From: The Honorable Juan Vargas
Sent By:
Bill: H.R. 3731
Date: 3/3/2016

Endorsed by: Biocom


Dear Colleague,

Please join us in helping to cure rare diseases by cosponsoring H.R. 3731, the Rare Disease (RaD) Fund Act.

Biomedicine is far more advanced today than even a decade ago, but breakthroughs require years of research at a cost of hundreds of millions of dollars and have a substantial likelihood of failure. For every 5,000-10,000 compounds that enter the drug discovery pipeline, just 250 progress to preclinical development—and only one will become an approved drug.

Biomedical innovation has become much more challenging to finance with private and public equity. Traditional investors are becoming increasingly risk adverse. This has created what industry professionals frequently refer to as the “Valley of Death” – a steadily widening funding and resource gap that exists between basic research and clinical development. This gap effectively limits the field of potential novel therapies for patients, as investors can no longer afford to risk their funds on basic research.

The life sciences industry needs a novel approach to early-stage drug development that better manages risk, lowers capital cost and improves research effectiveness.  Innovative financial structures can create diverse portfolios, leverage risk-tolerant capital, and access new capital sources. This will achieve the necessary grand scale of capital needed to support diverse biotech investments and create stable and attractive investment opportunities along the entire development pipeline. A simulation conducted by researchers at MIT suggested that a modest megafund model could be successfully implemented for rare diseases with as few as ten compounds and only $400 million in capital. This structure closely resembles the already existing drug royalty securitization model successfully employed by drug royalty investment companies. Here is a link to a recent TEDxCambridge Talk discussing the megafund model:

With this goal in mind, we are introducing the Rare Diseases (RaD) Fund Act. This common sense legislation authorizes a pilot program that allows the National Institutes of Health (NIH) to establish a privately owned and operated investment fund for rare disease therapeutics. The RaD Fund would invest in and develop early-stage (prior to FDA Stage 3) rare disease therapeutics.  NIH would serve in an advisory capacity to the RaD Fund. NIH would also be authorized to provide technical services and sell intellectual property to the RaD Fund in exchange for an equity stake in the company. The RaD Fund would have the authority to accept equity investments and issue debt, including a single tranche of government guaranteed debt.  Insurance will be purchased to offset any potential, but unlikely loss.

If you have questions about the legislation or would like to become a cosponsor, please contact Scott Hinkle in Congressman Vargas’ office at (202) 225-8045/ or Andrew Callahan in Congressman Rooney’s office at (202) 225-5792/


JUAN VARGAS                                                                                TOM ROONEY

Member of Congress                                                                           Member of Congress