To amend the Internal Revenue Code of 1986 to allow a credit against income tax for research related to developing vaccines against widespread diseases and ensure that such vaccines are affordable and widely distributed.

April 4, 2001

Ms. PELOSI (for herself, Ms. DUNN, Mr. RANGEL, Mr. MCDERMOTT, Mrs. MORELLA, Mrs. CHRISTENSEN, Mr. FOLEY, Mr. LEWIS of Georgia, Mr. TOWNS, Mr. DEUTSCH, Mr. SERRANO, Ms. WOOLSEY, Mr. JEFFERSON, Mr. FILNER, Mr. MCNULTY, Ms. ROYBAL-ALLARD, Mr. LANTOS, Mr. ENGLISH, Mrs. THURMAN, Ms. DELAURO, Ms. MILLENDER-MCDONALD, and Mr. WYNN) introduced the following bill; which was referred to the Committee on Ways and Means, and in addition to the Committees on Energy and Commerce, and International Relations, 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

To amend the Internal Revenue Code of 1986 to allow a credit against income tax for research related to developing vaccines against widespread diseases and ensure that such vaccines are affordable and widely distributed.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Vaccines for the New Millennium Act of 2001'.

SEC. 2. CREDIT FOR MEDICAL RESEARCH RELATED TO DEVELOPING VACCINES AGAINST WIDESPREAD DISEASES.

(a) IN GENERAL- Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to business related credits) is amended by adding at the end the following new section:

`SEC. 45E. CREDIT FOR MEDICAL RESEARCH RELATED TO DEVELOPING VACCINES AGAINST WIDESPREAD DISEASES.

`(a) GENERAL RULE- For purposes of section 38, the vaccine research credit determined under this section for the taxable year is an amount equal to 30 percent of the qualified vaccine research expenses for the taxable year.

`(b) QUALIFIED VACCINE RESEARCH EXPENSES- For purposes of this section--

`(1) QUALIFIED VACCINE RESEARCH EXPENSES-

`(A) IN GENERAL- Except as otherwise provided in this paragraph, the term `qualified vaccine research expenses' means the amounts which are paid or incurred by the taxpayer during the taxable year which would be described in subsection (b) of section 41 if such subsection were applied with the modifications set forth in subparagraph (B).

`(B) MODIFICATIONS; INCREASED INCENTIVE FOR CONTRACT RESEARCH PAYMENTS- For purposes of subparagraph (A), subsection (b) of section 41 shall be applied--

`(i) by substituting `vaccine research' for `qualified research' each place it appears in paragraphs (2) and (3) of such subsection, and

`(ii) by substituting `100 percent' for `65 percent' in paragraph (3)(A) of such subsection.

`(C) EXCLUSION FOR AMOUNTS FUNDED BY GRANTS, ETC- The term `qualified vaccine research expenses' shall not include any amount to the extent such amount is funded by any grant, contract, or otherwise by another person (or any governmental entity).

`(2) VACCINE RESEARCH- The term `vaccine research' means research to develop vaccines and microbicides for--

`(A) malaria,

`(B) tuberculosis,

`(C) HIV, or

`(D) any infectious disease (of a single etiology) which, according to the World Health Organization, causes over 1,000,000 human deaths annually.

`(c) COORDINATION WITH CREDIT FOR INCREASING RESEARCH EXPENDITURES-

`(1) IN GENERAL- Except as provided in paragraph (2), any qualified vaccine research expenses for a taxable year to which an election under this section applies shall not be taken into account for purposes of determining the credit allowable under section 41 for such taxable year.

`(2) EXPENSES INCLUDED IN DETERMINING BASE PERIOD RESEARCH EXPENSES- Any qualified vaccine research expenses for any taxable year which are qualified research expenses (within the meaning of section 41(b)) shall be taken into account in determining base period research expenses for purposes of applying section 41 to subsequent taxable years.

`(d) SPECIAL RULES-

`(1) LIMITATIONS ON FOREIGN TESTING- No credit shall be allowed under this section with respect to any vaccine research (other than human clinical testing) conducted outside the United States.

`(2) PRE-CLINICAL RESEARCH- No credit shall be allowed under this section for pre-clinical research unless such research is pursuant to a research plan an abstract of which has been filed with the Secretary before the beginning of such year. The Secretary, in consultation with the Secretary of Health and Human Services, shall prescribe regulations specifying the requirements for such plans and procedures for filing under this paragraph.

`(3) CERTAIN RULES MADE APPLICABLE- Rules similar to the rules of paragraphs (1) and (2) of section 41(f) shall apply for purposes of this section.

