[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[S. 378 Introduced in Senate (IS)]
<DOC>
116th CONGRESS
1st Session
S. 378
To amend the Internal Revenue Code of 1986 to establish an excise tax
on certain prescription drugs which have been subject to a price spike,
and for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
February 7, 2019
Mr. Brown (for himself, Mrs. Gillibrand, and Ms. Hassan) introduced the
following bill; which was read twice and referred to the Committee on
Finance
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to establish an excise tax
on certain prescription drugs which have been subject to a price spike,
and for other purposes.
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 ``Stop Price Gouging Act''.
SEC. 2. IDENTIFICATION OF PRESCRIPTION DRUG PRICE SPIKES.
(a) Definitions.--In this section:
(1) Applicable entity.--The term ``applicable entity''
means the holder of an application approved under subsection
(c) or (j) of section 505 of the Federal Food, Drug, and
Cosmetic Act (21 U.S.C. 355) or of a license issued under
subsection (a) or (k) of section 351 of the Public Health
Service Act (42 U.S.C. 262) for a drug described in paragraph
(5)(A).
(2) Average manufacturer price.--The term ``average
manufacturer price''--
(A) has the same meaning given such term under
section 1927(k)(1) of the Social Security Act (42
U.S.C. 1396r-8(k)(1)); or
(B) with respect to a drug for which there is no
average manufacturer price as so defined, such term
shall mean the wholesale acquisition cost of the drug.
(3) Commerce.--The term ``commerce'' has the meaning given
such term in section 4 of the Federal Trade Commission Act (15
U.S.C. 44).
(4) Inspector general.--The term ``Inspector General''
means the Inspector General of the Department of Health and
Human Services.
(5) Prescription drug.--
(A) In general.--The term ``prescription drug''
means any drug (as defined in section 201(g) of the
Federal Food, Drug, and Cosmetic Act (21 U.S.C.
321(g))), including a combination product whose primary
mode of action is determined under section 503(g) of
such Act (21 U.S.C. 353(g)) to be that of a drug, and
that--
(i) is subject to section 503(b)(1) of the
Federal Food, Drug, and Cosmetic Act (21 U.S.C.
353(b)(1)); and
(ii) is covered by a Federal health care
program (as defined in section 1128B(f) of the
Social Security Act (42 U.S.C. 1320a-7b(f))).
(B) Treatment of reformulated drugs.--For purposes
of this section, a prescription drug with respect to
which the Secretary of Health and Human Services has
approved any minor reformulation that does not produce
a meaningful therapeutic benefit, the drug that was
approved prior to any such reformulation and the drug
with any such reformulation shall be considered one
prescription drug.
(6) Price spike.--
(A) In general.--The term ``price spike'' means an
increase in the average manufacturer price in commerce
of a prescription drug for which the price spike
percentage is equal to or greater than applicable price
increase allowance.
(B) Price spike percentage.--The price spike
percentage is the percentage (if any) by which--
(i) the average manufacturer price of a
prescription drug in commerce for the calendar
year; exceeds
(ii) the average manufacturer price of such
prescription drug in commerce for the calendar
year preceding such year.
(C) Applicable price increase allowance.--The
applicable price increase allowance for any calendar
year is the percentage (rounded to the nearest one-
tenth of 1 percent) by which the C-CPI-U (as defined in
section 1(f)(6) of the Internal Revenue Code of 1986)
for that year exceeds the C-CPI-U for the preceding
calendar year.
(7) Price spike revenue.--
(A) In general.--The price spike revenue for any
calendar year is an amount equal to--
(i) the gross price spike revenue, minus
(ii) the adjustment amount.
(B) Gross price spike revenue.--The gross price
spike revenue for any calendar year is an amount equal
to the product of--
(i) an amount equal to the difference
between clause (i) of paragraph (6)(B) and
clause (ii) of such paragraph; and
(ii) the total number of units of the
prescription drug which were sold in commerce
in such calendar year.
