[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[S. 627 Introduced in Senate (IS)]
113th CONGRESS
1st Session
S. 627
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
March 20, 2013
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 Fund Act''.
SEC. 2. FINDINGS.
Congress makes the following findings:
(1) The development of new medicines and vaccines is
necessary to improve health care outcomes.
(2) Market exclusivity for new products is an expensive,
inefficient, and unfair mechanism to reward investments in new
products.
(3) By de-linking research and development incentives from
product prices, and by eliminating legal monopolies to sell
products, it is possible to induce investments that are
medically more important, procure products at low prices from
competitive suppliers, radically lower pricing barriers for
access to new medicines, reduce wasteful marketing and research
and development activities, and dramatically lower the overall
costs of acquiring innovation, while expanding access to that
innovation.
(4) By funding innovation prizes at .55 percent of gross
domestic product, the United States would provide more than
$86,000,000,000 in rewards for successful innovation in 2012.
(5) The development of new medicines benefits from greater
sharing of knowledge, data, materials, and technologies.
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 and to
share knowledge, data, materials, and technology, through the
establishment of a Medical Innovation Prize Fund, 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) 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;
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 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 sections 9, 10, or 11 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, 2014.
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 17(c), 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) 9 individuals to be appointed by the President, with
the advice and consent of the Senate, of which--
(A) 2 shall be representatives of businesses that
provide health insurance to employees;
(B) 2 shall be representatives of entities that
provide health insurance and contribute to the co-
funding of the Fund for Medical Innovation Prizes under
section 17;
(C) 2 shall be representatives of the medical
research and development sector, including at least 1
representative of the nonprofit private medical
research and development sector; and
(D) 3 shall be 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 (b)(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 (b)(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 States
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 16.
(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.
(F) Open source biomedical science.
(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 2015, 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;
(2) in the case of a manufacturing process, the holder of
the patent with respect to such process; or
(3) in the case of open source contributions, the persons
or communities that openly shared knowledge, data, materials,
and technology on a royalty-free and nondiscriminatory basis.
(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.
(5) 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.
(6) In the case of antibiotics or other products for which
drug resistance is a significant public health problem, the
expected life cycle benefits of the antibiotic or other
product, with appropriate adjustments that reward the
conservation of the resources, taking into account drug
resistance that is related to use of the product.
(7) In the case of products used in stockpiles for
potential threats to the public health, the risk adjusted
benefits of stockpiling the products.
(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 2015, 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 diseases; 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. 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 Board of Trustees 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 drugs, biological products, or manufacturing
processes that are rewarded under sections 9 and 10;
(C) in the case of rewards for contributing to the
development of new drugs, biological products, or
manufacturing processes rewarded under sections 9 and
10, 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. 12. COMPETITIVE INTERMEDIARIES FOR FUNDING INTERIM TECHNOLOGIES.
(a) In General.--The Board of Trustees may authorize multiple
nonprofit intermediaries to reward projects for interim research and
development of products, 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 Board of Trustees shall adopt rules to ensure the
transparency and accountability of any entities authorized to act as
competitive intermediaries under subsection (a).
SEC. 13. SPECIAL TRANSITION RULES.
(a) In General.--A drug or biological product that is on the market
on October 1, 2014, 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
2015, 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. 14. ARBITRATION.
In the case of a drug that is on the market on October 1, 2014, 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. 15. 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 and 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 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. 16. 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. 17. FUNDING.
(a) Appropriations.--
(1) Start-up costs.--For fiscal year 2015, 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 2015 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 .55 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.
SEC. 18. IMPOSITION OF ANNUAL FEE ON HEALTH INSURANCE PROVIDERS.
(a) Imposition of Fee.--
(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 2014 a fee in an amount
determined under subsection (b).
(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.
(b) Determination of Fee Amount.--With respect to each covered
entity, the fee under this section for any calendar year shall be equal
to the amount determined under section 17(a)(2), multiplied by 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--
(1) the sum of net premiums for all covered entities; and
(2) all Federal outlays on health insurance or
reimbursement of health care costs, excluding the costs of long
term care.
(c) Amounts Taken Into Account.--For purposes of paragraph (b), 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.
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