II 

113TH CONGRESS 

1ST SESSION S. 627 

To provide incentives for investment in research and development for new 

medicines, to enhance access to new medicines, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

MARCH 20, 2013 

Mr. SANDERS introduced the following bill; which was read twice and referred 

to the Committee on Health, Education, Labor, and Pensions 

A BILL 

To provide incentives for investment in research and development for new medicines, to enhance access to new medicines, and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Medical Innovation 

5 Prize Fund Act’’. 

6 SEC. 2. FINDINGS. 

7 Congress makes the following findings: 

8 (1) The development of new medicines and vac9 cines is necessary to improve health care outcomes. 


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1 (2) Market exclusivity for new products is an 

2 expensive, inefficient, and unfair mechanism to re3 ward investments in new products. 

4 (3) By de-linking research and development in5 centives from product prices, and by eliminating 

6 legal monopolies to sell products, it is possible to in7 duce investments that are medically more important, 

8 procure products at low prices from competitive sup9 pliers, radically lower pricing barriers for access to 

10 new medicines, reduce wasteful marketing and re11 search and development activities, and dramatically 

12 lower the overall costs of acquiring innovation, while 

13 expanding access to that innovation. 

14 (4) By funding innovation prizes at .55 percent 

15 of gross domestic product, the United States would 

16 provide more than $86,000,000,000 in rewards for 

17 successful innovation in 2012. 

18 (5) The development of new medicines benefits 

19 from greater sharing of knowledge, data, materials, 

20 and technologies. 

21 SEC. 3. PURPOSE. 

22 It is the purpose of this Act to provide incentives to 

23 encourage entities to invest in research and development 

24 of new medicines and to share knowledge, data, materials, 

25 and technology, through the establishment of a Medical 


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1 Innovation Prize Fund, while enhancing access to such 

2 medicines by eliminating legal monopolies on the manufac3 ture, distribution, and sale of such medicines. 

4 SEC. 4. DEFINITIONS. 

5 In this Act: 

6 (1) BIOLOGICAL PRODUCT.—The term ‘‘biologi7 cal product’’ has the meaning given such term in 

8 section 351 of the Public Health Service Act (42 

9 U.S.C. 262). 

10 (2) BOARD.—The term ‘‘Board’’ means the 

11 Board of Trustees for the Fund for Medical Innova12 tion Prizes established under section 7. 

13 (3) DRUG.—The term ‘‘drug’’ has the meaning 

14 given such term in section 201 of the Federal Food, 

15 Drug, and Cosmetic Act (21 U.S.C. 321). 

16 (4) FUND.—The term ‘‘Fund’’ means the Fund 

17 for Medical Innovation Prizes established under sec18 tion 6. 

19 (5) MARKET CLEARANCE.—The term ‘‘market 

20 clearance’’ means the approval of an application 

21 under section 505 of the Federal Food, Drug, and 

22 Cosmetic Act (21 U.S.C. 355) or the approval of a 

23 biologics license application under subsection (a) of 

24 section 351 of the Public Health Service Act (42 

25 U.S.C. 262). 


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1 SEC. 5. ELIMINATION OF EXCLUSIVE RIGHTS TO MARKET 

2 DRUGS AND BIOLOGICAL PRODUCTS. 

3 (a) IN GENERAL.—Notwithstanding title 35, United 

4 States Code, relevant provisions of the Federal Food, 

5 Drug, and Cosmetic Act (21 U.S.C. 301 et seq.) (including 

6 amendments made by the Drug Price Competition and 

7 Patent Term Restoration Act of 1984 (Public Law 98– 

8 417; commonly referred to as the ‘‘Hatch-Waxman Act’’)), 

9 the Medicare Prescription Drug, Improvement, and Mod10 ernization Act of 2003 (Public Law 108–173), and any 

11 other provision of law providing any patent right or exclu12 sive marketing period for any drug, biological product, or 

13 manufacturing process for a drug or biological product 

14 (such as pediatric extensions under section 505A of the 

15 Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355a) 

16 or orphan drug marketing exclusivity under subchapter B 

17 of chapter V of such Act (21 U.S.C. 360aa et seq.)), no 

18 person shall have the right to exclusively manufacture, dis19 tribute, sell, or use a drug, a biological product, or a man20 ufacturing process for a drug or biological product in 

21 interstate commerce, including the exclusive right to rely 

22 on health registration data or the 30-month stay-of-effec23 tiveness period for Orange Book patents under section 

24 505(j) of such Act (21 U.S.C. 355(j)). 


