breakthroughs require years of translational re-
search at a cost of hundreds of millions of dollars 
per trial and have a substantial likelihood of failure. 
(2) The drug development pipeline is laden with 
unfavorable probabilities. On average, for every 
5,000–10,000 compounds that enter the drug dis-
covery pipeline, just 250 progress to preclinical de-
velopment—and only one will become an approved 
drug. 
(3) Biotech and life sciences traditional financ-
ing vehicles of private and public equity are becom-
ing less effective funding sources because the needs 
and expectations of limited partners and share-
holders are not consistent with the increasing com-
plexity, risk, and duration of biomedical innovation. 
(4) Industry professionals frequently refer to 
the ‘‘Valley of Death’’—a steadily widening funding 
and resource gap that currently exists between basic 
research and clinical development, effectively limiting 
the field of potential novel therapies, technologies, 
and treatments for patients. 
(5) The life sciences industry needs novel ap-
proaches to early-stage drug development that better 
manage risk, lower capital cost, improve research ef-
VerDate Sep 11 2014 
01:59 Oct 15, 2015
Jkt 059200
PO 00000
Frm 00002
Fmt 6652
Sfmt 6201
E:\BILLS\H3731.IH
H3731
SSpencer on DSK4SPTVN1PROD with BILLS
fectiveness, create diverse portfolios, leverage risk- 
tolerant capital, and access new capital sources. 
(6) One solution is to implement a financial 
structure in which a large number of biomedical pro-
grams are funded by a single entity to substantially 
diversify the portfolio and thereby reduce risk. The 
entity can use securitization to finance its activities 
by issuing debt, which opens up a much larger pool 
of capital for investment. 
(7) This approach involves two components: 
(A) Creating large diversified portfolios, 
called ‘‘megafunds’’, consisting of biomedical 
products at all stages of development; and 
(B) Structuring the financing for these 
portfolios as combinations of equity and 
securitized debt. 
Diversification reduces risk, so that an entity can 
issue debt and equity, rather than the equity-only in-
vestments typically made by venture capital. 
(8) A simulation conducted by researchers at 
MIT suggested that a modest megafund model could 
be successfully implemented for rare diseases (e.g., 
rare genetic disorders, pediatric cancers, and orphan 
diseases) with as few as ten compounds and only 
$400 million in capital. 
VerDate Sep 11 2014 
01:59 Oct 15, 2015
Jkt 059200
PO 00000
Frm 00003
Fmt 6652
Sfmt 6201
E:\BILLS\H3731.IH
H3731
SSpencer on DSK4SPTVN1PROD with BILLS
(9) A rare disease therapeutics fund could serve 
as a viable pilot project, while minimizing govern-
mental exposure. 
(10) In addition to appealing to traditional 
biotech VC investors, megafund investments may be 
attractive to pension funds, insurance companies, 
and other large institutional investors. 
(11) The Food and Drug Administration 
(FDA) may grant the orphan designation for thera-
pies being studied for a rare disease or condition af-
fecting fewer than 200,000 people in the United 
States, which reduces costs and provides financial 
incentives to encourage development of such thera-
pies. 
SEC. 3. RARE DISEASE THERAPEUTICS CORPORATION. 
(a) ESTABLISHMENT.—The Director of the National 
Institutes of Health shall organize under the laws of a 
State a corporation to be know as the ‘‘Rare Disease 
Therapeutics Corporation’’ (hereinafter in this Act re-
ferred to as the ‘‘Corporation’’). 
(b) PURPOSE.—The purpose of the Corporation shall 
be to purchase rights to, fund the development of, and, 
once developed, sell ownership interests in rare disease 
therapeutics. 
