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Regulatory Focus™ > News Articles > Senator Looks to Spur Development of Medicines Through 'Prize Fund'

Senator Looks to Spur Development of Medicines Through 'Prize Fund'

Posted 15 May 2012

A Senate hearing being held by Senator Bernie Sanders (I-VT) seeks to advance legislation that would create a prize fund for companies to create new medicines and vaccines, partially replacing the current market-exclusivity model of product development.

Sanders' legislation, S.1137: The Medical Innovation Prize Fund Act, was introduced in May 2011, but has thus far eluded much notice. In remarks on the Senate floor on 15 May, Sanders said he did not expect the bill to pass during the 2012 session, but hopes instead to generate conversation about changing the drug approval paradigm currently used by the US Food and Drug Administration (FDA).

"Under this bill, innovation would be rewarded annually from a $3 billion Prize Fund for HIV/AIDS," said Leahy. "The Prize Fund would make awards to developers of medicines, based primarily upon the added therapeutic value a new treatment offers and the number of people it benefits.  Products would have generic competition immediately after FDA approval-that is, the bill would eliminate today's high-priced marketing monopolies as the reward for patented medical innovations."

Under current legislation, including the Hatch-Waxman Act, companies are immune from generic competition for five years after their drug is approved, with additional extensions in patent term exclusivity available for a number of reasons. These reasons including conducting clinical trials to show a drug's safety and efficacy in pediatric populations, successfully testing a drug for new indications and showing a drug was unnecessarily held up by FDA during the drug approval process.

While Sanders focused primarily on HIV/AIDS during his hearing, drawing upon a half-dozen experts and advocates of his bill, the Medical Innovation Prize Fund Act would go far beyond just a single disease area.

The bill would fund innovation prizes at a set percentage of the US' Gross Domestic Product (GDP)-five and a half percent of GDP-which would have provided $80 billion in prize funding during fiscal year 2011, according to Sanders. Further, the bill would provide 5% of the prize fund to "those who provide open access to knowledge, data, materials and technologies" in the hope of spurring collaboration in the research and development of medicines.

This system would entirely replace the current system established under Hatch-Waxman and the Medicare Prescription Drug Improvement and Modernization Act of 2003 (MMA), and relevant portions of the Federal Food, Drug and Cosmetic Act (FD&C Act).

Perhaps realizing that a complete overhaul of the research and development enterprise of the US's pharmaceutical industry is infeasible, Sanders' hearing today sought to establish a beachhead by offering up HIV/AIDS as the first area in which the prize fund would take place.

"It would reward true innovation, eliminate the market incentive for copy-cat drugs, and get all HIV/AIDS treatments to the people who need them at generic prices, which some have estimated to be under 1 percent, on average, compared to brand name prices for HIV/AIDS medicines," explained Sanders in remarks before the Senate.

For Sanders, it's about bringing logic to a system he thinks defies it.

"I believe that by breaking the link between drug prices and the rewards for medical R&D, we can provide virtually universal access to medicines as soon as they are available on the market, we can end rationing and restrictive formularies, and we can manage overall research and development incentives through a sanely-administered fund that provides significant rewards, but only for new medicines that actually offer new value," said Sanders. "The bottom line would be better products sooner, and generic prices for all pharmaceutical products right away, not after ten years of astronomical prices."

But numerous problems remain. Among them: the proposed legislation calls for "all private health reimbursement and insurance programs to contribute to the Prize Fund in an amount proportionate to the number of HIV/AIDS patients covered by private plans," which would drag another of the healthcare industry's most formidable sectors into a legislative fight. Paired with the pharmaceutical industry and biotechnology industry, this opposition could probe insurmountable without considerable legislative and public support.

The legislation is also almost certain to encounter criticism for trying to move the entire pharmaceutical industry to a generic-medicines model, which some critics have noted reduces profits necessary to make process improvements or smooth out manufacturing or quality issues. These same issues have featured prominently in recent drug shortages.

Ultimately, the impact of the bill may just be to start a conversation about pharmaceutical regulation and patent law, says Sanders.

"Let me be very clear, for the United States Congress this is a very radical idea and one that will most certainly not be passed in the short term.  However, it is a concept that is absolutely right, that must be passed, and will be passed when the American people demand it."

Read more:

Sanders - Opening Statement of Chairman Sanders Subcommittee on Primary Health and Aging Hearing

Sanders - Sanders: End HIV/AIDS Drug Monopolies

S.1137: The Medical Innovation Prize Fund Act

Subcommittee Hearing - The High Cost of High Prices for HIV/AIDS Drugs and the Prize Fund Alternative

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