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1 (b) REMUNERATION.—A person that is eligible for 

2 prize payments from the Fund as provided for in sections 

3 9, 10, or 11 shall receive such payments— 

4 (1) in lieu of any remuneration the person 

5 would have otherwise received for the exclusive mar6 keting, distribution, sale, or use of a drug, biological 

7 product, or manufacturing process for a drug or bio8 logical product but for the application of subsection 

9 (a); and 

10 (2) in addition to any other remuneration that 

11 such person receives by reason of the nonexclusive 

12 marketing, distribution, sale, or use of the drug, bio13 logical product, or manufacturing process for a drug 

14 or biological product. 

15 (c) APPLICATION.—This section shall apply only with 

16 respect to the marketing, distribution, sale, or use of a 

17 drug, a biological product, or a manufacturing process for 

18 a drug or biological product that occurs on or after Octo19 ber 1, 2014. 

20 SEC. 6. FUND FOR MEDICAL INNOVATION PRIZES. 

21 (a) ESTABLISHMENT.—There is hereby established in 

22 the Treasury of the United States a revolving fund to be 

23 known as the ‘‘Fund for Medical Innovation Prizes’’, 

24 which shall consist of amounts appropriated to the Fund 

25 and amounts credited to the Fund under subsection (c). 


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1 (b) AVAILABILITY OF FUNDS.—Amounts in the Fund 

2 shall be available to the Board, subject to section 17(c), 

3 for the purpose of carrying out this Act. 

4 (c) AMOUNTS CREDITED TO THE FUND.—The Sec5 retary of the Treasury shall credit to the Fund the interest 

6 on, and the proceeds from sale or redemption of, obliga7 tions held in the Fund. 

8 SEC. 7. BOARD OF TRUSTEES FOR THE FUND. 

9 (a) ESTABLISHMENT.—There is hereby established 

10 (as a permanent, independent establishment in the execu11 tive branch) a Board of Trustees for the Fund for Medical 

12 Innovation Prizes. 

13 (b) MEMBERSHIP.—The Board shall be composed of 

14 13 members, including— 

15 (1) the Administrator of the Centers for Medi16 care & Medicaid Services; 

17 (2) the Commissioner of Food and Drugs; 

18 (3) the Director of the National Institutes of 

19 Health; 

20 (4) the Director of the Centers for Disease 

21 Control and Prevention; and 

22 (5) 9 individuals to be appointed by the Presi23 dent, with the advice and consent of the Senate, of 

24 which— 


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1 (A) 2 shall be representatives of businesses 

2 that provide health insurance to employees; 

3 (B) 2 shall be representatives of entities 

4 that provide health insurance and contribute to 

5 the co-funding of the Fund for Medical Innova6 tion Prizes under section 17; 

7 (C) 2 shall be representatives of the med8 ical research and development sector, including 

9 at least 1 representative of the nonprofit private 

10 medical research and development sector; and 

11 (D) 3 shall be representatives of consumer 

12 and patient interests, including at least one rep13 resentative of patients suffering from orphan 

14 diseases. 

15 (c) TERMS.— 

16 (1) IN GENERAL.—Except as provided in para17 graph (2), each member appointed to the Board 

18 under subsection (b)(5) shall be appointed for a 

19 term of 4 years. 