`(4) ELECTION- This section (other than subsection (e)) shall apply to any taxpayer for any taxable year only if such taxpayer elects to have this section apply for such taxable year.

`(e) CREDIT TO BE REFUNDABLE FOR CERTAIN TAXPAYERS-

`(1) IN GENERAL- In the case of an electing qualified taxpayer--

`(A) the credit under this section shall be determined without regard to section 38(c), and

`(B) the credit so determined be allowed under subpart C.

`(2) ELECTING QUALIFIED TAXPAYER- For purposes of this subsection, the term `electing qualified taxpayer' means, with respect to any taxable year, any domestic C corporation if--

`(A) the aggregate gross assets of such corporation throughout such taxable year are $500,000,000 or less,

`(B) the net income tax (as defined in section 38(c)) of such corporation is zero for such taxable year and the 2 preceding taxable year,

`(C) as of the close of the taxable year, the corporation is not under the jurisdiction of a court in a title 11 or similar case (within the meaning of section 368(a)(3)(A)), and

`(D) the corporation elects the application of this subsection for such taxable year.

`(3) AGGREGATE GROSS ASSETS- Aggregate gross assets shall be determined under section 1202(d).

`(4) CONTROLLED GROUPS- A corporation shall be treated as meeting the requirement of paragraph (2)(B) only if each person who is treated with such corporation as a single employer under subsections (a) and (b) of section 52 also meets such requirement.'

(b) INCLUSION IN GENERAL BUSINESS CREDIT-

(1) IN GENERAL- Section 38(b) of such Code is amended by striking `plus' at the end of paragraph (12), by striking the period at the end of paragraph (13) and inserting `, plus', and by adding at the end the following new paragraph:

`(14) the vaccine research credit determined under section 45E.'.

(2) TRANSITION RULE- Section 39(d) of such Code is amended by adding at the end the following new paragraph:

`(10) NO CARRYBACK OF SECTION 45E CREDIT BEFORE ENACTMENT- No portion of the unused business credit for any taxable year which is attributable to the vaccine research credit determined under section 45E may be carried back to a taxable year ending before the date of the enactment of section 45E.'.

(c) DENIAL OF DOUBLE BENEFIT- Section 280C of such Code is amended by adding at the end the following new subsection:

`(d) CREDIT FOR QUALIFIED VACCINE RESEARCH EXPENSES-

`(1) IN GENERAL- No deduction shall be allowed for that portion of the qualified vaccine research expenses (as defined in section 45E(b)) otherwise allowable as a deduction for the taxable year which is equal to the amount of the credit determined for such taxable year under section 45E(a).

`(2) CERTAIN RULES TO APPLY- Rules similar to the rules of paragraphs (2), (3), and (4) of subsection (c) shall apply for purposes of this subsection.'.

(d) DEDUCTION FOR UNUSED PORTION OF CREDIT- Section 196(c) of such Code (defining qualified business credits) is amended by striking `and' at the end of paragraph (8), by striking the period at the end of paragraph (9) and inserting `, and', and by adding at the end the following new paragraph:

`(10) the vaccine research credit determined under section 45E(a) (other than such credit determined under the rules of section 280C(d)(2)).'.

(e) CLERICAL AMENDMENT- The table of sections for subpart D of part IV of subchapter A of chapter 1 of such Code is amended by adding at the end the following new item:

`Sec. 45E. Credit for medical research related to developing vaccines against widespread diseases.'.

(f) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years ending after the date of the enactment of this Act.

(g) STUDY- The Institute of Medicine shall conduct a study of the degree to which the credit under section 45E of the Internal Revenue Code of 1986 has stimulated vaccine research. Not later than the date which is 5 years after the date of the enactment of this Act, the Institute of Medicine shall submit to the Congress the results of such study together with any recommendations it may have to improve the effectiveness of such credit has stimulated vaccine research.

SEC. 3. CREDIT FOR CERTAIN SALES OF LIFESAVING VACCINES.

(a) IN GENERAL- Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to business related credits) is amended by adding at the end the following new section:

`SEC. 45F. CREDIT FOR CERTAIN SALES OF LIFESAVING VACCINES.

`(a) IN GENERAL- For purposes of section 38, the lifesaving vaccine sale credit determined under this section with respect to a taxpayer for the taxable year is an amount equal to the amount of qualified vaccine sales for the taxable year.

`(b) QUALIFIED VACCINE SALES- For purposes of this section--

`(1) IN GENERAL- The term `qualified vaccine sales' means the aggregate amount paid to the taxpayer for a qualified sale.