(C) Adjustment amount.--The adjustment amount is
the amount, if any, of the gross price spike revenue
which the Inspector General has determined is due
solely to an increase in the cost of the inputs
necessary to manufacture the prescription drug subject
to the price spike.
(b) Submission by Pharmaceutical Companies of Information to
Inspector General.--
(1) In general.--For each prescription drug, the applicable
entity shall submit to the Inspector General a quarterly report
that includes the following:
(A) For each prescription drug of the applicable
entity--
(i) the total number of units of the
prescription drug which were sold in commerce
in the preceding calendar quarter;
(ii) the average and median price per unit
of such prescription drug in commerce in the
preceding calendar quarter, disaggregated by
month; and
(iii) the gross revenues from sales of such
prescription drug in commerce in the preceding
calendar quarter.
(B) Such information related to increased input
costs or public health considerations as the applicable
entity may wish the Inspector General to consider in
making a determination under clause (ii) of subsection
(c)(2)(B) or an assessment in clause (iii) of such
subsection for the preceding calendar quarter.
(C) Such information related to any anticipated
increased input costs for the subsequent calendar
quarter as the applicable entity may wish the Inspector
General to consider in making a determination under
clause (ii) of subsection (c)(2)(B) or an assessment in
clause (iii) of such subsection for such calendar
quarter.
(2) Penalty for failure to submit.--
(A) In general.--An applicable entity described in
paragraph (1) that fails to submit information to the
Inspector General regarding a prescription drug, as
required by such paragraph, before the date specified
in paragraph (3) shall be liable for a civil penalty,
as determined under subparagraph (B).
(B) Amount of penalty.--The amount of the civil
penalty shall be equal to the product of--
(i) an amount, as determined appropriate by
the Inspector General, which is--
(I) not less than 0.5 percent of
the gross revenues from sales of the
prescription drug described in
subparagraph (A) for the preceding
calendar year, and
(II) not greater than 1 percent of
the gross revenues from sales of such
prescription drug for the preceding
calendar year, and
(ii) the number of days in the period
between--
(I) the applicable date specified
in paragraph (3), and
(II) the date on which the
Inspector General receives the
information described in paragraph (1)
from the applicable entity.
(3) Submission deadline.--An applicable entity shall submit
each quarterly report described in paragraph (1) not later than
January 17, April 18, June 15, and September 15 of each
calendar year.
(c) Assessment by Inspector General.--
(1) In general.--Not later than the last day in February of
each year, the Inspector General, in consultation with other
relevant Federal agencies (including the Federal Trade
Commission), shall--
(A) complete an assessment of the information the
Inspector General received pursuant to subsection
(b)(1) with respect to sales of prescription drugs in
the preceding calendar year; and
(B) in the case of any prescription drug which
satisfies the conditions described in paragraph (1) or
(2) of subsection (d), submit a recommendation to the
Secretary of Health and Human Services that such drug
be exempted from application of the tax imposed under
section 4192 of the Internal Revenue Code of 1986 (as
added by section 3 of this Act) for such year.
(2) Elements.--The assessment required by paragraph (1)(A)
shall include the following:
(A) Identification of each price spike relating to
a prescription drug in the preceding calendar year.
(B) For each price spike identified under
subparagraph (A)--
(i) a determination of the price spike
revenue;
(ii) a determination regarding the accuracy
of the information submitted by the applicable
entity regarding increased input costs; and
(iii) an assessment of the rationale of the
applicable entity for the price spike.
(d) Exemption of Certain Drugs.--
(1) In general.--The Secretary of Health and Human
Services, upon recommendation of the Inspector General pursuant
to subsection (c)(1)(B), may exempt any prescription drug which
has been subject to a price spike during the preceding calendar
year from application of the tax imposed under section 4192 of
the Internal Revenue Code of 1986 for such year, if the
Secretary determines that--
(A) based on information submitted pursuant to
subsection (b)(1)(B), a for-cause price increase
exemption should apply; or
(B)(i) the prescription drug which has been subject
to a price spike has an average manufacturer price of
not greater than $10 for a 30 day supply; and
(ii) such drug is marketed by not less than 3 other
holders of applications approved under subsection (c)
or (j) of section 505 of the Federal Food, Drug, and
Cosmetic Act (21 U.S.C. 355), where such applications
approved under such subsection (j) use as a reference
drug the drug so approved under such subsection (c).