(c) PRIVATIZATION OF THE CORPORATION.— 
VerDate Sep 11 2014 
01:59 Oct 15, 2015
Jkt 059200
PO 00000
Frm 00004
Fmt 6652
Sfmt 6201
E:\BILLS\H3731.IH
H3731
SSpencer on DSK4SPTVN1PROD with BILLS
(1) IN GENERAL.—As soon as practicable after 
the establishment of the Corporation, the Director 
shall sell equity stock in the Corporation to inves-
tors. 
(2) GOVERNMENT STAKE.— 
(A) IN GENERAL.—Notwithstanding para-
graph (1), the board of directors of the Cor-
poration and the Director may enter into an 
agreement under which the National Institutes 
of Health maintains an ownership interest in 
the Corporation in exchange for the National 
Institutes of Health providing the Corporation 
with intellectual property or other assistance, 
such as medicinal chemistry, toxicology, and 
high throughput screening services. 
(B) LIMIT ON GOVERNMENT STAKE.—The 
amount of any ownership interest maintained 
by the National Institutes of Health pursuant 
to subparagraph (A) may not exceed 25 percent 
of the equity stock of the Corporation. 
(3) PROHIBITION
ON
DIVIDENDS.—The Cor-
poration may not pay dividends on the equity stock 
of the Corporation. 
VerDate Sep 11 2014 
01:59 Oct 15, 2015
Jkt 059200
PO 00000
Frm 00005
Fmt 6652
Sfmt 6201
E:\BILLS\H3731.IH
H3731
SSpencer on DSK4SPTVN1PROD with BILLS
(4) BOARD OF DIRECTORS.—At all times, two 
of the members of the board of directors of the Cor-
poration shall be chosen as follows: 
(A) One member chosen by the Director. 
(B) One member chosen by the Secretary 
of the Treasury. 
(d) SALE OF OWNERSHIP INTERESTS.— 
(1) IN GENERAL.—The Corporation— 
(A) may sell a rare disease therapy owned 
by the Corporation at any time; and 
(B) shall sell any rare disease therapy 
owned by the Corporation prior to the com-
mencement of a phase 3 study (as such term is 
defined in section 312.21(b) of title 21, Code of 
Federal Regulations (or any successor regula-
tions)). 
(2) SALE REQUIREMENTS.—In any sale of a 
rare disease therapy, the Corporation shall make 
such sale through an open and transparent process 
and on commercially reasonable terms. 
(e) FUNDING THROUGH BOND ISSUANCES.— 
(1) IN GENERAL.—The Corporation shall issue 
one or more classes of bonds, with a maturity of no 
more than 12 years and carrying such interest as 
the Corporation determines appropriate: 
VerDate Sep 11 2014 
01:59 Oct 15, 2015
Jkt 059200
PO 00000
Frm 00006
Fmt 6652
Sfmt 6201
E:\BILLS\H3731.IH
H3731
SSpencer on DSK4SPTVN1PROD with BILLS
(A) GUARANTEED BONDS.—The Corpora-
tion shall issue a class of bonds that is guaran-
teed by the United States. 
(B) UNGUARANTEED
BONDS.—The Cor-
poration may issue one or more classes of bonds 
that are backed by the Corporation, but are not 
guaranteed by the United States. 
(2) DEBT-TO-EQUITY RATIO OF GUARANTEED 
BONDS.—The Corporation may not issue any guar-
anteed bond pursuant to paragraph (1)(A) if the 
issuance of such bond would cause the Corporation 
to exceed a debt-to-equity ratio of 1 to 1. 
(3) GUARANTEE FEE.—The Corporation shall 
pay the Treasury a guarantee fee, which shall be set 
by the Secretary of the Treasury in an amount equal 
to the anticipated cost to the Treasury in guaran-
teeing bonds of the Corporation under paragraph 
(1)(A). 
