[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1588 Introduced in House (IH)]

103d CONGRESS
  1st Session
                                H. R. 1588

To amend the Internal Revenue Code of 1986 to impose a windfall profit 
  tax on certain drugs for rare diseases or conditions if they become 
            excessively profitable, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             April 1, 1993

  Mr. Stark introduced the following bill; which was referred to the 
                      Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to impose a windfall profit 
  tax on certain drugs for rare diseases or conditions if they become 
            excessively profitable, 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. WINDFALL PROFIT TAX ON PROFITS FROM DRUGS FOR RARE DISEASES 
              OR CONDITIONS.

    (a) In General.--Section 28 of the Internal Revenue Code of 1986 is 
amended by redesignating subsection (e) as subsection (f) and by 
inserting after subsection (d) the following new subsection:
    ``(e) Windfall Profit Tax.--
            ``(1) In general.--If--
                    ``(A) there is a windfall profit on any orphan drug 
                for any taxable year, and
                    ``(B) any portion of such taxable year is within 
                the exclusivity period for such drug,
        the tax imposed by this chapter for such taxable year shall be 
        increased by 75 percent of such windfall profit for such 
        taxable year.
            ``(2) Windfall profit.--For purposes of this subsection, 
        the term `windfall profit' means, with respect to any orphan 
        drug, the excess of--
                    ``(A) the gross revenues from sales during the 
                taxable year of such drug, over
                    ``(B) 125 percent of the sum of--
                            ``(i) the cost of producing the drug sold 
                        during such year, and
                            ``(ii) such year's allocable share of the 
                        marketing costs of such drug.
            ``(3) No tax until recovery of total investment in drug 
        development.--The gross revenues from the sale of an orphan 
        drug shall be taken into account under paragraph (2) for any 
        taxable year only to the extent the aggregate of such revenues 
        for the taxable year and all preceding taxable years exceed the 
        development costs of such drug.
            ``(4) Other definitions.--For purposes of this subsection--
                    ``(A) Development costs.--The term `development 
                costs' means, with respect to any orphan drug, the 
                amount equal to the excess of--
                            ``(i) the sum of the qualified clinical 
                        testing expenses and the qualified research 
                        expenses attributable to such drug for the 
                        period before the beginning of the exclusivity 
                        period, over
                            ``(ii) the aggregate amount received to 
                        develop such drug from Federal funds.
                    ``(B) Exclusivity period.--The term `exclusivity 
                period' means the 7-year period referred to in section 
                527(a) of the Federal Food, Drug, and Cosmetic Act.
                    ``(C) Orphan drug.--The term `orphan drug' means 
                any drug for which an exclusivity period is granted.
            ``(5) Proration.--If only a portion of a taxable year is 
        within the exclusivity period, the windfall profit taken into 
        account under this subsection for such year shall be the amount 
        which bears the same ratio to such profit for such year as such 
        portion bears to the entire taxable year.
            ``(6) Coordination with other credits and minimum tax.--Any 
        increase in tax under this subsection shall not be treated as a 
        tax imposed by this chapter for purposes of--
                    ``(A) determining the amount of any credit 
                allowable under this chapter or
                    ``(B) determining the amount of the minimum tax 
                imposed by section 55.
            ``(7) 75 percent tax to be exclusive tax.--Gross income 
        shall not include the amount of windfall profit taken into 
        account under this subsection for any taxable year.''
    (b) Effective Date.--The amendment made by this section shall apply 
to amounts paid or incurred after December 31, 1992, in taxable years 
ending after such date.

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