(2) Clarification.--In considering, under paragraph (1)(A),
information submitted pursuant to subsection (b)(1)(B), the
Secretary--
(A) has the discretion to determine that such
information does not warrant a for-cause price increase
exemption; and
(B) shall exclude from such consideration any
information submitted by the applicable entity
threatening to curtail or limit production of the
prescription drug if the Secretary does not grant an
exemption from the application of the tax under section
4192 of the Internal Revenue Code of 1986.
(e) Inspector General Report to Internal Revenue Service.--
(1) In general.--Subject to paragraph (3), not later than
the last day in February of each year, the Inspector General
shall transmit to the Internal Revenue Service a report on the
findings of the Inspector General with respect to the
information the Inspector General received under subsection
(b)(1) with respect to the preceding calendar year and the
assessment carried out by the Inspector General under
subsection (c)(1)(A) with respect to such information.
(2) Contents.--The report transmitted under paragraph (1)
shall include the following:
(A) The information received under subsection
(b)(1) with respect to the preceding calendar year.
(B) The price spikes identified under subparagraph
(A) of subsection (c)(2).
(C) The price spike revenue determinations made
under subparagraph (B)(i) of such subsection.
(D) The determinations and assessments made under
clauses (ii) and (iii) of subparagraph (B) of such
subsection.
(3) Notice and opportunity for hearing.--
(A) In general.--No report shall be transmitted to
the Internal Revenue Service under paragraph (1) in
regards to a prescription drug unless the Inspector
General has provided the applicable entity with--
(i) the assessment of such drug under
subsection (c)(1)(A); and
(ii) notice of their right to a hearing in
regards to such assessment.
(B) Notice.--The notice required under subparagraph
(A) shall be provided to the applicable entity not
later than 30 days after completion of the assessment
under subsection (c)(1)(A).
(C) Request for hearing.--Subject to subparagraph
(E), an applicable entity may request a hearing before
the Secretary of Health and Human Services not later
than 30 days after the date on which the notice under
subparagraph (B) is received.
(D) Completion of hearing.--In the case of an
applicable entity which requests a hearing pursuant to
subparagraph (C), the Secretary of Health and Human
Services shall, not later than 12 months after the date
on which the assessment under subsection (c)(1)(A) was
completed by the Inspector General--
(i) make a final determination in regards
the accuracy of such assessment; and
(ii) provide the report described in
paragraph (2) to the Internal Revenue Service.
(E) Limitation.--An applicable entity may request a
hearing under subparagraph (C) with respect to a
particular prescription drug only once within a 5-year
period.
(4) Publication.--
(A) In general.--Not later than the last day in
February of each year, subject to subparagraph (B), the
Inspector General shall make the report transmitted
under paragraph (1) available to the public, including
on the Internet website of the Inspector General,
subject to subparagraph (B).
(B) Proprietary information.--The Inspector General
shall ensure that any information made public in
accordance with subparagraph (A) excludes trade secrets
and confidential commercial information.
(f) Notification.--The Secretary of the Treasury, in conjunction
with the Inspector General, shall notify, at such time and in such
manner as the Secretary of the Treasury shall provide, each applicable
entity in regard to any prescription drug which has been determined to
have been subject to a price spike during the preceding calendar year
and the amount of the tax imposed on such applicable entity pursuant to
section 4192 of the Internal Revenue Code of 1986.
SEC. 3. EXCISE TAX ON PRESCRIPTION DRUGS SUBJECT TO PRICE SPIKES.
(a) In General.--Subchapter E of chapter 32 of the Internal Revenue
Code of 1986 is amended by adding at the end the following new section:
``SEC. 4192. PRESCRIPTION DRUGS SUBJECT TO PRICE SPIKES.
