most 
promising 
or 
demonstrate 
progress; and 
‘‘(II) at the end of the competi-
tions, to the competitors whose inno-
vations prove to be the best solutions; 
‘‘(B) ensure that the design of such com-
petitions— 
‘‘(i) is realistic, given the amount of 
funds to be awarded as prizes; 
‘‘(ii) does not reflect any bias con-
cerning the type of innovations which will 
prove to be the best solutions; 
‘‘(iii) allows any person to participate 
as a competitor without regard to the per-
son’s place of incorporation, primary place 
of business, citizenship, and residency, as 
applicable; and 
‘‘(iv) addresses areas of unmet need 
with regard to a lack of recent and pend-
ing innovations; and 
‘‘(C) submit to the Congress a report on 
the design of such competitions. 
‘‘(3) CONSULTATION.—In carrying out para-
graphs (1) and (2), the Director of NIH shall con-
sult with— 
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‘‘(A) medical, economic, budgetary, innova-
tion, and venture capital experts; and 
‘‘(B) the heads of relevant Federal agen-
cies, including the Commissioner of Food and 
Drugs, the Director of the National Science 
Foundation, and the Administrator of the Small 
Business Administration. 
‘‘(c) SIMULATION.—The Director of NIH shall— 
‘‘(1) not later than 14 months after the date of 
enactment of the Health Prizes Rewarding Innova-
tion, Savings, and Effectiveness Act of 2014, award 
one or more contracts— 
‘‘(A) to perform a simulation of the prize 
competitions to be conducted under this section, 
based on the designs developed under sub-
section (b)(2) and in consultation with the cat-
egories of experts and agency heads described 
in subsection (b)(3); and 
‘‘(B) to use the simulation to assess the ef-
fectiveness of the design; and 
‘‘(2) not later than 4 months after awarding 
such one or more contracts, submit to the Congress 
a report on the results of the simulation and assess-
ment. 
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‘‘(d) ADJUSTMENTS TO DESIGN.—Not later than 21 
months after the date of enactment of the Health Prizes 
Rewarding Innovation, Savings, and Effectiveness Act of 
2014, the Director of NIH shall— 
‘‘(1) taking into consideration the results of the 
simulation under subsection (c), and subject to the 
requirements of subparagraphs (A) and (B) of sub-
section (b)(2), make such adjustments to the design 
of the prize competitions under this section as the 
Director determines appropriate; and 
‘‘(2) submit to the Congress a report on any 
such adjustments. 
‘‘(e) IMPLEMENTATION OF PRIZE COMPETITIONS.— 
‘‘(1) IN GENERAL.—The Director of NIH shall 
enter into an agreement with one or more private 
entities to implement prize competitions based on 
the designs developed under subsection (b)(2), as ad-
justed under subsection (d). 
‘‘(2) DURATION.—The prize competitions under 
paragraph (1) shall require competitors to dem-
onstrate the effectiveness of their innovations over a 
period of not more than 5 years. 
‘‘(3) GUIDANCE AND ACCESS TO TESTING FA-
CILITIES.—The Secretary and the Commissioner of 
Food and Drugs may cooperate with qualified com-
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petitors in the prize competitions under paragraph 
(1) by providing guidance and access to testing fa-
cilities. 
‘‘(4) NUMBER OF PRIZE COMPETITIONS.—The 
Director shall conduct— 
‘‘(A) a total of not more than 5 prize com-
petitions under this section; and 
‘‘(B) not more than 2 such prize competi-
tions with respect to any disease or condition. 
‘‘(f) TRACKING; REPORTING.—The Director of NIH 
shall— 
‘‘(1) collect information on— 
‘‘(A) the medical efficacy of innovations 
funded through the prize competitions under 
subsection (e); and 
‘‘(B) the actual and potential effect of the 
innovations on Federal expenditures; and 
‘‘(2) not later than one year after the conclu-
sion of the prize competitions under subsection (e), 
and not later than the end of each of the 4 suc-
ceeding years, submit to the Congress a report on 
the information collected under paragraph (1). 
‘‘(g) INTELLECTUAL PROPERTY.— 
‘‘(1) PROHIBITION ON THE GOVERNMENT AC-
QUIRING
INTELLECTUAL
PROPERTY
RIGHTS.—The 
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Federal Government may not gain an interest in in-
tellectual property developed by a participant in a 
prize competition under subsection (e) without the 
written consent of the participant. 
‘‘(2) LICENSES.—The Federal Government may 
negotiate a license for the use of intellectual prop-
erty developed by a participant in a prize competi-
tion under subsection (e). 
‘‘(h) AUTHORIZATION OF APPROPRIATIONS.— 
‘‘(1) IN GENERAL.—To carry out this section, 
in lieu of amounts authorized to be appropriated by 
section 402A, there are authorized to be appro-
priated $50,000,000. 
‘‘(2) MINIMUM PERCENTAGE FOR PRIZES.—Of 
the total assistance awarded to private entities under 
subsection (e) (including in-kind contributions and 
testing or other technical support) to implement any 
prize competition under this section— 
‘‘(A) not more than 30 percent of such as-
sistance shall be for administration of the prize 
competition; and 
‘‘(B) not less than 70 percent of such as-
sistance shall be awarded as prizes to competi-
tors in the prize competition.’’. 
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(b) PRIZES EXCLUDED FROM GROSS INCOME OF RE-
CIPIENTS.— 
(1) IN GENERAL.—Section 74 of the Internal 
Revenue Code of 1986 is amended by adding at the 
end the following new subsection: 
‘‘(d) CERTAIN PRIZES
FOR IMPROVING HEALTH 
OUTCOMES.—Gross income shall not include the value of 
any prize received by the taxpayer pursuant to a prize 
competition under section 409K of the Public Health 
Service Act (as in effect immediately after the enactment 
of this subsection).’’. 
(2) EFFECTIVE DATE.—The amendment made 
by this subsection shall apply to taxable years end-
ing after the date of the enactment of this Act. 
Æ 
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