[Congressional Record Volume 147, Number 67 (Wednesday, May 16, 2001)]
[Senate]
[Pages S5007-S5010]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. KERRY (for himself and Mr. Frist):
  S. 895. A bill to amend the Internal Revenue Code of 1986 to allow a 
credit against income tax for research related to developing vaccines 
against widespread diseases and ensure that such vaccines are 
affordable and widely distributed; to the Committee on Finance.
  Mr. KERRY. Mr. President, last month at the African Summit on AIDS in 
Nigeria, the Secretary General of the U.N., Kofi Annan, called upon the 
international community to establish a new multibillion-dollar global 
fund to combat AIDS and other infectious diseases, such as tuberculosis 
and malaria. He estimates that $7 billion to $10 billion annually will 
be needed to fight the global pandemic of HIV/AIDS on all fronts--
prevention, care, and treatment. This call reflects the magnitude of 
the challenge before all of us.
  The AIDS crisis has never been so devastating or so urgent as it is 
today. In less than two decades, AIDS has become a global epidemic, 
endangering the lives of millions of people, the majority of them in 
developing countries. It has proved more devastating than wars. In 
1998, in Africa, 200,000 people died in armed conflict, but in the same 
time, 2.2 million people died from AIDS.
  It is destroying the economies of many developing countries at a 
critical juncture, unacceptable as that level of death would be at any 
time, and it is reversing half a century of developmental gains.
  Even more importantly, AIDS has emerged as an international security 
threat with the ability to destroy communities, whole generations, and 
even nations. Just recently, the Bush administration continued what the 
Clinton administration had done, which is recognizing it as a security 
threat to the United States of America.
  The statistics are chilling. Over 36.1 million people are living with 
HIV/AIDS around the world. According to the United Nations, every 60 
seconds, 11 people contract HIV due mostly to unprotected sex, but also 
to intravenous drugs. At the end of the day today, 14,500 more men, 
women, and children will be infected with HIV. Over 13 million children 
have been orphaned by AIDS.
  Africa is hardest hit by this epidemic today. Eight African countries 
are struggling under the weight of a disease that has infected 15 
percent of their adult populations. Three African countries--South 
Africa, Botswana, and Zimbabwe--are threatened with negative population 
growth in the next few years, and if a cure is not found, that will 
happen.
  I know it is difficult for any of us to imagine the enormity of the 
human suffering that goes along with these statistics, but it is 
important that we as policymakers do not shy away from understanding 
the terrible impact AIDS is having on a global basis.
  In South Africa, which is at the epicenter of this global epidemic, 
25 percent of adults, one in every nine South Africans, are now living 
with HIV. U.N. officials estimate that if the epidemic continues to 
spread at its current pace, close to one-half of the country's 15-year-
olds will die of AIDS-related illnesses in the coming years--one-half 
of all the 15-year-olds. This represents an entire generation of South 
Africans.
  While Africa is bearing the brunt of the epidemic today, there are 
strong signs that Asia will soon fall under the same inconceivable 
burden. Infection rates are climbing in Asia with countries such as 
India on the brink of a large-scale expansion of the epidemic. 
Currently, almost 4 million people in India are infected--second only 
to South Africa in total number of infections.
  In a country with one-sixth the world's population, the AIDS pandemic 
in India is of particular concern to us. According to the International 
AIDS Vaccine Initiative, it is making clear inroads into the general 
population. As with many countries affected by HIV/AIDS, many of the 
high-risk groups, such as commercial sex workers, intravenous drug 
users, truckers, and migrant workers, all of whom have high infection 
rates, end up spreading HIV at alarming rates as globalization and the 
market economies continue to put pressure on the movement of migrant 
populations of workers.

