[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[S. 1138 Introduced in Senate (IS)]

112th CONGRESS
  1st Session
                                S. 1138

To de-link research and development incentives from drug prices for new 
    medicines to treat HIV/AIDS and to stimulate greater sharing of 
                         scientific knowledge.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                              May 26, 2011

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

_______________________________________________________________________

                                 A BILL


 
To de-link research and development incentives from drug prices for new 
    medicines to treat HIV/AIDS and to stimulate greater sharing of 
                         scientific knowledge.

    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 ``Prize Fund for HIV/AIDS Act''.

SEC. 2. FINDINGS.

    Congress makes the following findings:
            (1) The Centers for Disease Control and Prevention 
        estimates that more than 1,000,000 people are living with HIV 
        in the United States, and that 1 in 5 of those people living 
        with HIV is unaware of their infection.
            (2) An estimated 56,300 Americans become infected with HIV 
        each year.
            (3) More than 18,000 people with AIDS still die each year 
        in the United States.
            (4) Through 2007, more than 576,000 people with AIDS in the 
        United States have died since the epidemic began.
            (5) Globally, UNAIDS estimates that more than 33,000,000 
        persons are living with HIV.
            (6) Persons with HIV/AIDS require access to antiretroviral 
        drugs.
            (7) In the United States, public and private sector 
        expenditures on antiretroviral drugs currently exceed 
        $9,000,000,000 per year.
            (8) The United States Federal Government is the largest 
        funder of treatments for HIV/AIDS in the developing world.
            (9) The development of new medicines and vaccines for HIV/
        AIDS is a national priority.
            (10) Market exclusivity for new products is an expensive, 
        inefficient, and unfair mechanism to reward investments in new 
        products, and has created hardships for persons with HIV/AIDS 
        and businesses that employ persons with HIV/AIDS.
            (11) By de-linking research and development incentives from 
        product prices, and by eliminating legal monopolies to sell new 
        medicines for the treatment of HIV/AIDS, it is possible to 
        induce investments that are medically more important, procure 
        products at low prices from competitive suppliers, and 
        introduce more efficient incentives for research and 
        development.

SEC. 3. PURPOSE.

    It is the purpose of this Act to provide sustainable financing of 
incentives to encourage investments in research and development of new 
medicines for HIV/AIDS and to share knowledge, data, materials, and 
technology, through the establishment of a Prize Fund for HIV/AIDS, 
while enhancing access to such medicines by eliminating legal 
monopolies on the manufacture, distribution, and sale of such 
medicines.

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) 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).
            (3) Dual use product.--The term ``dual use product'' means 
        a product that is a qualifying treatment for HIV/AIDS and that 
        has a significant use for other diseases.
            (4) Fund.--The term ``Fund'' means the Prize Fund for HIV/
        AIDS established under section 7.
            (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).
            (6) Qualifying treatment for hiv/aids.--The term 
        ``qualifying treatment for HIV/AIDS'' means an antiretrovial 
        drug, biological product, vaccine, or other treatment primarily 
        used for HIV/AIDS that has been certified as a qualifying 
        product by the Secretary of Health and Human Services, for 
        purposes of the Prize Fund for HIV/AIDS.

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; 
commonly 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 qualifying treatment for HIV/AIDS 
or manufacturing process for a qualifying treatment for HIV/AIDS (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 qualifying treatment for HIV/AIDS or a manufacturing 
process for a qualifying treatment for HIV/AIDS 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 Prize Fund for HIV/AIDS 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 qualifying treatment for HIV/AIDS or 
        manufacturing process for a qualifying treatment for HIV/AIDS 
        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 qualifying treatment for HIV/AIDS or 
        manufacturing process for a qualifying treatment for HIV/AIDS.
    (c) Application.--This section shall apply only with respect to the 
marketing, distribution, sale, or use of a qualifying treatment for 
HIV/AIDS or a manufacturing process for a qualifying treatment for HIV/
AIDS that occurs on or after October 1, 2012.
    (d) Dual Use Products.--In the case of a dual use product, the 
elimination of exclusive rights under subsection (a) shall apply only 
with respect to the manufacture, distribution, marketing, sale, or use 
of the product for the treatment of HIV/AIDS.