20 (2) TERMS OF INITIAL APPOINTEES.—As des21 ignated by the President at the time of appointment, 

22 of the members first appointed to the Board under 

23 subsection (b)(5)— 

24 (A) 5 members shall be appointed for a 

25 term of 4 years; and 


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1 (B) 4 members shall be appointed for a 

2 term of 2 years. 

3 (d) VACANCIES.—Any member of the Board ap4 pointed to fill a vacancy occurring before the expiration 

5 of the term for which the member’s predecessor was ap6 pointed shall be appointed only for the remainder of that 

7 term. A member of the Board may serve after the expira8 tion of that member’s term until a successor has taken 

9 office. 

10 (e) COMPENSATION AND TRAVEL EXPENSES.— 

11 (1) COMPENSATION.—Members of the Board 

12 shall each be paid not less than the daily equivalent 

13 of level IV of the Executive Schedule for each day 

14 (including travel time) during which they are en15 gaged in the actual performance of the duties of the 

16 Board. 

17 (2) TRAVEL EXPENSES.—Each member of the 

18 Board shall receive travel expenses, including per 

19 diem in lieu of subsistence, in accordance with appli20 cable provisions under subchapter I of chapter 57 of 

21 title 5, United States Code. 

22 (f) CHAIRPERSON; OFFICERS.—The members of the 

23 Board shall elect a Chairperson and any other officers of 

24 the Board. The Chairperson and any such officers shall 

25 be elected for a term of 2 years. 


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1 (g) STAFF.—The Board may appoint and fix the pay 

2 of such additional personnel as the Board considers appro3 priate. The staff of the Board shall be appointed subject 

4 to the provisions of title 5, United States Code, governing 

5 appointments in the competitive service, and shall be paid 

6 in accordance with the provisions of chapter 51 and sub7 chapter III of chapter 53 of such title relating to classi8 fication and General Schedule pay rates. 

9 (h) EXPERTS AND CONSULTANTS.—The Board may 

10 procure temporary and intermittent services under section 

11 3109(b) of title 5, United States Code. 

12 SEC. 8. POWERS AND DUTIES OF THE BOARD. 

13 (a) DUTIES.—The Board shall— 

14 (1) award prize payments for medical innova15 tion in accordance with this Act; and 

16 (2) submit a report to the Congress under sec17 tion 16. 

18 (b) POWERS OF BOARD.— 

19 (1) HEARINGS AND SESSIONS.— 

20 (A) IN GENERAL.—The Board may, for 

21 the purpose of carrying out this Act, hold hear22 ings, sit and act at times and places, take testi23 mony, and receive evidence as the Board con24 siders appropriate. 


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1 (B) FIRST MEETING.—Not later than 30 

2 days after the initial members of the Board are 

3 appointed under section 7(b)(5) and confirmed, 

4 the Board shall conduct its first meeting. 

5 (2) POLICIES AND PROCEDURES.— 

6 (A) IN GENERAL.—Not later than 1 year 

7 after the initial members of the Board are ap8 pointed under section 7(b)(5) and confirmed, 

9 the Board shall establish such policies and pro10 cedures as may be appropriate to carry out this 

11 Act. 

12 (B) MAJORITY VOTE.—The policies and 

13 procedures of the Board shall require that any 

14 determination of the Board be made by not less 

15 than a majority vote of the members of the 

16 Board. 

17 (C) ADMINISTRATIVE PROCEDURES.—The 

18 policies and procedures of the Board shall com19 ply with subchapter II of chapter 5 of title 5, 

20 United States Code. 

21 (D) TRANSPARENCY.—The policies and 

22 procedures of the Board shall— 

23 (i) comply with sections 552 and 552b 

24 of title 5, United States Code (commonly 

25 referred to as the ‘‘Freedom of InformaVerDate Mar 15 2010 15:59 Mar 27, 2013 Jkt 029200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S627.IS S627

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1 tion Act’’ and the ‘‘Government in the 

2 Sunshine Act’’, respectively); and 

3 (ii) ensure that the proceedings and 

4 deliberations of the Board are transparent 

5 and are supported by a description of the 

6 methods, data sources, assumptions, out7 comes, and related information that will 

8 allow the public to understand how the 

9 Board reaches its criteria-setting and 

10 award decisions. 

