Medical Innovation Prize Fund Act, S. 627

This post Medical Innovation Prize Fund Act, S. 627 originally appeared on Truth About Bills

The Bill: S. 627, the Medical Innovation Prize Fund Act

Annualized Cost: $108.5 billion ($433.9 billion over four years)

Many Americans see the advertisements for specialized pharmaceuticals on television, but they may not be aware of the expenses involved with creating a new drug. Companies must invest millions, if not billions, to research and develop the most effective version of a medication, change their manufacturing capacity to make as many doses as possible, and wade through clinical trials and the Food and Drug Administration’s approval process. As time goes on, costs could mount to as much as $1.3 billion to put a new drug or vaccine on pharmacy shelves. Once companies are permitted to sell new drugs, they rely on patent protections to recover the costs of development and production before others can sell generic drugs that achieve the same results but are less costly to make and sell.

In light of the costs of new drugs for businesses and patients, Senator Bernard Sanders (I-VT) introduced a bill to reform how the pharmaceutical sector operates. The Medical Innovation Prize Fund Act would prohibit producers and suppliers from having any exclusive rights on the drugs that those firms have created. The idea is that if producers are able to produce generic versions of medicines much sooner than they can now under current law, consumers would be able to pay less for the same medications. However, the loss of patent rights may also discourage companies from developing new drugs.

Senator Sanders’ bill would attempt to offset the companies’ loss of patent rights by creating a new “Prize Fund.” Firms would be awarded prize payments from the Fund to research and produce new drugs, biological products (such as vaccines), or manufacturing processes. Since they would be receiving public funding, companies would be required to disclose all details regarding the production process of their new drugs.

To pay for the entirety of the pharmaceutical sector’s research and development costs, the government would deposit some startup money into the Fund and a new annual “fee” would be imposed on health insurance providers to sustain it. Higher-revenue companies would be taxed more than lower-revenue firms. Though government health programs, such as Medicare and Medicaid, would not be required to pay the new tax, other public health care expenditures would also be figured into the progressive formula.

NTUF determined that implementing S. 627 would increase federal spending by $433.9 billion over four years. The Act calls for the Fund to receive up to 0.55 percent of Gross Domestic Product (GDP) from the previous Fiscal Year through the insurance provider tax. For the first full year that the Fund would be in operation, the government could collect up to $100.0 billion in FY 2015. GDP figures were based on the President’s FY 2014 proposed budget.

This article originally appeared in the National Taxpayers Union Foundation’s Taxpayer’s Tab weekly newsletter, The Taxpayer’s Tab, on May 3, 2013. The Foundation’s BillTally project scores the potential spending of every introduced bill in Congress.

This post Medical Innovation Prize Fund Act, S. 627 originally appeared on Truth About Bills