SEC. 6. QUALIFYING TREATMENTS FOR HIV/AIDS.

    Prize payments from the Fund under section 8 shall be limited to 
qualifying treatments for HIV/AIDS, as defined in section 4.

SEC. 7. PRIZE FUND FOR HIV/AIDS.

    (a) Establishment.--There is hereby established in the Treasury of 
the United States a revolving fund to be known as the ``Prize Fund for 
HIV/AIDS'', which shall consist of amounts appropriated to the Fund and 
amounts credited to the Fund under subsection (d).
    (b) Prize Fund Administration.--The Secretary of Health and Human 
Services shall designate a Prize Fund Director and other officials as 
needed to administer the Fund.
    (c) Advisory Board.--The Secretary of Health and Human Services 
shall appoint an advisory board for the Fund.
    (d) 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. 8. PRIZE PAYMENTS FOR MEDICAL INNOVATION.

    (a) Award.--For fiscal year 2013, and each subsequent fiscal year, 
the Prize Fund Director shall award to persons described in subsection 
(b) prize payments for medical innovation relating to a qualifying 
treatment for HIV/AIDS, or a new manufacturing process for such a 
qualifying treatment for HIV/AIDS.
    (b) Eligibility.--To be eligible to receive a prize payment under 
subsection (a) a person shall be--
            (1) in the case of a qualifying treatment for HIV/AIDS that 
        is a drug or biological product, the first person to receive 
        market clearance with respect to the drug or biological 
        product;
            (2) in the case of a manufacturing process for a qualifying 
        treatment for HIV/AIDS, the holder of the patent with respect 
        to such process; or
            (3) in the case of open source contributions with respect 
        to a qualifying treatment for HIV/AIDS, the persons or 
        communities that openly shared knowledge, data, materials, and 
        technology on a royalty-free and nondiscriminatory basis.
    (c) Criteria.--The Prize Fund Director 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 benefit from the qualifying 
        treatment for HIV/AIDS or manufacturing process involved.
            (2) The incremental therapeutic benefit of the qualifying 
        treatment for HIV/AIDS 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 Prize Fund Director 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) Improved efficiency of manufacturing processes for 
        drugs or biological processes.
            (4) The extent to which knowledge, data, materials, and 
        technology that are openly shared have contributed to the 
        successful development of new products or improved processes 
        for manufacturing products.
    (d) Requirements.--In awarding prize payments under this section, 
the Prize Fund Director shall comply with the following:
            (1) In cases where a new qualifying treatment for HIV/AIDS 
        or manufacturing process for a qualifying treatment of HIV/AIDS 
        offers an improvement over an existing qualifying treatment for 
        HIV/AIDS or manufacturing process for a qualifying treatment 
        and such new qualifying treatment or manufacturing process 
        competes with or replaces the existing qualifying treatment or 
        manufacturing process, the Prize Fund Director shall continue 
        to make prize payments for the existing qualifying treatment or 
        manufacturing process to the degree that the new qualifying 
        treatment or manufacturing process was based on or benefitted 
        from the development of the existing qualifying treatment or 
        manufacturing process.
            (2) The Prize Fund Director may award prize payments for a 
        qualifying treatment for HIV/AIDS or a manufacturing process 
        for a qualifying treatment for HIV/AIDS for not more than 10 
        fiscal years, regardless of the term of any related patents.
            (3) For any fiscal year, the Prize Fund Director may not 
        award a prize payment for any single qualifying treatment for 
        HIV/AIDS or manufacturing process for a qualifying treatment in 
        an amount that exceeds 50 percent of the total amount 
        appropriated to the Fund for that year.
            (4) For every qualifying treatment for HIV/AIDS that 
        receives market clearance, the Prize Fund Director shall 
        determine whether and in what amount to award a prize payment 
        for the qualifying treatment for HIV/AIDS not later than the 
        end of the fourth full calendar-year quarter following the 
        calendar-year quarter in which the qualifying treatment for 
        HIV/AIDS receives market clearance.

SEC. 9. OPEN SOURCE DIVIDEND PRIZES.

