(b) AVAILABILITY OF FUNDS.—Amounts in the Fund 
shall be available to the Board, subject to section 16(b), 
for the purpose of carrying out this Act. 
(c) AMOUNTS CREDITED TO FUND.—The Secretary 
of the Treasury shall credit to the Fund the interest on, 
and the proceeds from sale or redemption of, obligations 
held in the Fund. 
SEC. 6. BOARD OF TRUSTEES FOR THE FUND FOR MEDICAL 
INNOVATION PRIZES. 
(a) ESTABLISHMENT.—There is hereby established 
(as a permanent, independent establishment in the execu-
tive branch) a Board of Trustees for the Fund for Medical 
Innovation Prizes. 
(b) DUTIES.—The Board shall— 
(1) award prize payments for medical innova-
tion in accordance with this Act; and 
(2) submit a report to the Congress under sec-
tion 14. 
SEC. 7. MEMBERSHIP AND STAFF OF BOARD. 
(a) MEMBERSHIP.—The Board shall be composed of 
13 members as follows: 
(1) The Administrator of the Centers for Medi-
care & Medicaid Services. 
(2) The Commissioner of Food and Drugs.
(3) The Director of the National Institutes of 
Health. 
(4) The Director of the Centers for Disease 
Control and Prevention. 
(5) Nine members, appointed by the President, 
with the advice and consent of the Senate, as fol-
lows: 
(A) Three representatives of the business 
sector. 
(B) Three representatives of the private 
medical research and development sector, in-
cluding at least one representative of the non-
profit private medical research and development 
sector. 
(C) Three representatives of consumer and 
patient interests, including at least one rep-
resentative of patients suffering from orphan 
diseases. 
(b) TERMS.— 
(1) IN GENERAL.—Except as provided in para-
graph (2), each member appointed to the Board 
under subsection (a)(5) shall be appointed for a 
term of 4 years. 
(2) TERMS OF INITIAL APPOINTEES.—As des-
ignated by the President at the time of appointment,
of the members first appointed to the Board under 
subsection (a)(5)— 
(A) 5 shall be appointed for a term of 4 
years; and 
(B) 4 shall be appointed for a term of 2 
years. 
(c) VACANCIES.—Any member of the Board ap-
pointed to fill a vacancy occurring before the expiration 
of the term for which the member’s predecessor was ap-
pointed shall be appointed only for the remainder of that 
term. A member of the Board may serve after the expira-
tion of that member’s term until a successor has taken 
office. 
(d) BASIC PAY.—Members of the Board shall each 
be paid not less than the daily equivalent of level IV of 
the Executive Schedule for each day (including travel 
time) during which they are engaged in the actual per-
formance of duties vested in the Board. 
(e) TRAVEL EXPENSES.—Each member of the Board 
shall receive travel expenses, including per diem in lieu 
of subsistence, in accordance with applicable provisions 
under subchapter I of chapter 57 of title 5, United States 
Code. 
(f) CHAIRPERSON; OFFICERS.—The members of the 
Board shall elect the Chairperson and any other officers
of the Board. The Chairperson and any such officers shall 
be elected for a term of 2 years. 
(g) STAFF.—The Board may appoint and fix the pay 
of such additional personnel as the Board considers appro-
priate. The staff of the Board shall be appointed subject 
to the provisions of title 5, United States Code, governing 
appointments in the competitive service, and shall be paid 
in accordance with the provisions of chapter 51 and sub-
chapter III of chapter 53 of that title relating to classifica-
tion and General Schedule pay rates. 
(h) EXPERTS AND CONSULTANTS.—The Board may 
procure temporary and intermittent services under section 
3109(b) of title 5, United State Code. 
SEC. 8. POWERS OF BOARD. 
(a) HEARINGS AND SESSIONS.— 
(1) IN GENERAL.—The Board may, for the pur-
pose of carrying out this Act, hold hearings, sit and 
act at times and places, take testimony, and receive 
evidence as the Board considers appropriate. 
(2) FIRST MEETING.—Not later than 30 days 
after the initial 9 members of the Board under sec-
tion 7(a)(5) have been appointed and confirmed, the 
Board shall conduct its first meeting. 
(b) POLICIES AND PROCEDURES.—
(1) IN GENERAL.—Not later than 1 year after 
the initial 9 members of the Board under section 
7(a)(5) have been appointed and confirmed, the 
Board shall establish such policies and procedures as 
may be appropriate to carry out this Act. 
(2) MAJORITY VOTE.—The policies and proce-
dures of the Board shall require that any determina-
tion of the Board be made by not less than a major-
ity vote of the members of the Board. 
(3) ADMINISTRATIVE PROCEDURES.—The poli-
cies and procedures of the Board shall comply with 
subchapter II of chapter 5 of title 5, United States 
Code. 
