[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.
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