    (a) In General.--In order to induce greater access and the open 
sharing of knowledge, data, materials, and technology, at least 5 
percent of the prize payments from the Fund shall be dedicated to Open 
Source Dividend Prizes.
    (b) Procedures.--
            (1) In general.--The Prize Fund Director shall adopt 
        procedures for the allocation of Open Source Dividend Prizes. 
        Such procedures shall--
                    (A) be fully transparent regarding the process for 
                evaluating the value of open sharing of knowledge, 
                data, materials, and technology;
                    (B) reward the open, nondiscriminatory, and 
                royalty-free sharing of knowledge, data, materials, and 
                technology that has contributed to the development of 
                the new qualifying treatment for HIV/AIDS or 
                manufacturing processes that are rewarded under section 
                7;
                    (C) in the case of rewards for contributing to the 
                development of new qualifying treatment for HIV/AIDS or 
                manufacturing processes rewarded under section 7, 
                provide for a time-limited period of nominations for 
                persons or communities whose contributions were 
                considered useful, including the evidence to support 
                such nominations to describe the significance of the 
                contribution; and
                    (D) provide for rules and procedures to protect 
                against conflicts of interest.
            (2) Public availability of nominations.--The nominations 
        described in paragraph (1)(C), and the evidence supporting such 
        nominations, shall be public. The public shall be allowed to 
        provide commentary and additional evidence on such nominations 
        before awards are made.

SEC. 10. COMPETITIVE INTERMEDIARIES FOR FUNDING INTERIM TECHNOLOGIES.

    (a) In General.--The Prize Fund Director may authorize multiple 
nonprofit intermediaries to manage Fund payments to reward projects for 
interim research and development of new qualifying treatments for HIV/
AIDS, or for open source dividend prizes. Such intermediaries shall 
compete for funding from non-Federal entities that co-fund the Fund.
    (b) Availability.--Prizes awarded by competitive intermediaries 
shall be available to persons or communities that provide open, 
nondiscriminatory, and royalty-free licenses to relevant intellectual 
property rights.
    (c) Rules.--The Prize Fund Director shall adopt rules to ensure the 
transparency and accountability of any entities authorized to act as 
competitive intermediaries under subsection (a).
    (d) Allocation.--The Secretary of Health and Human Services shall 
determine how much of the Fund shall be managed by competitive 
intermediaries to reward projects for interim research and development 
of new qualifying treatments for HIV/AIDS or for open source dividend 
prizes.

SEC. 11. SPECIAL TRANSITION RULES.

    (a) In General.--A qualifying treatment for HIV/AIDS that is on the 
market on October 1, 2012, shall remain eligible for prize payments for 
not more than 10 fiscal years, consistent with section 8(d)(3).
    (b) Determination of Value.--In determining the amount of a prize 
payment for a qualifying treatment for HIV/AIDS described in subsection 
(a), the Prize Fund Director shall calculate the incremental value of 
the qualifying treatment for HIV/AIDS as of the date on which the 
qualifying treatment for HIV/AIDS was first introduced in the market.
    (c) Maximum Amount.--With respect to qualifying treatment for HIV/
AIDS described in subsection (a), the Prize Fund Director may award--
            (1) of the amount appropriated to the Fund for fiscal year 
        2013, 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 qualifying treatment for HIV/AIDS that is on the 
market on October 1, 2012, and subject to patents owned by a party 
other than the person who first received market clearance for the 
qualifying treatment for HIV/AIDS, the Prize Fund Director 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 qualifying treatment 
for HIV/AIDS.

SEC. 13. FUNDING.