11 (3) EXPERT ADVISORY COMMITTEES.—To as12 sist the Board in carrying out this Act, the Board 

13 shall establish independent expert advisory commit14 tees, including committees on the following: 

15 (A) Economic evaluation of therapeutic 

16 benefits. 

17 (B) Business models and incentive struc18 tures for innovation. 

19 (C) Research and development priorities. 

20 (D) Orphan diseases. 

21 (E) Financial control and auditing. 

22 (F) Open source biomedical science. 

23 (4) POWERS OF MEMBERS AND AGENTS.—Any 

24 member or agent of the Board may, if authorized by 


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1 the Board, take any action which the Board is au2 thorized to take under this Act. 

3 (5) MAILS.—The Board may use the United 

4 States mails in the same manner and under the 

5 same conditions as other departments and agencies 

6 of the United States. 

7 SEC. 9. PRIZE PAYMENTS FOR MEDICAL INNOVATION. 

8 (a) AWARD.—For fiscal year 2015, and each subse9 quent fiscal year, the Board shall award to persons de10 scribed in subsection (b) prize payments for medical inno11 vation relating to a drug, a biological product, or a new 

12 manufacturing process for a drug or biological product. 

13 (b) ELIGIBILITY.—To be eligible to receive a prize 

14 payment under subsection (a) for medical innovation relat15 ing to a drug, a biological product, or a manufacturing 

16 process, a person shall be— 

17 (1) in the case of a drug or biological product, 

18 the first person to receive market clearance with re19 spect to the drug or biological product; 

20 (2) in the case of a manufacturing process, the 

21 holder of the patent with respect to such process; or 

22 (3) in the case of open source contributions, the 

23 persons or communities that openly shared knowl24 edge, data, materials, and technology on a royalty25 free and nondiscriminatory basis. 


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1 (c) CRITERIA.—The Board shall, by regulation, es2 tablish criteria for the selection of recipients, and for de3 termining the amount, of prize payments under this sec4 tion. Such criteria shall include consideration of the fol5 lowing: 

6 (1) The number of patients who would benefit 

7 from the drug, biological product, or manufacturing 

8 process involved, including (in cases of global ne9 glected diseases, global infectious diseases, and other 

10 global public health priorities) the number of non11 United States patients. 

12 (2) The incremental therapeutic benefit of the 

13 drug, biological product, or manufacturing process 

14 involved as compared to existing drugs, biological 

15 products, and manufacturing processes available to 

16 treat the same disease or condition, except that the 

17 Board shall provide for cases where drugs, biological 

18 products, or manufacturing processes are developed 

19 at roughly the same time, so that the comparison is 

20 to products that were not recently developed. 

21 (3) The degree to which the drug, biological 

22 product, or manufacturing process involved address23 es priority health care needs, including— 

24 (A) current and emerging global infectious 

25 diseases; 


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1 (B) severe illnesses with small client popu2 lations (such as indications for which orphan 

3 designation has been granted under section 526 

4 of the Federal Food, Drug, and Cosmetic Act 

5 (21 U.S.C. 360bb)); and 

6 (C) neglected diseases that primarily afflict 

7 the poor in developing countries. 

8 (4) Improved efficiency of manufacturing proc9 esses for drugs or biological processes. 

10 (5) The extent to which knowledge, data, mate11 rials and technology that are openly shared have 

12 contributed to the successful development of new 

13 products or improved processes for manufacturing 

14 products. 

15 (6) In the case of antibiotics or other products 

16 for which drug resistance is a significant public 

17 health problem, the expected life cycle benefits of the 

18 antibiotic or other product, with appropriate adjust19 ments that reward the conservation of the resources, 

20 taking into account drug resistance that is related to 

21 use of the product. 

22 (7) In the case of products used in stockpiles 

23 for potential threats to the public health, the risk 

24 adjusted benefits of stockpiling the products. 