`(2) QUALIFIED SALE-

`(A) IN GENERAL- The term `qualified sale' means a sale of a qualified vaccine--

`(i) to a nonprofit organization or to a government of any foreign country (or instrumentality of such a government), and

`(ii) for distribution in a developing country.

`(B) DEVELOPING COUNTRY- For purposes of this paragraph, the term `developing country' means a country which the Secretary determines to be a country with a lower middle income or less (as such term is used by the International Bank for Reconstruction and Development).

`(3) QUALIFIED VACCINE- The term `qualified vaccine' means any vaccine and microbicide--

`(A) which is described in section 45E(b)(3)(C), and

`(B) which is approved as a new drug after the date of the enactment of this paragraph by--

`(i) the Food and Drug Administration,

`(ii) the World Health Organization, or

`(iii) the appropriate authority of a county included in the list under section 802(b)(1) of the Federal Food, Drug, and Cosmetic Act.

`(c) LIMIT ON AMOUNT OF CREDIT- The maximum amount of the credit allowable under subsection (a) with respect to a sale shall not exceed the portion of the limitation amount allocated under subsection (d) with respect to such sale.

`(d) NATIONAL LIMITATION ON AMOUNT OF CREDITS-

`(1) IN GENERAL- Except as provided in paragraph (3), there is a lifesaving vaccine sale credit for each calendar year equal to--

`(A) $100,000,000 for each of years 2002 through 2006, and

`(B) $125,000,000 for each of years 2007 through 2010.

`(2) ALLOCATION OF LIMITATION- The limitation amount under paragraph (1) shall be allocated for any calendar year by the Administrator of the United States Agency for International Development among organizations with an application approved by the Administrator. The Administrator shall prescribe the procedures for applications for an allocation under this subsection and the factors to be taken into account in making such allocations. Such applications shall be made at such time and in such form and manner as the Administrator shall prescribe and shall include a detailed plan for distribution of the vaccine.

`(3) CARRYOVER OF UNUSED LIMITATION- If the limitation amount under paragraph (1) for any calendar year exceeds the aggregate amount allocated under paragraph (2), such limitation for the following calendar year shall be increased by the amount of such excess. No amount may be carried under the preceding sentence to any calendar year after 2020.

`(e) SPECIAL RULES- For purposes of this section, rules similar to the rules of section 41(f)(2) shall apply.'

(b) INCLUSION IN GENERAL BUSINESS CREDIT-

(1) IN GENERAL- Section 38(b) of such Code (relating to current year business credit) is amended by striking `plus' at the end of paragraph (13), by striking the period at the end of paragraph (14) and inserting `, plus', and by adding at the end the following new paragraph:

`(15) the lifesaving vaccine sale credit determined under section 45F.'.

(2) TRANSITION RULE- Section 39(d) of such Code (relating to transitional rules) is amended by adding at the end the following new paragraph:

`(11) NO CARRYBACK OF SECTION 45F CREDIT BEFORE ENACTMENT- No portion of the unused business credit for any taxable year which is attributable to the lifesaving vaccine sale credit determined under section 45F may be carried back to a taxable year ending before the date of the enactment of section 45F.'.

(c) CLERICAL AMENDMENT- The table of sections for subpart D of part IV of subchapter A of chapter 1 of such Code is amended by adding at the end the following new item:

`Sec. 45F. Credit for certain sales of lifesaving vaccines.'.

(d) EFFECTIVE DATE- The amendments made by this section shall apply to sales of vaccines after December 31, 2001, in taxable years ending after such date.

SEC. 4. LIFESAVING VACCINE PURCHASE FUND.

(a) PURPOSE- It is the purpose of this section to--

(1) create incentives for private sector research into vaccines for HIV, malaria, tuberculosis, and other major infectious diseases; and

(2) ensure that vaccines for major infectious diseases are affordable and widely distributed.

(b) DEFINITIONS- In this section:

(1) DEVELOPING COUNTRY- The term `developing country' means a country which the International Bank for Reconstruction and Development (commonly referred to as the `World Bank') determines to be a country with a lower middle income or less.

(2) ELIGIBLE VACCINE- The term `eligible vaccine' has the meaning given the term `qualified vaccine' in section 45F(b)(3) of the Internal Revenue Code of 1986.

(c) ESTABLISHMENT OF FUND- As of the date that the Secretary of the Treasury (in this section referred to as the `Secretary') determines that any eligible vaccine is available for purchase, there is established in the Treasury of the United States a fund to be known as the `Lifesaving Vaccine Purchase Fund' (in this section referred to as the `Fund') consisting of amounts appropriated under subsection (f).