  Prevention efforts in India face many of the same obstacles as in 
many developing countries. These include high illiteracy rates, 
widespread poverty, very poor infrastructure, the low status of women, 
and taboos on talking about issues of sexuality.
  In East Asia, more than 2.4 million people are already infected with 
the HIV virus, and an estimated 150,000 children have been orphaned. 
While China does not yet have the same infections as India, Chinese 
researchers estimate that the number of HIV-infected people could jump 
to 10 million in a few years.
  Countries of the former Soviet Union and Eastern Europe are also 
vulnerable, with Russia experiencing the highest increase in infection 
rates in the world last year. The Russian Federation had more new HIV 
infections in 2000 than in all the previous years of the epidemic 
combined, totaling 700,000 infections in the year 2000, up from 170,000 
in 1997.
  Latin America and the Caribbean are also heading down the same path. 
In fact, some of the Caribbean island states have worse epidemics than 
any country outside of sub-Saharan Africa. Five percent of the adults 
in Haiti are living with AIDS.
  Even these alarming statistics do not give a full picture of the 
scope of the HIV/AIDS threat. In fact, for many people in the 
developing world, AIDS is simply another burden on top of many others, 
such as poverty, armed conflict, and incomplete infrastructure.
  By eating away at the social capital of many of these countries, AIDS 
is decimating the most productive members of society who are needed to 
solve many of the other problems in their nations.
  In addition to the challenges posed by AIDS, malaria and tuberculosis 
are also exacting a tremendous toll on the developing world. In 1999, 
there were an estimated 8.4 million new tuberculosis cases, and 10.2 
million new cases are expected in 2005 if present trends continue. 
Malaria also poses an increasing threat as well, killing at least 1 
million people each year, about 3,000 people a day.
  The spread of each of these infectious diseases is made worse by 
health systems' failure, population movement, deteriorating sanitation, 
and insufficient prevention and treatment efforts.
  A human crisis of this proportion demands that we respond with 
urgency and thoughtfulness. We must continue to support robust 
prevention, treatment and care programs. But we must also recognize 
that vaccines are the most effective weapons in the arsenal of modern 
medicine to stop the threat of AIDS and other infectious diseases. 
Pharmaceutical companies, however, are reluctant to invest in research 
for vaccines to prevent HIV/AIDS and other infectious diseases because 
they fear they will not recover the expense of their research.
  The bill that I am introducing today, along with my colleague Senator 
Frist, is designed to address this problem by providing incentives for 
pharmaceutical and biotech research companies to accelerate their 
efforts to develop vaccines and microbicides to prevent AIDS, TB, 
malaria, and other

[[Page S5009]]

deadly infectious diseases. It does this in three ways.
  First, it provides a 30 percent tax credit each year on qualified 
research expenses to develop microbicides for HIV and vaccines for HIV, 
TB, malaria, and other infectious diseases that kill more than 1 
million people annually. This is an expansion of the existing R&D tax 
and can be applied to clinical trials outside of the United States, 
since the majority of those infected with these diseases are beyond our 
borders.
  Second, it provides a refundable tax credit to small biotechnology 
companies based on the amount of qualified research that they do in a 
given year. Biotech firms are among the most innovative when it comes 
to research. Increased research efforts by these firms could be 
instrumental to the effort to develop effective vaccines, particularly 
for HIV/AIDS.
  Third, the bill provides a 100 percent tax credit on contracts and 
other arrangements for research and development of these vaccines 
and microbicides. This credit, which is an increase over the 65 percent 
credit now in the tax code, is designed to serve as an incentive to 
larger pharmaceutical companies to work hand in hand with the smaller 
biotech companies to pick up the pace of vaccine development.

