d) 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.
    (e) Compensation and Travel Expenses.--
            (1) Compensation.--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 the duties of the 
        Board.
            (2) 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 a 
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 such 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 AND DUTIES OF THE BOARD.

    (a) 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.
    (b) Powers of Board.--
            (1) Hearings and sessions.--
                    (A) 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.
                    (B) First meeting.--Not later than 30 days after 
                the initial members of the Board are appointed under 
                section 7(b)(5) and confirmed, the Board shall conduct 
                its first meeting.
            (2) Policies and procedures.--
                    (A) In general.--Not later than 1 year after the 
                initial members of the Board are appointed under 
                section 7(b)(5) and confirmed, the Board shall 
                establish such policies and procedures as may be 
                appropriate to carry out this Act.
                    (B) 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.
                    (C) Administrative procedures.--The policies and 
                procedures of the Board shall comply with subchapter II 
                of chapter 5 of title 5, United States Code.
                    (D) Transparency.--The policies and procedures of 
                the Board shall--
                            (i) 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
                            (ii) 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.
            (3) 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:
                    (A) Economic evaluation of therapeutic benefits.
                    (B) Business models and incentive structures for 
                innovation.
                    (C) Research and development priorities.
                    (D) Orphan diseases.
                    (E) Financial control and auditing.
            (4) 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 under this Act.
            (5) 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 2008, 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 
subsection (a) 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 with respect to the drug or 
        biological product; or
            (2) in the case of a manufacturing process, the holder of 
        the patent with respect to such process.
    (c) Criteria.--The Board shall, by regulation, establish criteria 
for the selection of recipients, and for determining the amount, of 
prize payments under this section. Such criteria shall include 
consideration of the following:
            (1) The number of patients who would benefit from the drug, 
        biological product, or manufacturing process involved, 
        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 the drug, 
        biological product, or manufacturing process involved as 
        compared to existing drugs, biological products, and 
        manufacturing processes available to treat the same disease or 
        condition, except that the Board shall provide for cases where 
        drugs, biological products, or manufacturing processes are 
        developed at roughly the same time, so that the comparison is 
        to products that were not recently developed.
            (3) The degree to which the drug, biological product, or 
        manufacturing process involved 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 
        benefitted 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 2008, 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 the 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(b)(3)) shall--
            (1) solicit public input on research and development 
        priorities; and
            (2) periodically recommend to the Board modifications in 
        the minimum levels of funding for prizes for priority research 
        and development under this section.
    (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 on the market 
on 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.--With respect to drugs and biological products 
described in subsection (a), the Board may award--
            (1) of the amount appropriated to the Fund for fiscal year 
        2008, 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 equal to 9 percent less the percentage 
        applicable to the preceding fiscal year under this subsection.

SEC. 12. ARBITRATION.

    In the case of a drug that is on the market on October 1, 2008, 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 under this Act 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 Congress a report containing the findings, 
conclusions, and recommendations of the Board concerning the 
implementation and administration of this Act, including 
recommendations for such legislative and administrative action as the 
Board determines to be appropriate.

SEC. 15. FUNDING.

    (a) Appropriations.--
            (1) Start-up costs.--For fiscal year 2008, there are 
        authorized to be appropriated to the Fund, such sums as may be 
        necessary to carry out this Act.
            (2) Program implementation.--For fiscal year 2008 and each 
        subsequent fiscal year, there is appropriated to the Fund, out 
        of any funds in the Treasury not otherwise appropriated, an 
        amount equal to the amount that is 0.6 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 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.
                                 <all>