(4) TRANSPARENCY.—The policies and proce-
dures of the Board shall— 
(A) comply with sections 552 and 552b of 
title 5, United States Code (commonly referred 
to as the ‘‘Freedom of Information Act’’ and 
the ‘‘Government in the Sunshine Act’’, respec-
tively); and 
(B) ensure that the proceedings and delib-
erations of the Board are transparent and are 
supported by a description of the methods, data 
sources, assumptions, outcomes, and related in-
formation that will allow the public to under-
stand how the Board reaches its criteria-setting 
and award decisions. 
(c) EXPERT ADVISORY COMMITTEES.—To assist the 
Board in carrying out this Act, the Board shall establish 
independent expert advisory committees, including com-
mittees on the following: 
(1) Economic evaluation of therapeutic benefits. 
(2) Business models and incentive structures 
for innovation. 
(3) Research and development priorities. 
(4) Orphan diseases. 
(5) Financial control and auditing. 
(d) POWERS OF MEMBERS AND AGENTS.—Any mem-
ber or agent of the Board may, if authorized by the Board, 
take any action which the Board is authorized to take by 
this Act. 
(e) MAILS.—The Board may use the United States 
mails in the same manner and under the same conditions 
as other departments and agencies of the United States. 
SEC. 9. PRIZE PAYMENTS FOR MEDICAL INNOVATION. 
(a) AWARD.—For fiscal year 2007 and each subse-
quent fiscal year, the Board shall award to persons de-
scribed in subsection (b) prize payments for medical inno-
vation relating to a drug, a biological product, or a new 
manufacturing process for a drug or biological product.
(b) ELIGIBILITY.—To be eligible to receive a prize 
payment under this section for medical innovation relating 
to a drug, a biological product, or a manufacturing proc-
ess, a person shall be— 
(1) in the case of a drug or biological product, 
the first person to receive market clearance; or 
(2) in the case of a manufacturing process, the 
holder of the patent. 
(c) CRITERIA.—The Board shall determine by regula-
tion criteria for selecting recipients, and determining the 
amount, of prize payments under this section. Such cri-
teria shall include consideration of the following: 
(1) The number of patients who benefit from a 
drug, biological product, or manufacturing process 
including (in cases of global neglected diseases, glob-
al infectious diseases, and other global public health 
priorities) the number of non-United States patients. 
(2) The incremental therapeutic benefit of a 
drug, biological product, or manufacturing process, 
compared to existing drugs, biological products, and 
manufacturing processes available to treat the same 
disease or condition. 
(3) The degree to which the drug, biological 
product, or manufacturing process addresses priority 
health care needs, including—
(A) current and emerging global infectious 
diseases; 
(B) severe illnesses with small client popu-
lations (such as indications for which orphan 
designation has been granted under section 526 
of the Federal Food, Drug, and Cosmetic Act 
(21 U.S.C. 360bb)); and 
(C) neglected diseases that primarily afflict 
the poor in developing countries. 
(4) Improved efficiency of manufacturing proc-
esses for drugs or biological processes. 
(d) REQUIREMENTS.—In awarding prize payments 
under this section, the Board shall comply with the fol-
lowing: 
(1) In cases where a new drug, biological prod-
uct, or manufacturing process offers an improve-
ment over an existing drug, biological product, or 
manufacturing process and the new drug, biological 
product, or manufacturing process competes with or 
replaces the existing drug, biological product, or 
manufacturing process, the Board shall continue to 
make prize payments for the existing drug, biological 
product, or manufacturing process to the degree that 
the new drug, biological product, or manufacturing 
process was based on or benefited from the develop-
ment of the existing drug, biological product, or 
manufacturing process. 
(2) The Board may not make prize payments 
based on the identity of the person who manufac-
tures, distributes, sells, or uses the drug, biological 
product, or manufacturing process involved. 
(3) The Board may award prize payments for 
a drug, a biological product, or a manufacturing 
process for not more than 10 fiscal years, regardless 
of the term of any related patents. 
(4) For any fiscal year, the Board may not 
award a prize payment for any single drug, biologi-
cal product, or manufacturing process in an amount 
that exceeds 5 percent of the total amount appro-
priated to the Fund for that year. 
(5) For every drug or biological product that 
receives market clearance, the Board shall determine 
whether and in what amount to award a prize pay-
ment for the drug or biological product not later 
than the end of the fourth full calendar-year quarter 
following the calendar-year quarter in which the 
drug or biological product receives market clearance.
SEC. 10. PRIZES FOR PRIORITY RESEARCH AND DEVELOP-
MENT. 
(a) MINIMUM LEVELS OF FUNDING.—For fiscal year 
2007 and each subsequent fiscal year, the Board shall es-
tablish and may periodically modify minimum levels of 
funding under section 9 for priority research and develop-
ment. 
(b) INITIAL MINIMUM LEVELS.—Of the amount ap-
propriated to the Fund for a fiscal year, the Board shall 
use (subject to establishment or modification of an appli-
cable minimum level of funding under subsection (a)) not 
less than— 
(1) 4 percent of such amount for global ne-
glected diseases; 
(2) 10 percent of such amount for orphan 
drugs; and 
(3) 4 percent of such amount for global infec-
tious diseases and other global public health prior-
ities, including research on AIDS, AIDS vaccines, 
and medicines for responding to bioterrorism. 