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1 (d) REQUIREMENTS.—In awarding prize payments 

2 under this section, the Board shall comply with the fol3 lowing: 

4 (1) In cases where a new drug, biological prod5 uct, or manufacturing process offers an improve6 ment over an existing drug, biological product, or 

7 manufacturing process and the new drug, biological 

8 product, or manufacturing process competes with or 

9 replaces the existing drug, biological product, or 

10 manufacturing process, the Board shall continue to 

11 make prize payments for the existing drug, biological 

12 product, or manufacturing process to the degree that 

13 the new drug, biological product, or manufacturing 

14 process was based on or benefitted from the develop15 ment of the existing drug, biological product, or 

16 manufacturing process. 

17 (2) The Board may not make prize payments 

18 based on the identity of the person who manufac19 tures, distributes, sells, or uses the drug, biological 

20 product, or manufacturing process involved. 

21 (3) The Board may award prize payments for 

22 a drug, a biological product, or a manufacturing 

23 process for not more than 10 fiscal years, regardless 

24 of the term of any related patents. 


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1 (4) For any fiscal year, the Board may not 

2 award a prize payment for any single drug, biologi3 cal product, or manufacturing process in an amount 

4 that exceeds 5 percent of the total amount appro5 priated to the Fund for that year. 

6 (5) For every drug or biological product that 

7 receives market clearance, the Board shall determine 

8 whether and in what amount to award a prize pay9 ment for the drug or biological product not later 

10 than the end of the fourth full calendar-year quarter 

11 following the calendar-year quarter in which the 

12 drug or biological product receives market clearance. 

13 SEC. 10. PRIZES FOR PRIORITY RESEARCH AND DEVELOP14 MENT. 

15 (a) MINIMUM LEVELS OF FUNDING.—For fiscal year 

16 2015, and each subsequent fiscal year, the Board shall 

17 establish and may periodically modify minimum levels of 

18 funding under section 9 for priority research and develop19 ment. 

20 (b) INITIAL MINIMUM LEVELS.—Of the amount ap21 propriated to the Fund for a fiscal year, the Board shall 

22 use (subject to the establishment or modification of an ap23 plicable minimum level of funding under subsection (a)) 

24 not less than— 


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1 (1) 4 percent of such amount for global ne2 glected diseases; 

3 (2) 10 percent of such amount for orphan dis4 eases; and 

5 (3) 4 percent of such amount for global infec6 tious diseases and other global public health prior7 ities, including research on AIDS, AIDS vaccines, 

8 and medicines for responding to bioterrorism. 

9 (c) PUBLIC INPUT; RECOMMENDATIONS.—The advi10 sory committee on research and development priorities (es11 tablished pursuant to section 8(b)(3)) shall— 

12 (1) solicit public input on research and develop13 ment priorities; and 

14 (2) periodically recommend to the Board modi15 fications in the minimum levels of funding for prizes 

16 for priority research and development under this sec17 tion. 

18 (d) PROCEDURES.—The Board shall adopt proce19 dures to establish and periodically modify minimum levels 

20 of funding under section 9 for priority research and devel21 opment. 

22 SEC. 11. OPEN SOURCE DIVIDEND PRIZES. 

23 (a) IN GENERAL.—In order to induce greater access 

24 and the open sharing of knowledge, data, materials and 

25 technology, at least 5 percent of the prize payments from 


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1 the Fund shall be dedicated to Open Source Dividend 

2 prizes. 

