Prize Fund for HIV/AIDS Act

Summary

S. 1138[1], Prize Fund for HIV/AIDS Act, was proposed by Sen. Bernie Sanders during the 112th session of Congress. The bill sought to change the current patent system for drugs treating AIDS to a prize system where the inventor would receive a lump sum payment for discovering a drug, and then void any claim on a paten for the drug. The bill died in Congress, and was re-introduced as S. 626 in the 113th Congressional session[2].

Provisions

• Drug companies void their right to patent a drug that treats HIV/AIDS.
• In lieu of patents, companies would receive prize funds from the Prize Fund for HIV/AIDS.

Administrative

• Secretary of Health and Human Services appoints a Prize Fund Director, advisory board other officials, as needed.

Prize Fund

• Prize Fund operates as a revolving fund.
  • Secretary of Treasury credits Fund with proceeds.
• Prize Fund Director responsible for giving prizes for medical innovation drugs.
  • New prizes do not exclude older prizes (e.g. if a company finds an innovative drug and receives prize money and another company builds on the previous drug and receives money, then both companies would receive prize funds).
  • Prize funds may be granted for a maximum of 10 fiscal years for a particular treatment.
  • No one particular treatment may receive funds in excess of 50% of the total Prize Fund amount.
• At least 5% of prizes dedicated to Open Source Dividend Prizes

Funding

• Seed capital for fund was defined "as needed", which has a level of ambiguity.
  • Subsequent funds were defined as .02% of GDP for the preceding fiscal year (e.g. the prize fund would have received ~$3,354,000,000 in FY2014)

Donor Innovation Prize Fund

• The Donor Innovation Prize Fund is also created, with the goal of encouraging medical innovation related to HIV/AIDS in developing countries.
  • Fund would contain 10% of the funding for the President's Emergency Plan for AIDS relief (PEPFAR).
    • FY2013 Funding would equal $652,700 (10% of the $6,527,000 total PEPFAR budget[3])

Heterogeneity of Patent and Prize Systems

The act nullifies patents on manufacturing processes of drugs, so that no company may hold the patent on the manufacturing process of a drug. However, a company becomes eligible for prize funds by holding a patent on the manufacturing process they use to create a drug. [Bill language: ...in the case of a manufacturing process for a qualifying treatment for HIV/AIDS, the holder of the patent with respect to such process...]. No new firms may be eligible for prize funds if they use a manufacturing process they did not hold a patent for.