    (a) Appropriations.--
            (1) Start-up costs.--For fiscal year 2013, 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 2013 and each 
        subsequent fiscal year, there is authorized to be appropriated 
        to the Fund, and there is appropriated, out of any funds in the 
        Treasury not otherwise appropriated, an amount equal to 0.02 
        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).
            (3) 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.
    (b) Imposition of Annual Fee on Health Insurance Providers.--
            (1) In general.--Each covered entity engaged in the 
        business of providing health insurance shall pay to the 
        Secretary, not later than the annual payment date of each 
        calendar year beginning after 2012, a fee in an amount 
        determined under paragraph (3).
            (2) Annual payment date.--For purposes of this section, the 
        term ``annual payment date'' means, with respect to any 
        calendar year, a date determined by the Secretary, which in no 
        event, may be later than September 30 of such calendar year.
            (3) Determination of fee amount.--
                    (A) In general.--The total of all fees paid by all 
                covered entities for any given year shall be the amount 
                described in subsection (a)(2) multiplied by the ratio 
                of the number of persons receiving treatments for HIV/
                AIDS that are insured in the private sector to the 
                number of persons receiving treatments for HIV/AIDS who 
                received insurance or reimbursements or care from the 
                public sector.
                    (B) Individual contributions.--With respect to each 
                covered entity, the fee under this section for any 
                calendar year shall be equal to the ratio of the 
                covered entity's net premiums written with respect to 
                health insurance for any United states health risk 
                taken into account under subsection (c) during the 
                preceding calendar year, to the sum of such net 
                premiums for all covered entities, multiplied by the 
                amount under subparagraph (A).
    (c) Amounts Taken Into Account.--For purposes of subsection (b)(3), 
the net premiums written with respect to health insurance for any 
United States health risk that are taken into account during any 
calendar year with respect to any covered entity shall be determined as 
follows:
            (1) With respect to a covered entity's net premiums written 
        during the calendar year that are not more than $25,000,000, 
        the percentage of net premiums written that are taken into 
        account is 0 percent.
            (2) With respect to a covered entity's net premiums written 
        during the calendar year that are more than $25,000,000 but 
        less than $50,000,000, the percentage of net premiums written 
        that are taken into account is 50 percent.
            (3) With respect to a covered entity's net premiums written 
        during the calendar year that are $50,000,000 or more, the 
        percentage of net premiums written that are taken into account 
        is 100 percent.
    (d) Covered Entity.--
            (1) In general.--For purposes of this section, the term 
        ``covered entity'' means any entity which provides health 
        insurance for any United States health risk.
            (2) Exclusion.--Such term does not include any governmental 
        entity.

SEC. 14. DONOR INNOVATION PRIZE FUND.

    (a) In General.--In order to further separate product prices from 
research and development incentives and to facilitate the supply of 
low-cost generic drugs for the treatment of HIV/AIDS in developing 
countries, there is established in the Treasury of the United States a 
``Donor Innovation Prize Fund''.
    (b) Amount in Fund.--The amount in the Donor Innovation Prize Fund 
shall consist of--
            (1) an amount set aside by the Secretary of Health and 
        Human Services that is equal to 10 percent of the amount of 
        money estimated by such Secretary as the cost of qualifying 
        treatments for HIV/AIDS used by programs supported by the 
        President's Emergency Plan for AIDS Relief (commonly referred 
        to as ``PEPFAR'') or other federally supported programs to fund 
        the treatment of HIV/AIDS in developing countries; and
            (2) other amounts donated to the Fund as described in 
        subsection (d).
    (c) Use of Funds.--The Secretary of Health and Human Services 
(referred to in this section as the ``Secretary'') shall use the funds 
from the Donor Innovation Prize Fund to reward the owners and 
developers of products that permit open competition for products in 
developing countries, either by not patenting products, providing 
nondiscriminatory royalty-free open licenses to all patents and other 
intellectual property claims on at least a field of use for the 
treatment of HIV/AIDS in developing countries, or through licenses to 
the Medicine Patent Pool.
    (d) Encouragement by Secretary.--The Secretary shall encourage 
other donors and developing country governments to contribute a similar 
fraction of drug purchase budgets to the Donor Innovation Prize Fund, 
in order to facilitate greater competition for generic drugs, while 
providing a sustainable source of rewards for innovation.
    (e) Prizes.--The Secretary shall establish and award prize payments 
from the Donor Innovation Prize Fund by applying similar eligibility 
rules, selection criteria, and requirements as are applied with respect 
to prize payments awarded from the Prize Fund for HIV/AIDS under 
section 8.
    (f) Transparency.--The Secretary shall adopt procedures to ensure 
that the operation of the Donor Innovation Prize Fund is transparent 
and supported by a description of the methods, data sources, 
assumptions, outcomes, and related information that will allow the 
public to understand how the Secretary reaches its criteria-setting and 
award decisions.
                                 <all>