3 (b) PROCEDURES.— 

4 (1) IN GENERAL.—The Board of Trustees shall 

5 adopt procedures for the allocation of Open Source 

6 Dividend prizes. Such procedures shall— 

7 (A) be fully transparent regarding the 

8 process for evaluating the value of open sharing 

9 of knowledge, data, materials, and technology; 

10 (B) reward the open, nondiscriminatory 

11 and royalty-free sharing of knowledge, data, 

12 materials, and technology that has contributed 

13 to the development of the new drugs, biological 

14 products, or manufacturing processes that are 

15 rewarded under sections 9 and 10; 

16 (C) in the case of rewards for contributing 

17 to the development of new drugs, biological 

18 products, or manufacturing processes rewarded 

19 under sections 9 and 10, provide for a time-lim20 ited period of nominations for persons or com21 munities whose contributions were considered 

22 useful, including the evidence to support such 

23 nominations to describe the significance of the 

24 contribution; and 


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1 (D) provide for rules and procedures to 

2 protect against conflicts of interest. 

3 (2) PUBLIC AVAILABILITY OF NOMINATIONS.— 

4 The nominations described in paragraph (1)(C), and 

5 the evidence supporting such nominations, shall be 

6 public. The public shall be allowed to provide com7 mentary and additional evidence on such nomina8 tions before awards are made. 

9 SEC. 12. COMPETITIVE INTERMEDIARIES FOR FUNDING IN10 TERIM TECHNOLOGIES. 

11 (a) IN GENERAL.—The Board of Trustees may au12 thorize multiple nonprofit intermediaries to reward 

13 projects for interim research and development of products, 

14 or for open source dividend prizes. Such intermediaries 

15 shall compete for funding from non-Federal entities that 

16 co-fund the Fund. 

17 (b) AVAILABILITY.—Prizes awarded by competitive 

18 intermediaries shall be available to persons or commu19 nities that provide open, nondiscriminatory and royalty20 free licenses to relevant intellectual property rights. 

21 (c) RULES.—The Board of Trustees shall adopt rules 

22 to ensure the transparency and accountability of any enti23 ties authorized to act as competitive intermediaries under 

24 subsection (a). 


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1 SEC. 13. SPECIAL TRANSITION RULES. 

2 (a) IN GENERAL.—A drug or biological product that 

3 is on the market on October 1, 2014, shall remain eligible 

4 for prize payments for not more than 10 fiscal years, con5 sistent with section 9(d)(3). 

6 (b) DETERMINATION OF VALUE.—In determining the 

7 amount of a prize payment for a drug or biological product 

8 described in subsection (a), the Board shall calculate the 

9 incremental value of the drug or biological product as of 

10 the date on which the drug or biological product was first 

11 introduced in the market. 

12 (c) MAXIMUM AMOUNT.—With respect to drugs and 

13 biological products described in subsection (a), the Board 

14 may award— 

15 (1) of the amount appropriated to the Fund for 

16 fiscal year 2015, not more than 90 percent of such 

17 amount; and 

18 (2) of the amount appropriated to the Fund for 

19 each of the succeeding 9 fiscal years, not more than 

20 a percentage of such amount that is equal to 9 per21 cent less the percentage applicable to the preceding 

22 fiscal year under this subsection. 

23 SEC. 14. ARBITRATION. 

24 In the case of a drug that is on the market on Octo25 ber 1, 2014, and subject to patents owned by a party other 

26 than the person who first received market clearance for 


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1 the drug, the Board shall establish an arbitration proce2 dure to determine an equitable division of any prize pay3 ments under this Act among the patent owners and the 

4 person who first received market clearance for the drug. 

5 SEC. 15. ANNUAL AUDITS BY GAO. 

6 (a) AUDITS.—The Comptroller General of the United 

7 States shall conduct an audit of the Board each fiscal year 

8 to determine the effectiveness of the Board— 

9 (1) in bringing to market drugs, vaccines and 

10 other biological products, and new manufacturing 

11 processes for medicines in a cost-effective manner; 

12 and 

13 (2) in addressing society’s medical needs, in14 cluding global neglected diseases that afflict pri15 marily the poor in developing countries, indications 

16 for which orphan designation has been granted 

17 under section 526 of the Federal Food, Drug, and 

18 Cosmetic Act (21 U.S.C. 360bb), and global infec19 tious diseases and other global public health prior20 ities. 

21 (b) REPORTS.—The Comptroller General of the 

22 United States shall submit a report to the Congress each 

23 fiscal year on the results of each audit conducted under 

24 subsection (a). 