  Over the last year a number of pharmaceutical companies have taken 
steps to help in the treatment of those infected with AIDS by providing 
life-extending therapies to the developing world at reduced costs. 
These drugs are critically important but the war against AIDS cannot be 
won unless we develop vaccines against the HIV virus and related 
infectious diseases. The pharmaceutical and biotech companies hold the 
key.
  Once vaccines are developed, it is imperative that they be widely 
distributed. The bill that I am introducing today with Senator Frist 
also addresses the distribution side of the equation. It provides a 100 
percent tax credit to companies on the sales of new vaccines and 
microbicides as long as those sales are made to a qualified 
international health organization or foreign government for 
distribution in developing countries. It also directs the Secretary of 
the Treasury to establish a fund in the Treasury for the purchase and 
distribution of eligible vaccines to developing countries. Finally, it 
urges continued U.S. government support for the Global Alliance for 
Vaccines and Immunizations, GAVI, and the Global Fund for Children's 
Vaccines.
  Mr. President, many steps need to be taken in the war against AIDS 
and other infectious diseases. This bill focuses on only one area but a 
critically important one: vaccine development and distribution. If the 
public and private sectors work together with energy and commitment, I 
believe we can develop the vaccines and once developed, we will win the 
war.
  It is easy for people in a country as rich as we are, as safe as we 
are, as blessed as we are to lose sight of what is happening on the 
rest of the planet. There are even some in this country who are quick 
to simply say: Well, it's their fault; it's the result of their sexual 
practices; it's the result of their values; it's the result of their 
culture.
  It may well be that it is possible for people to cast a finger and to 
point blame, but this is a crisis of human proportions that affects all 
of us. It affects all of us because of the potential destabilization of 
whole nations with which we do business and on whom we must rely in a 
whole series of relationships.
  It is also critical for us to understand the implications of this 
because in the world today there are no boundaries. This is a disease, 
and a disease has all the capacity to be carried across boundaries and 
become as important to us in this nation as it should have been already 
simply by virtue of the number of people in our country who are 
infected and who may potentially carry the disease elsewhere.
  Yes, we must continue to support prevention; yes, we must continue to 
support treatment; and, yes, we must continue to support care programs. 
But I do not believe any of us can feel secure in the notion that there 
will be enough money, enough delivery systems, or that we will ever 
have the capacity to provide the kind of care, treatment, and 
prevention that will deal with the numbers about which we are talking 
in a global pandemic of this nature.
  The most important tool, the most important weapon in the arsenal 
against this we have not even begun to use because we have not 
discovered it yet, and that is a vaccine. A vaccine can replace all of 
the need for infrastructure, except for the delivery of the vaccine, 
the need for care, the extraordinary burden on health care systems, and 
the incapacity of systems to deal with the sheer numbers we are facing.
  There is a reason we do not have a vaccine. It is because there is no 
marketplace. All of these countries are poor, and the drug companies, 
by and large, have an incentive to provide the drugs that most rapidly 
remunerates them. We have Prozac, Viagra, and a host of other drugs 
that are quickly and easily put in the marketplace.
  We need to create an incentive in the Tax Code to encourage research 
and development for the creation of an AIDS vaccine. Many of us are 
confident that if the United States were to create the kind of energy 
in our research and development technology, in our education sector, we 
have the ability to provide the ultimate vaccine against this.
  Senator Frist, a colleague of enormous respect in this institution, 
as a physician is unparalleled in his understanding of the difficulties 
of this issue.
  I am proud that he is a cosponsor with me of this legislation. We are 
hoping our colleagues will join us next week when the tax bill comes to 
the floor in reconciliation. We have an opportunity to provide the 
small amount of money necessary through this tax structure to be able 
to create the vaccine that can help deal with this crisis.
  Many steps are needed in the war against AIDS and other infectious 
diseases. This bill focuses on only one area, but it is a critically 
important one, vaccine development and distribution. If the public and 
private sectors work together with the energy and commitment that we 
produced for so many other things in this country, we can make a global 
contribution of historic proportions. I think we should strive to do 
nothing less than that.
  I yield the floor.
  Mr. FRIST. Mr. President, I am pleased to support of S. 895, the 
Vaccines for the New Millennium Act of 2001. In an age where 
antibiotics are taken for granted, we often forget that one fourth of 
all deaths worldwide, over 13 million people annually, are the result 
of infectious disease. In the next hour alone, 1,500 will die from an 
infectious disease such as AIDS, malaria, TB or pneumonia, over half 
those who die will be under the age of 5 years old.
  The developing world suffers a disproportionate burden of infectious 
disease deaths, which destroy lives and perpetuate poverty and 
sickness, undermining gains in economic growth, education and life 
expectancy. Vaccines, the most cost-effective weapons in the fight 
against infectious diseases, have eradicated smallpox, nearly 
eliminated polio from the planet, and dramatically lowered measles 
rates.
  Yet vaccines are not reaching all those who need them. The expanded 
use of currently available vaccines, such as those for tetanus, measles 
and hepatitis could save up to 4 million children every year. The U.S. 
heavily invests in immunization programs, providing over $100 million 
each year for polio eradication efforts and millions more to support 
other global vaccination programs. Recently, we joined the Gates 
Foundation and other governments to fund the Global Alliance for 
Vaccines and Immunization to help purchase and deliver the latest 
vaccines to the poorest countries.
  But despite these programs, effective vaccines do not yet exist for 
malaria, TB, or AIDS, diseases that together kill nearly 6 million 
people each year. Unfortunately, research and development for diseases 
such as these, lag far behind the need. Of the $60 billion investment 
in health research by the public and private sectors, only 10 percent 
is allocated to the health needs of developing countries.
  The National Institutes of Health is the global leader in searching 
for new vaccines for these diseases, but the job of NIH is science, not 
development and distribution of commodities such as vaccines. We must 
encourage increased attention by the private sector if vaccines for 
AIDS, Malaria and TB are to become a reality.

[[Page S5010]]