``(a) Imposition of Tax.--
``(1) In general.--Subject to paragraph (3), for each
taxable prescription drug sold by an applicable entity during
the calendar year, there is hereby imposed on such entity a tax
equal to the greater of--
``(A) the annual price spike tax for such
prescription drug, or
``(B) subject to paragraph (2), the cumulative
price spike tax for such prescription drug.
``(2) Limitation.--In the case of a taxable prescription
drug for which the applicable period (as determined under
subsection (c)(2)(E)(i)) is less than 2 calendar years, the
cumulative price spike tax shall not apply.
``(3) Exemption.--For any calendar year in which the
Secretary of Health and Human Services has provided an
exemption for a taxable prescription drug pursuant to section
2(d) of the Stop Price Gouging Act, the amount of the tax
determined under paragraph (1) for such drug or device for such
calendar year shall be reduced to zero.
``(b) Annual Price Spike Tax.--
``(1) In general.--The amount of the annual price spike tax
shall be equal to the applicable percentage of the price spike
revenue received by the applicable entity on the sale of the
taxable prescription drug during the calendar year.
``(2) Applicable percentage.--For purposes of paragraph
(1), the applicable percentage shall be equal to--
``(A) in the case of a taxable prescription drug
which has been subject to a price spike percentage
greater than the applicable price increase allowance
(as defined in section 2(a)(6)(C) of the Stop Price
Gouging Act) but less than 15 percent, 50 percent,
``(B) in the case of a taxable prescription drug
which has been subject to a price spike percentage
equal to or greater than 15 percent but less than 20
percent, 75 percent, and
``(C) in the case of a taxable prescription drug
which has been subject to a price spike percentage
equal to or greater than 20 percent, 100 percent.
``(c) Cumulative Price Spike Tax.--
``(1) In general.--The amount of the cumulative price spike
tax shall be equal to the applicable percentage of the
cumulative price spike revenue received by the applicable
entity on the sale of the taxable prescription drug during the
calendar year.
``(2) Applicable percentage.--
``(A) In general.--For purposes of paragraph (1),
the applicable percentage shall be equal to--
``(i) in the case of a taxable prescription
drug which has been subject to a cumulative
price spike percentage greater than the
cumulative price increase allowance but less
than the first multi-year percentage, 50
percent,
``(ii) in the case of a taxable
prescription drug which has been subject to a
cumulative price spike percentage equal to or
greater than the first multi-year percentage
but less than the second multi-year percentage,
75 percent, and
``(iii) in the case of a taxable
prescription drug which has been subject to a
cumulative price spike percentage equal to or
greater than the second multi-year percentage,
100 percent.
``(B) Cumulative price spike percentage.--The
cumulative price spike percentage is the percentage (if
any) by which--
``(i) the average manufacturer price of the
taxable prescription drug in commerce for the
preceding calendar year, exceeds
``(ii) the average manufacturer price of
such prescription drug in commerce for the base
year.
``(C) Cumulative price increase allowance.--For
purposes of clause (i) of subparagraph (A), the
cumulative price increase allowance for any calendar
year is the percentage (rounded to the nearest one-
tenth of 1 percent) by which the C-CPI-U (as defined in
section 1(f)(6)) for that year exceeds the C-CPI-U for
the base year.
``(D) Multi-year percentages.--For purposes of
subparagraph (A), the first multi-year percentage and
second multi-year percentage shall be determined in
accordance with the following table:
------------------------------------------------------------------------
First Second
``Number of years in applicable period multi-year multi-year
percentage percentage
------------------------------------------------------------------------
2 years....................................... 17.5 22.5
3 years....................................... 20.0 25.0
4 years....................................... 22.5 27.5
5 years....................................... 25.0 30.0.
------------------------------------------------------------------------
``(E) Applicable period and base year.--
``(i) Applicable period.--The applicable
period shall be the lesser of--
``(I) the 5 preceding calendar
years,
``(II) all calendar years beginning
after the date of enactment of this
section, or
``(III) all calendar years in which
the taxable prescription drug was sold
in commerce.
