1.This Act may be cited as
the Medical Innovation Prize Act of
2007
.
2.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.
3.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.
4.In this Act:
(1)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)The
term Board means the Board of Trustees for the Fund for Medical
Innovation Prizes established under section 7.
(3)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)The
term Fund means the Fund for Medical Innovation Prizes established
under section 6.
(5)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).
5.Elimination of
exclusive rights to market drugs and biological products
(a)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)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)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.
6.Fund for medical
innovation prizes
(a)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)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 FundThe 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.
7.Board of
trustees for the Fund
(a)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)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)
(1)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 appointeesAs 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)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)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)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)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)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)The Board may procure temporary and intermittent
services under section 3109(b) of title 5, United State Code.
8.Powers and
duties of the Board
(a)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)
(1)
(A)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)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)
(A)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)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
proceduresThe policies and procedures of the Board shall comply
with subchapter II of chapter 5 of title 5, United States Code.
(D)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
committeesTo 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 agentsAny 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)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.
9.Prize payments
for medical innovation
(a)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)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)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)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.
10.Prizes for
priority research and development
(a)Minimum levels
of fundingFor 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)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;
recommendationsThe 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)The
Board shall adopt procedures to establish and periodically modify minimum
levels of funding under section 9 for priority research and development.
11.
(a)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)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)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.
12.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.
13.
(a)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)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).
14.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.
15.
(a)
(1)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)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)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.