Sen. Sanders Introduces Bill to End Market Exclusivity and Create a New “Medical Innovation Prize Fund”

Earlier this month, Senator Bernie Sanders (I-VT) announced the introduction of the “Medical Innovation Prize Act of 2007” (S. 2210).  If enacted, the bill would replace the current patent and non-patent market exclusivity system for drugs that has been in place since the enactment of the Hatch-Waxman Act in 1984 with a new “prize system” (for both drugs and biologics) that is intended to “provide incentives to encourage entities to invest in research and development of new medicines . . . and to enhance access to such medicines by allowing any person in compliance with [FDA] requirements to manufacture, distribute, or sell an approved medicine.”  According to the bill’s findings:

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.

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. . . .

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.

Specifically, the bill provides that notwithstanding the U.S. patents laws (i.e., U.S.C. Title 35), the Hatch-Waxman Act, the Medicare Modernization Act, the Orphan Drug Act, the Best Pharmaceuticals For Children Act, 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 . . . , 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. . . .”  Instead, a person could receive a “prize payment” “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,” and “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.”  This provision would 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.”

The “prize payment” would come from a fund (the “Fund for Medical Innovation Prizes”) established in the U.S. Treasury Department.  Each fiscal year, an amount equal to 0.6% of the U.S. gross domestic product for the preceding fiscal year would be appropriated to the fund.  To be eligible to receive a prize payment a person must be either: (1) “the first person to receive market clearance with respect to the drug or biological product;” or (2) “the holder of the patent with respect to [ a manufacturing process].”  Prize payments would be made by the fund’s 13-member Board of Trustees based on several criteria specified in the bill.  Among other things, “[t]he 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,” and “[f]or 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.”

S. 2210 has been referred to the Senate Health, Education, Labor, and Pensions Committee where it will either be considered, or more likely languish and die.

Although S. 2210 is (to our knowledge) the first attempt to legislatively abolish patent and non-patent market exclusivities in lieu of a prize system, the idea is not new.  Earlier this year, Democratic Presidential Candidate John Edwards proposed such a system as part of his health care plan.  In addition, the World Health Organization mentioned prizes as a complementary mechanism to stimulate research and development in a July 2007 draft Global Strategy and Plan of Action.

ADDITIONAL READING:

• Knowledge Ecology International (“KEI”) comments on S. 2210
• KEI research paper – “The Big Idea: Prizes to Stimulate R&D for new Medicines”
• Huffington Post article on the Edwards prize proposal