``(ii) Base year.--The base year shall be
the calendar year immediately preceding the
applicable period.
``(3) Cumulative price spike revenue.--For purposes of
paragraph (1), the cumulative price spike revenue for any
taxable prescription drug shall be an amount equal to--
``(A) an amount equal to the product of--
``(i) an amount (not less than zero) equal
to--
``(I) the average manufacturer
price of such prescription drug in
commerce for the preceding calendar
year, minus
``(II) the average manufacturer
price of such prescription drug in
commerce for the base year, and
``(ii) the total number of units of such
prescription drug which were sold in commerce
in the preceding calendar year, minus
``(B) an amount equal to the sum of the adjustment
amounts, if any, determined under section 2(a)(7)(C) of
the Stop Price Gouging Act for each calendar year
during the applicable period.
``(d) Definitions.--For purposes of this section--
``(1) Taxable prescription drug.--The term `taxable
prescription drug' means a prescription drug (as defined in
section 2(a)(5) of the Stop Price Gouging Act) which has been
identified by the Inspector General of the Department of Health
and Human Services, under section 2(c)(2)(A) of such Act, as
being subject to a price spike.
``(2) Other terms.--The terms `applicable entity', `average
manufacturer price', `price spike', `price spike percentage',
and `price spike revenue' have the same meaning given such
terms under section 2(a) of the Stop Price Gouging Act.''.
(b) Clerical Amendments.--
(1) The heading of subchapter E of chapter 32 of the
Internal Revenue Code of 1986 is amended by striking ``Medical
Devices'' and inserting ``Certain Medical Devices and
Prescription Drugs''.
(2) The table of subchapters for chapter 32 of such Code is
amended by striking the item relating to subchapter E and
inserting the following new item:
``subchapter e. certain medical devices and prescription drugs''.
(3) The table of sections for subchapter E of chapter 32 of
such Code is amended by adding at the end the following new
item:
``Sec. 4192. Prescription drugs subject to price spikes.''.
(c) Effective Date.--The amendments made by this section shall
apply to sales after the date of the enactment of this Act.
SEC. 4. STUDY ON MONOPOLY MEDICAL PRODUCTS.
(a) In General.--The Comptroller General of the United States shall
conduct a study that examines--
(1) how drug manufacturers and health plans (including
private insurers, the Medicare program, and State Medicaid
programs) establish initial launch prices for newly approved
drugs; and
(2) alternative methods that have been proposed for setting
the price of new drugs.
(b) Study of Specific Drugs.--As part of the study described in
subsection (a), the Comptroller General shall examine drug pricing with
respect to several drugs approved within the 5-year period immediately
preceding the date of enactment of this Act and explore potential
alternative approaches to establish new drug prices that could help
make new drugs more affordable, better reflect the clinical value of
such drugs in treating patients, and maintain incentives for
innovation.
(c) Factors.--In conducting the study described in subsection (a),
the Comptroller General shall consider--
(1) what factors drug manufacturers and health plans
consider in establishing initial launch prices;
(2) how initial pricing decisions by drug manufacturers and
health plans affect costs and use of services for patients and
public programs such as the Medicare and Medicaid programs;
(3) efforts by health plans to limit costs, including
through benefit design or coverage limitations;
(4) how prices change in the first few years following a
new drug's launch; and
(5) recommendations manufacturers, health plans, and other
experts have for alternative approaches to establishing new
drug prices and the benefits and challenges associated with
such alternative approaches.
SEC. 5. REVENUES COLLECTED.
There are authorized to be appropriated to the Secretary of Health
and Human Services such sums as are equal to any increase in revenue to
the Treasury by reason of the provisions of this Act or the amendments
made by this Act for the purposes of increasing amounts available to
the National Institutes of Health for research and development of
drugs.
<all>
Stop Price Gouging Act
#378 | S Congress #116
Policy Area: Taxation
Last Action: Read twice and referred to the Committee on Finance. (2/7/2019)
Bill Text Source: Congress.gov
Summary and Impacts
Original Text