  Research and development by both pharmaceutical and biotech companies 
have provided dramatic and lifesaving technologies and drugs that 
benefit millions here and abroad. Their efforts are the lynchpin that 
ensures recent advances in science reach the widest number of people. 
But companies are faced with a conundrum, how do they justify the 
hundreds of millions of dollars necessary to develop and license a 
vaccine, such as for TB, when the markets for those vaccines are 
primarily in the world's poorest countries, countries spending less 
than $10-20 per person on health care per year?
  The Vaccines for the New Millennium Act of 2001, is an attempt to 
provide market incentives for both the large pharmaceutical industry 
and smaller biotech companies to accelerate development of vaccines for 
AIDS, malaria and TB, diseases that disproportionately affect 
developing countries.
  The bill will provide incentives at multiple levels in the vaccine 
development process. It: provides a 30 percent tax credit for research 
and development expenditures for vaccines for malaria, TB, and AIDS; 
provides a refundable tax credit to biotech companies that are doing 
innovative research but are not yet making a profit; provides a 100 
percent credit on sale of vaccines for these three diseases to poor 
countries. Over 10 years, this provision alone could provide as much as 
$1 billion in additional funding for pharmaceutical companies that 
develop vaccines for AIDS, malaria, and TB; authorizes a purchase fund 
for these three vaccines to be established after they become available 
to the market; and provides the same package of benefits to research 
and development of microbicides for HIV/AIDS--medications that would 
enable women to protect themselves from infection with the virus.
  It is the objective of this bill to energize the public/private 
partnership that has helped the U.S. pharmaceutical industry become the 
world leader in innovation. By promoting increased R&D for diseases 
affecting the poorest countries, we will all benefit. There is a clear 
humanitarian and moral call to do what we can to provide safe and 
effective vaccines to save lives. But beyond this obligation, we cannot 
forget that infectious diseases do not respect borders. Until TB, 
malaria, and AIDS are eliminated, we all face the threat from diseases 
that should be rapidly relegated to the waste bin of history.
  Mr. President, I ask unanimous consent that additional material be 
printed in the Record.
  There being no objection, the additional material was ordered to be 
printed in the Record, as follows:

          Vaccines for the New Millennium Act of 2001--Summary

       This bill has two purposes: to provide incentives to 
     pharmaceutical and private sector biotech companies to 
     accelerate research and development of vaccines and 
     microbicides to prevent deadly infectious diseases such as 
     HIV/AIDS, tuberculosis, and malaria, which kill some 5-6 
     million people annually; and to increase international access 
     to vaccines and microbicides, once developed.

                   Incentives to Accelerated Research


      1--increased tax credit for vaccine research and development

       Provides a 30 percent tax credit on qualified research 
     expenses to develop microbicides for HIV and vaccines for 
     malaria, TB, HIV and other diseases that kill 1 million 
     people or more annually. This is an expansion of the existing 
     20 percent Research and Development tax credit.
       Mandates that a company file a research plan with the 
     Secretary of the Treasury on these priority vaccines or 
     microbicides before claiming the tax credit.
       Allows the tax credit to be applied to the costs of 
     clinical trials outside of the United States, because of the 
     prevalence of malaria, TB, and HIV in developing countries. 
     However, pre-clinical research must be conducted in the 
     United States in order to claim the tax credit.


         2--refundable tax credit for small, biotech companies

       Provides a refundable tax credit to small biotech companies 
     based on the amount of qualified research that they a company 
     does in a given year. This credit is designed to stimulate 
     increased research among firms that often do the most 
     innovative research.
       Mandates that any firm receiving this credit put an 
     equivalent amount of funds into research and development 
     within 2 years of having received the credit. Such 
     expenditures cannot be claimed under the tax credit for 
     qualified vaccine research and development. Requires the 
     Secretary of the Treasury to promulgate regulations to 
     recapture the credit if a company fails to make these 
     expenditures.


               3--tax credit for research contracted out

       Provides a 100 percent tax credit on contracts and other 
     arrangements for research and development on these priority 
     vaccines and microbicides. This credit, an increase from the 
     existing 65 percent, is designed as an incentive for larger 
     firms to contract with smaller, vaccine research companies.

           International Access to Vaccines and Microbicides


          1--Tax Credit on sales of vaccines and microbicides

       Provides a 100 percent tax credit on the value of sales of 
     new vaccines and microbicides for malaria, TB, and HIV and 
     any other disease killing more than 1 million people 
     annually. Sales must be made to a qualified international 
     health organization or foreign government for use in 
     developing countries.
       Limits the annual credit on such sales to $100 million 
     through the years 2002-2006 and 125 million through the years 
     2007-2010.


          2--establishment of lifesaving vaccine purchase fund

       Mandates the Secretary of the Treasury to establish a 
     purchase fund in the Department of the Treasury at the time 
     that an eligible vaccine is ready for purchase.
       Authorizes the Secretary to use the fund to purchase 
     vaccines and distribute those vaccines in developing 
     countries.


           3--other mechanisms to increase access to vaccines

       Requires a company that develops a vaccine or microbicide 
     using the research and development credit to certify to the 
     Secretary of the Treasury that it will establish a plan to 
     maximize distribution of the vaccine or microbicide to 
     developing countries. Such plan would not waive any rights to 
     pricing, patent ownership or release of proprietary 
     information.
       Urges continued US government support for the Global 
     Alliance for Vaccines and Immunizations, GAVI, and the Global 
     Fund for Children's Vaccines.
                                 ______