(f) TREATMENT UNDER THE SECURITIES LAWS.— 
For purposes only of the securities laws— 
(1) securities of the Corporation shall be 
deemed to be securities that are not issued or guar-
anteed by the Government; and 
VerDate Sep 11 2014 
01:59 Oct 15, 2015
Jkt 059200
PO 00000
Frm 00007
Fmt 6652
Sfmt 6201
E:\BILLS\H3731.IH
H3731
SSpencer on DSK4SPTVN1PROD with BILLS
(2) the National Institutes of Health shall be 
deemed to not be an instrumentality of the Govern-
ment. 
(g) CORPORATION
NOT
GUARANTEED
BY
THE 
UNITED STATES.—Except as provided under subsection 
(e)(1)(A), the full faith and credit of the United States 
shall not be pledged to the Corporation or any security 
of the Corporation. 
(h) AUTHORIZATION
OF APPROPRIATIONS.—There 
are authorized to be appropriated to the Director such 
sums as may be necessary to establish the Corporation 
and complete the privatization of the Corporation. 
(i) SUNSET.—The Corporation shall terminate after 
the end of the 18-month period following the later of— 
(1) the date on which the last bond issued 
under subsection (e) matures; and 
(2) the date on which the Corporation receives 
the final payment for the sale of the rare disease 
therapeutics owned by the Corporation. 
SEC. 4. RARE DISEASE THERAPEUTICS CORPORATION 
SCIENCE ADVISORY COUNCIL. 
(a) ESTABLISHMENT.—There is established within 
the National Institutes of Health an advisory council to 
be known as the ‘‘Rare Disease Therapeutics Corporation 
Science Advisory Council’’. 
VerDate Sep 11 2014 
01:59 Oct 15, 2015
Jkt 059200
PO 00000
Frm 00008
Fmt 6652
Sfmt 6201
E:\BILLS\H3731.IH
H3731
SSpencer on DSK4SPTVN1PROD with BILLS
(b) MEMBERS.—The members of the Advisory Coun-
cil shall be selected by the Director. 
(c) PURPOSE.—The purpose of the Advisory Council 
shall be to advise the Corporation on the purchase, sale, 
and development of rare disease therapeutics. 
(d) DISCLOSURE OF CERTAIN EMPLOYMENT.—Each 
member of the Advisory Council shall disclose each com-
pany, partnership, or other entity with respect to which 
the member is an officer or director. 
(e) SUNSET.—The Advisory Council shall terminate 
on the date that the Corporation terminates. 
SEC. 5. DEFINITIONS. 
For purposes of this Act: 
(1) RARE DISEASE THERAPEUTICS.—The term 
‘‘rare disease therapeutics’’ means a compound, bio-
logic, medical device, or companion diagnostic that 
has been designated as a therapy for a rare disease 
or condition pursuant to section 526 of the Federal 
Food, Drug, and Cosmetic Act (21 U.S.C. 360bb). 
(2) ADVISORY COUNCIL.—The term ‘‘Advisory 
Council’’ means the Rare Disease Therapeutics Cor-
poration Advisory Council established under section 
4(a). 
VerDate Sep 11 2014 
01:59 Oct 15, 2015
Jkt 059200
PO 00000
Frm 00009
Fmt 6652
Sfmt 6201
E:\BILLS\H3731.IH
H3731
SSpencer on DSK4SPTVN1PROD with BILLS
(3) CORPORATION.—The term ‘‘Corporation’’ 
means the Rare Disease Therapeutics Corporation 
established under section 3(a). 
(4) DIRECTOR.—The term ‘‘Director’’ means 
the Director the National Institutes of Health. 
(5) SECURITIES LAWS.—The term ‘‘securities 
laws’’ has the meaning given that term under section 
3(a) of the Securities Exchange Act of 1934 (15 
U.S.C. 78c(a)). 
Æ 
VerDate Sep 11 2014 
01:59 Oct 15, 2015
Jkt 059200
PO 00000
Frm 00010
Fmt 6652
Sfmt 6301
E:\BILLS\H3731.IH
H3731
SSpencer on DSK4SPTVN1PROD with BILLS