I 113th CONGRESS 2d Session H. R. 5790 IN THE HOUSE OF REPRESENTATIVES December 3, 2014 Mr. Young of Indiana introduced the following bill; which was referred to the Committee on Energy and Commerce , and in addition to the Committee on Ways and Means , for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned A BILL To authorize the Director of the National Institutes of Health to design and enter into agreements for the implementation of prize competitions with the goal of improving health outcomes and thereby reducing Federal expenditures.

1. Short title This Act may be cited as the Health Prizes Rewarding Innovation, Savings, and Effectiveness Act of 2014 . 2. Prize competitions (a) In general Part B of title IV of the Public Health Service Act ( 42 U.S.C. 284 et seq. ) is amended by adding at the end the following: 409K. Prize competitions for improving health outcomes and reducing Federal expenditures (a) Goals The goal of the prize competitions under this section is to improve health outcomes, thereby reducing Federal expenditures on health programs. (b) Initial actions (1) Identification of diseases and conditions Not later than 6 months after the date of enactment of the Health Prizes Rewarding Innovation, Savings, and Effectiveness Act of 2014 , the Director of NIH, in consultation with the Director of the Congressional Budget Office, the Administrator for the Centers for Medicare & Medicaid Services, and relevant health economists, shall identify 3 to 5 human diseases or health conditions with respect to which— (A) the Federal Government, for such diseases and conditions, collectively spends a total of not less than $5,000,000,000 per year on prevention and treatment activities; (B) public and private investment in research is disproportionately small in comparison with such investment for other human diseases and conditions for which the Federal Government has similar or greater expenditures on prevention and treatment activities; and (C) the prize competitions under this section would be appropriate for achieving the goal described in subsection (a). (2) Design of prize competitions Not later than 12 months after the date of enactment of the Health Prizes Rewarding Innovation, Savings, and Effectiveness Act of 2014 , the Director of NIH shall— (A) design prize competitions— (i) to cooperate with competitors to realize innovations to achieve the goal described in subsection (a) with respect to one or more diseases or conditions identified pursuant to subsection (b); and (ii) to award one or more prizes— (I) if appropriate, at the beginning of or during the competitions, to the competitors whose innovations are most promising or demonstrate progress; and (II) at the end of the competitions, to the competitors whose innovations prove to be the best solutions; (B) ensure that the design of such competitions— (i) is realistic, given the amount of funds to be awarded as prizes; (ii) does not reflect any bias concerning 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 person’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 pending innovations; and (C) submit to the Congress a report on the design of such competitions. (3) Consultation In carrying out paragraphs (1) and (2), the Director of NIH shall consult with— (A) medical, economic, budgetary, innovation, and venture capital experts; and (B) the heads of relevant Federal agencies, 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 Innovation, 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 subsection (b)(2) and in consultation with the categories of experts and agency heads described in subsection (b)(3); and (B) to use the simulation to assess the effectiveness 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 assessment. (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 subsection (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 adjusted under subsection (d). (2) Duration The prize competitions under paragraph (1) shall require competitors to demonstrate the effectiveness of their innovations over a period of not more than 5 years. (3) Guidance and access to testing facilities The Secretary and the Commissioner of Food and Drugs may cooperate with qualified competitors in the prize competitions under paragraph (1) by providing guidance and access to testing facilities. (4) Number of Prize Competitions The Director shall conduct— (A) a total of not more than 5 prize competitions under this section; and (B) not more than 2 such prize competitions 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 conclusion of the prize competitions under subsection (e), and not later than the end of each of the 4 succeeding years, submit to the Congress a report on the information collected under paragraph (1). (g) Intellectual property (1) Prohibition on the government acquiring intellectual property rights The Federal Government may not gain an interest in intellectual 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 property developed by a participant in a prize competition 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 appropriated $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 assistance shall be for administration of the prize competition; and (B) not less than 70 percent of such assistance shall be awarded as prizes to competitors in the prize competition. . (b) Prizes excluded from gross income of recipients (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 ending after the date of the enactment of this Act.