(d) INVESTMENT OF FUND- Amounts in the Fund shall be invested in accordance with section 9702 of title 31, United States Code, and any interest on, and proceeds from any such investment shall be credited to and become part of the Fund.

(e) USE OF FUND-

(1) IN GENERAL- The Secretary is authorized to expend amounts in the Fund for purchases of eligible vaccines. Such vaccines shall be distributed to developing countries.

(2) PURCHASE AND DISTRIBUTION OF VACCINES-

(1) PURCHASE PRICES, ETC- Vaccines purchased by the Fund--

(A) shall be made at prices which take into account the seller's research and development and manufacturing costs and the desirability of the vaccine purchased, and

(B) shall be made under a funding formula establishing a minimum price per dose and minimum technical requirements and a market test requirement for the eligible vaccine.

(3) DISTRIBUTION- Eligible vaccines purchased by the Fund shall be distributed to developing countries under agreements between the

United States Agency for International Development and international organizations or recipient developing countries that provide for--

(A) consideration of the prevalence of the disease treated by the eligible vaccine in the recipient developing country;

(B) consideration of the ability of the recipient country to effectively and safely deliver the vaccines; and

(C) a required matching payment by the recipient developing country based on the per capita income of the country, in an amount not in excess of 25 percent of the purchase price paid for such vaccine.

(4) REGULATIONS- The Secretary shall promulgate such regulations as are necessary to carry out the provisions of this subsection.

(5) CONSULTATION- The Secretary shall promulgate regulations under paragraph (4) after extensive consultation with--

(A) the International Bank for Reconstruction and Development (commonly referred to as the `World Bank');

(B) the World Health Organization;

(C) the Secretary of Health and Human Services; and

(D) the Lifesaving Vaccine Advisory Commission.

(f) APPROPRIATIONS-

(1) IN GENERAL- Subject to paragraph (2), there are appropriated out of any funds in the Treasury not otherwise appropriated such sums as may be necessary to carry out the purposes of the Fund for each of 10 fiscal years beginning with the first fiscal year after the date that the Secretary determines that any eligible vaccine is available for purchase by the Fund.

(2) TRANSFER TO FUND- The Secretary shall transfer the amount appropriated under paragraph (1) for a fiscal year to the Fund.

(3) AVAILABILITY- Amounts appropriated under this section shall remain available until expended.

SEC. 5. SENSES OF CONGRESS.

It is the sense of Congress that:

(1) MANUFACTURING CAPACITY- Delivery of vaccines to developing country populations is often delayed a decade or more after these products are licensed for use in industrialized nations. This delay is due partly to inadequate manufacturing capacity that limits supply of vaccines in the early years of their distribution. The public sector has a role to play in ensuring that manufacturing capacity for vaccines for the priority diseases referred to in section 45E(b)(2) of the Internal Revenue Code of 1986 (as added by this Act) is sufficient to secure access to these vaccines simultaneously in industrialized and developing countries. It is appropriate for the Federal government to consider a variety of mechanisms in order to ensure adequate manufacturing capacity to meet this goal. These mechanisms may include loan programs, accelerated depreciation, revenue bonds, or infrastructure grants.

(2) DISTRIBUTION OF VACCINES DEVELOPED USING CREDIT- Given the important goal of ensuring that all those in need, in both industrialized and developing countries, reap the benefits of any vaccine or microbicide that is developed for HIV, tuberculosis, or malaria, and acknowledging the importance of intellectual property rights and the right of corporations and shareholders of corporations to set prices, retain patent ownership, and maintain confidentiality of privileged information, corporations and shareholders of corporations who elect to take the credit under section 45E of the Internal Revenue Code of 1986 for research expenses incurred in the development of a vaccine or microbicide shall certify to the Secretary of the Treasury that, within 1 year after that vaccine or microbicide is first licensed, such corporation will establish a plan to maximize distribution of such vaccine or microbicide in the developing world using such mechanisms as technology transfer, differential pricing, and in-country production where possible, or other mechanisms to maximize international access to high quality and affordable vaccines.

(3) CONTINUED SUPPORT OF GLOBAL EFFORTS- The Federal government should continue supporting the work of the Global Alliance for Vaccines and Immunizations and the Global Fund for Children's Vaccines as an appropriate and effective vehicle to purchase and distribute these vaccines at an affordable price once they are discovered in order to distribute them to the developing world, as it does with vaccines against hepatitis-B, haemophilus influenza, and yellow fewer.

(4) TIERED PRICING- Flexible or differential pricing for vaccines, providing lowered prices for the poorest countries, is one of several valid strategies to accelerate the introduction of vaccines in developing countries.

END