Taxpayer's Tab: S. 627, the Medical Innovation Prize Fund Act

Vol. 4 Issue 16 May 3, 2013

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Details: NTUF's policy research is centered on the federal budget and government programs. We work hard to educate the public on what spending our elected officials are pushing for. If you're looking for a typical internship, this program is not for you. Associate Policy Analysts are expected to score legislation, write blog and newsletter articles, and come up with insightful research opportunities.

For more information and to apply to the program, go here.

Most Expensive Bill of the Week

The Bill: S. 627, the Medical Innovation Prize Fund Act

Annualized Cost: $108.5 billion ($433.9 billion over four years)

Many Americans see the advertisements for specialized pharmaceuticals on television, but they may not be aware of the expenses involved with creating a new drug. Companies must invest millions, if not billions, to research and develop the most effective version of a medication, change their manufacturing capacity to make as many doses as possible, and wade through clinical trials and the Food and Drug Administration's approval process. As time goes on, costs could mount to as much as $1.3 billion to put a new drug or vaccine on pharmacy shelves. Once companies are permitted to sell new drugs, they rely on patent protections to recover the costs of development and production before others can sell generic drugs that achieve the same results but are less costly to make and sell.

In light of the costs of new drugs for businesses and patients, Senator Bernard Sanders (I-VT) introduced a bill to reform how the pharmaceutical sector operates. The Medical Innovation Prize Fund Act would prohibit producers and suppliers from having any exclusive rights on the drugs that those firms have created. The idea is that if producers are able to produce generic versions of medicines much sooner than they can now under current law, consumers would be able to pay less for the same medications. However, the loss of patent rights may also discourage companies from developing new drugs.

Senator Sanders' bill would attempt to offset the companies' loss of patent rights by creating a new "Prize Fund." Firms would be awarded prize payments from the Fund to research and produce new drugs, biological products (such as vaccines), or manufacturing processes. Since they would be receiving public funding, companies would be required to disclose all details regarding the production process of their new drugs.

To pay for the entirety of the pharmaceutical sector's research and development costs, the government would deposit some startup money into the Fund and a new annual "fee" would be imposed on health insurance providers to sustain it. Higher-revenue companies would be taxed more than lower-revenue firms. Though government health programs, such as Medicare and Medicaid, would not be required to pay the new tax, other public health care expenditures would also be figured into the progressive formula.

NTUF determined that implementing S. 627 would increase federal spending by $433.9 billion over four years. The Act calls for the Fund to receive up to 0.55 percent of Gross Domestic Product (GDP) from the previous Fiscal Year through the insurance provider tax. For the first full year that the Fund would be in operation, the government could collect up to $100.0 billion in FY 2015. GDP figures were based on the President's FY 2014 proposed budget.

To learn more or discuss this bill visit


The Least Expensive Bill of the Week

The Bill: H.R. 527, the Responsible Helium Administration and Stewardship Act

Annualized Savings: $82 million ($410 million over five years)

Since 1925, the federal government has operated a strategic supply of helium. The reserve was initially established because airships, which were being used as military and meteorological tools, required a lighter-than-air gas that was more stable than the explosive element hydrogen. Later, its uses expanded to NASA's space missions and medical devices. America's helium reserve was, and still is, the chief domestic supplier of the gaseous element. However, a 1960 law permitted private companies to collect helium and sell it exclusively to the government, who would then sell it in global markets.

As the consumer economy demanded more and more helium, the reserve sold supplies at below-market prices and took on increasing amounts of debt -- $1.3 billion worth -- because of costs associated with refinement and the construction of specialized pipelines. In 1996, Congress responded by calling for a gradual sell-off and privatization of the reserve by 2015, or earlier upon full payment of the reserve's debts. The final payment is expected to occur later this year.

However, the reserve still sells helium at a low market rate set in the 1996 law, distorting the market and discouraging private investment. With concerns that taxpayers were not getting a good deal from the reserve's sales, the Responsible Helium Administration and Stewardship Act was passed by the House to delay privatization and more significantly sell down the stockpile of helium. Proceeds would be used to finance the program's debt. The reserve would sell 30 percent of its helium, which would leave three billion cubic feet remaining. Increased sales would lead to larger offsetting receipts for the government. The Congressional Budget Office (CBO) counts offsetting receipts as decreases in spending, unlike revenues. Offsetting receipts differ from tax receipts in that they are derived from voluntary, market-based actions and not through payments mandated under the sovereign power of the government. The remaining helium would then only be bought and used by public entities. The bill was sponsored by Congressman Doc Hastings (R-WA).

CBO estimates that enacting H.R. 527 would lead to a net $410 million gain in receipts over the FY 2014-2018 period. New spending would be required for studies on the effect of privatizing the helium supply that would lead to a $10 million cost. Beyond the first five years, CBO projects spending increases between 2020 and 2023, attributed to operating the reserve when offsetting receipts would not offset costs.

To learn more or discuss this bill visit


Most Friended

The Bill: H.R. 1652, the Student Non-Discrimination Act of 2013

Annualized Savings: "No Cost" -- Regulatory

Congressman Jared Polis (D-CO) reintroduced the Student Non-Discrimination Act to "help protect public school students from bullying, harassment, and discrimination based on sexual orientation or gender identity." The bill would prohibit schools or other educational entities that are receiving federal funds from discriminating against LGBT students or from ignoring harassing behavior. In the event such an event occurs, the school would lose federal financial support and give the victim a legal cause of action.

According to BillTally rules, H.R. 1652 would not directly increase federal spending. The regulations would serve as mandates for state and local governments to implement.

Cosponsors include 139 House Democrats and one Republican.

To learn more or discuss this bill visit


The Wildcard

The Bill: H.R. 1609/S. 750, the Campus Fire Safety Education Act of 2013

Annualized Cost: $15 million ($75 million over five years)

The Campus Fire Safety Education Act was reintroduced for the third consecutive Congress in both the House and Senate. Sponsored by Congressman Bill Pascrell (D-NJ) and Senator Frank Lautenberg (D-NJ), the bill calls for the establishment of a grant that would improve fire and safety awareness programs on higher education campuses. Colleges and universities could receive up to $250,000 per year to teach students how to recognize, fight, escape, and prevent fires. Financial assistance would also be made available to provide students living off-campus with similar instruction and outreach programs.

H.R. 1609 and S. 750 would build on the Campus Fire Safety Right-to-Know Act, passed in a 2008 higher education bill. The law requires higher education institutions that maintain on-campus housing to compile annual fire safety reports and incident logs. The Federal Emergency Management Administration (FEMA) also currently operates similar firefighter assistance and fire prevention programs, including the Fire Prevention and Safety Grant Program, all of which requested $670 million in funding in FY 2014.

According to the text of the Act, the Department of Education would be authorized to spend $15 million in additional tax dollars for each of the next five years.

To learn more or discuss this bill visit

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About NTUF

The National Taxpayers Union Foundation is a research and educational organization dedicated solely to helping citizens of all generations understand how tax policies, spending programs, and regulations at all levels affect them now and in the future. Through NTUF's timely information, analysis, and commentary, we're empowering citizens to actively engage in the fiscal policy debate and hold public officials accountable every day.

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