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1 SEC. 16. REPORT TO CONGRESS. 

2 Not later than 1 year after the date of the enactment 

3 of this Act, the Board shall submit to Congress a report 

4 containing the findings, conclusions, and recommendations 

5 of the Board concerning the implementation and adminis6 tration of this Act, including recommendations for such 

7 legislative and administrative action as the Board deter8 mines to be appropriate. 

9 SEC. 17. FUNDING. 

10 (a) APPROPRIATIONS.— 

11 (1) START-UP COSTS.—For fiscal year 2015, 

12 there are authorized to be appropriated to the Fund, 

13 such sums as may be necessary to carry out this 

14 Act. 

15 (2) PROGRAM IMPLEMENTATION.—For fiscal 

16 year 2015 and each subsequent fiscal year, there is 

17 appropriated to the Fund, out of any funds in the 

18 Treasury not otherwise appropriated, an amount 

19 equal to the amount that is .55 percent of the gross 

20 domestic product of the United States for the pre21 ceding fiscal year (as such amount is determined by 

22 the Secretary of Commerce). 

23 (b) AVAILABILITY.—Funds appropriated to the Fund 

24 for a fiscal year shall remain available for expenditure in 

25 accordance with this Act until the end of the 3-year period 

26 beginning on October 1 of such fiscal year. Any such funds 


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1 that are unexpended at the end of such period shall revert 

2 to the Treasury. 

3 SEC. 18. IMPOSITION OF ANNUAL FEE ON HEALTH INSUR4 ANCE PROVIDERS. 

5 (a) IMPOSITION OF FEE.— 

6 (1) IN GENERAL.—Each covered entity engaged 

7 in the business of providing health insurance shall 

8 pay to the Secretary not later than the annual pay9 ment date of each calendar year beginning after 

10 2014 a fee in an amount determined under sub11 section (b). 

12 (2) ANNUAL PAYMENT DATE.—For purposes of 

13 this section, the term ‘‘annual payment date’’ 

14 means, with respect to any calendar year, a date de15 termined by the Secretary, which in no event, may 

16 be later than September 30 of such calendar year. 

17 (b) DETERMINATION OF FEE AMOUNT.—With re18 spect to each covered entity, the fee under this section for 

19 any calendar year shall be equal to the amount determined 

20 under section 17(a)(2), multiplied by the ratio of the cov21 ered entity’s net premiums written with respect to health 

22 insurance for any United States health risk taken into ac23 count under subsection (c) during the preceding calendar 

24 year, to— 


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1 (1) the sum of net premiums for all covered en2 tities; and 

3 (2) all Federal outlays on health insurance or 

4 reimbursement of health care costs, excluding the 

5 costs of long term care. 

6 (c) AMOUNTS TAKEN INTO ACCOUNT.—For purposes 

7 of paragraph (b), the net premiums written with respect 

8 to health insurance for any United States health risk that 

9 are taken into account during any calendar year with re10 spect to any covered entity shall be determined as follows: 

11 (1) With respect to a covered entity’s net pre12 miums written during the calendar year that are not 

13 more than $25,000,000, the percentage of net pre14 miums written that are taken into account is 0 per15 cent. 

16 (2) With respect to a covered entity’s net pre17 miums written during the calendar year that are 

18 more than $25,000,000 but less than $50,000,000, 

19 the percentage of net premiums written that are 

20 taken into account is 50 percent. 

21 (3) With respect to a covered entity’s net pre22 miums written during the calendar year that are 

23 $50,000,000 or more, the percentage of net pre24 miums written that are taken into account is 100 

25 percent. 


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1 (d) COVERED ENTITY.— 

2 (1) IN GENERAL.—For purposes of this section, 

3 the term ‘‘covered entity’’ means any entity which 

4 provides health insurance for any United States 

5 health risk. 

6 (2) EXCLUSION.—Such term does not include 

7 any governmental entity. 

Æ 


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