Senate HELP Committee proposes evaluation of Innovation Inducement Prizes, as alternative to product monopolies

In the United States Senate, the Committee on Health, Education, Labor and Pensions (HELP) is trying to move forward a bill titled the "Food and Drug Administration Safety and Innovation Act." Among other things, the bill would "amend the Federal Food, Drug, and Cosmetic Act to revise and extend the user-fee programs for prescription drugs and medical devices, establish user-fee programs for generic drugs and biosimilars," and address a number of other topics, such as extend the legal monopoly on antibiotic drugs by 5 years. After long negotiations among Senators on the HELP Committee, the Chair has produced a "Manager's Amendment," which available on the web page of the Senate HELP committee here.

Senator Bernie Sanders (I-VT) was successful in adding Section 906 to the Manager's Amendment. Section 906 provides for an expert consultation and study by the National Academies to evaluate "the feasibility and possible consequences of the use of innovation inducement prizes to reward successful medical innovations." (For more on the topic of innovation inducement prizes, see: keionline.org/prizes, and the references below.)

The following is the text of Section 906 of the bill, which sets out the terms of reference of the National Academies evaluation of innovation inducement prizes.

AMENDMENT NO.__________
Purpose: In the nature of a substitute.

IN THE SENATE OF THE UNITED STATES—112th Cong., 2d Sess. S. ___________

To amend the Federal Food, Drug, and Cosmetic Act to revise and extend the user-fee programs for prescription drugs and medical devices, to establish user-fee programs for generic drugs and biosimilars, and for other purposes.

AMENDMENT IN THE NATURE OF A SUBSTITUTE intended
to be proposed by Mr. HARKIN (for himself and Mr. ENZI)

SEC. 906. INDEPENDENT STUDY ON MEDICAL INNOVATION INDUCEMENT MODEL.

(a) IN GENERAL.—The Secretary of Health and Human Services shall enter into an agreement with the National Academies to provide expert consultation and conduct a study that evaluates the feasibility and possible consequences of the use of innovation inducement prizes to reward successful medical innovations. Under the agreement, the National Academies shall submit to such Secretary a report on such study not later than 15 months after the date of enactment of this Act.

(b) REQUIREMENTS.—

  • (1) IN GENERAL.—The study conducted under subsection (a) shall model at least 3 separate segments on the medical technologies market as candidate targets for the new incentive system and consider different medical innovation inducement prize design issues, including the challenges presented in the implementation of prizes for end products, open source dividend prizes, and prizes for upstream research.
  • (2) MARKET SEGMENTS.—The segments on the medical technologies market that shall be considered under paragraph (1) include—
    • (A) all pharmaceutical and biologic drugs and vaccines;
    • (B) drugs and vaccines used solely for the treatment of HIV/AIDS; and
    • (C) antibiotics.

(c) ELEMENTS.—The study conducted under subsection (a) shall include consideration of each of the following:

  • (1) Whether a system of large innovation inducement prizes could work as a replacement for the existing product monopoly/patent-based system, as in effect on the date of enactment of this Act.
  • (2) How big large innovation prize funds would have to be in order to induce at least as much research and development investment in innovation as is induced under the current system of time-limited market exclusivity, as in effect on the date of enactment of this Act.
  • (3) Whether a system of large innovation inducement prizes would be more or less expensive than such current system of time-limited market exclusivity, calculated over different time periods.
  • (4) Whether a system of large innovation inducement prizes would expand access to new products and improve health outcomes.
  • (5) The type of information and decisionmaking skills that would be necessary to manage end product prizes.
  • (6) Whether there would there be major advantages in rewarding the incremental impact of innovations, as benchmarked against existing products.
  • (7) How open-source dividend prizes could be managed, and whether such prizes would increase access to knowledge, materials, data and technologies.
  • (8) Whether a system of competitive intermediaries for interim research prizes would provide an acceptable solution to the valuation challenges for interim prizes.

Additional references

April 24, 2012. Kevin Outterson, Antibiotic prize study in PDUFA V reauthorization bill, the Incidental Economist.

May 27, 2011. Senator Sanders introduces two medical innovation prize bills in U.S. Senate to de-link R&D costs from drug prices, KEIonline.Org