A leading US Senator has called for drug patent "monopolies" to be abolished and replaced by an annual prize fund to reward the discovery of new treatments which would then, because of the power of competitive markets, become available at the lowest possible price.

"The US has - by far - the highest prices in the world for prescription drugs," says Vermont's Independent Senator, Bernie Sanders. "The simple fact is that the prices of patent medicines are a significant barrier to health for millions of uninsured and underinsured Americans, and people die because of it," he added, opening a hearing held by a subcommittee of the Senate Health Education, Labour and Pensions (HELP) Committee last week.

What drives up US prices is the government patent system that grants monopolies to pharmaceutical companies that develop new drugs, Sen Sanders told the hearing, held by the panel's subcommittee in primary health and ageing, which he chairs. As far as he knew, he said, this was "the first Congressional hearing ever held to discuss the possibility of ending monopolies for medicines and offering a serious proposal to replace our broken system with one that would accelerate innovation while providing virtually universal access to life-saving medicines."

Sen Sanders says that while this concept is relevant to all kinds of diseases, he has introduced Senate bill 1138, the Prize Fund for HIV/AIDS Act, which would de-link R&D incentives from drug prices specifically for new HIV/AIDS medicines and create instead a $3 billion annual prize fund to reward the discovery of new treatments. 

One of the reasons he decided to focus the bill on a single disease was what he discovered about the price of Bristol-Myers Squibb/Gilead's HIV/AIDS drug Atripla, which combines three medicines - Sustiva (efavirenz), Emtriva (emtricitabine) and Viread (tenofovir disproxil fumarate) - which, he said, "simply blew me away."

Atripla costs more than $25,000 per person per year in the US, but the generic version, which is approved by the Food and Drug Administration (FDA) but unavailable for sale in the US, costs less than $200 per patient per year, he said. The generic version is being purchased from a competitive supplier by the President's Emergency Plan for AIDS Relief (PEPFAR), for under $200 per patient a year, for distribution in developing countries, Sen Sanders told the hearing.

The $3 billion annual prize fund proposed in his bill would make awards to developers of medicines, based primarily upon therapeutic value a new treatment offers and the number of people it benefits. Products would have generic competition immediately after FDA approval - the bill would eliminate "today's high-priced marketing monopolies as the reward for patented medical innovations," he said.

The $3 billion-a-year fund would pay for itself, "and then some," said Sen Sanders. When you compare this cost to the savings which would be realised by paying generic prices for the estimated $9.7 billion paid in the US last year on the top 15 brand-name HIV/AIDS drugs, before rebates or discounts, "it's a bargain," he said.

Sen Sanders' bill is supported by Joseph Stiglitz, winner of the Nobel Prize in Economics and a chief economist for the World Bank. "America is the most innovative country in the world. It has the best universities, attracting the best minds from around the world. But America also has the least efficient health care system in the world, spending more money per capita and a larger fraction of Gross Domestic Product (GDP) on the health care system than any other country - and getting far poorer outcomes than countries that spending much less," he said.

"We need to harness our innovation system to work to drive down the costs and to improve performance, Prof Stiglitz told the hearing, adding that the approach taken by Sen Sanders' bill is "exactly right" and "will provide a model for further reforms in our health innovation system."