(c) PUBLIC INPUT; RECOMMENDATIONS.—The advi-
sory committee on research and development priorities (es-
tablished pursuant to section 8(c)) shall— 
(1) solicit public input on research and develop-
ment priorities; and
(2) periodically recommend to the Board 
changes in the minimum levels of funding for prizes 
for priority research and development. 
(d) PROCEDURES.—The Board shall adopt proce-
dures to establish and periodically modify minimum levels 
of funding under section 9 for priority research and devel-
opment. 
SEC. 11. SPECIAL TRANSITION RULES. 
(a) IN GENERAL.—A drug or biological product that 
is already on the market by October 1, 2007, shall remain 
eligible for prize payments for not more than 10 fiscal 
years, consistent with section 9(d)(3). 
(b) DETERMINATION OF VALUE.—In determining the 
amount of a prize payment for a drug or biological product 
described in subsection (a), the Board shall calculate the 
incremental value of the drug or biological product as of 
the date on which the drug or biological product was first 
introduced in the market. 
(c) MAXIMUM AMOUNT.—For drugs and biological 
products described in subsection (a), the Board may 
award— 
(1) of the amount appropriated to the Fund for 
fiscal year 2007, not more than 90 percent of such 
amount; and
(2) of the amount appropriated to the Fund for 
each of the succeeding 9 fiscal years, not more than 
a percentage of such amount that is 9 percent less 
than the percentage applicable to the preceding fis-
cal year under this subsection. 
SEC. 12. ARBITRATION. 
In the case of a drug that is already on the market 
by October 1, 2007, and subject to patents owned by a 
party other than the person who first received market 
clearance for the drug, the Board shall establish an arbi-
tration procedure to determine an equitable division of any 
prize payments among the patent owners and the person 
who first received market clearance for the drug. 
SEC. 13. ANNUAL AUDITS BY GAO. 
(a) AUDITS.—The Comptroller General of the United 
States shall conduct an audit of the Board each fiscal year 
to determine the effectiveness of the Board— 
(1) in bringing to market drugs, vaccines, other 
biological products, and new manufacturing proc-
esses for medicines in a cost-effective manner; and 
(2) in addressing society’s medical needs, in-
cluding global neglected diseases that afflict pri-
marily the poor in developing countries, indications 
for which orphan designation has been granted 
under section 526 of the Federal Food, Drug, and
Cosmetic Act (21 U.S.C. 360bb), and global infec-
tious diseases and and other global public health pri-
orities. 
(b) REPORTS.—The Comptroller General of the 
United States shall submit a report to the Congress each 
fiscal year on the results of each audit conducted under 
subsection (a). 
SEC. 14. REPORT TO CONGRESS. 
Not later than 1 year after the date of the enactment 
of this Act, the Board shall submit to the Congress a re-
port containing the findings, conclusions, and rec-
ommendations of the Board regarding the implementation 
and administration of this Act, including recommenda-
tions for such legislative and administrative action as the 
Board determines to be appropriate. 
SEC. 15. DEFINITIONS. 
In this Act: 
(1) The term ‘‘biological product’’ has the 
meaning given to that term in section 351 of the 
Public Health Service Act (42 U.S.C. 262). 
(2) The term ‘‘Board’’ means the Board of 
Trustees for the Fund for Medical Innovation Prizes 
established by section 6.
(3) The term ‘‘drug’’ has the meaning given to 
that term in section 201 of the Federal Food, Drug, 
and Cosmetic Act (21 U.S.C. 321). 
(4) The term ‘‘Fund’’ means the Fund for 
Medical Innovation Prizes established by section 5. 
(5) The term ‘‘market clearance’’ means ap-
proval of an application under section 505 of the 
Federal Food, Drug, and Cosmetic Act (21 U.S.C. 
355) or approval of a biologics license application 
under subsection (a) of section 351 of the Public 
Health Service Act (42 U.S.C. 262). 
SEC. 16. FUNDING. 
(a) APPROPRIATIONS.— 
(1) START-UP
COSTS.—For fiscal year 2006, 
there are authorized to be appropriated to the Fund 
for Medical Innovation Prizes such sums as may be 
necessary to carry out this Act. 
(2) PROGRAM
IMPLEMENTATION.—For fiscal 
year 2007 and each subsequent fiscal year, there is 
appropriated to the Fund for Medical Innovation 
Prizes, out of any funds in the Treasury not other-
wise appropriated, an amount equal to the amount 
that is 0.5 percent of the gross domestic product of 
the United States for the preceding fiscal year (as
such amount is determined by the Secretary of Com-
merce). 
(b) AVAILABILITY.—Funds appropriated to the Fund 
for Medical Innovation Prizes for a fiscal year shall remain 
available for expenditure in accordance with this Act until 
the end of the 3-year period beginning on October 1 of 
such fiscal year. Any such funds that are unexpended at 
the end of such period shall revert to the Treasury. 
Æ