[House Report 116-688]
[From the U.S. Government Publishing Office]
116th Congress } { Rept. 116-688
HOUSE OF REPRESENTATIVES
2d Session } { Part 1
======================================================================
PRESCRIPTION DRUG SUNSHINE, TRANSPARENCY, ACCOUNTABILITY AND REPORTING
ACT
_______
December 24, 2020.--Committed to the Committee of the Whole House on
the State of the Union and ordered to be printed
_______
Mr. Neal, from the Committee on Ways and Means, submitted the following
R E P O R T
[To accompany H.R. 2113]
[Including cost estimate of the Congressional Budget Office]
The Committee on Ways and Means, to whom was referred the
bill (H.R. 2113) to amend titles XI and XVIII of the Social
Security Act to provide for drug manufacturer price
transparency, to require certain manufacturers to report on
product samples provided to certain health care providers, and
for other purposes, having considered the same, reports
favorably thereon with an amendment and recommends that the
bill as amended do pass.
CONTENTS
Page
I. SUMMARY AND BACKGROUND............................................8
A. Purpose and Summary................................... 8
B. Background and Need for Legislation................... 8
C. Legislative History................................... 9
II. EXPLANATION OF THE BILL..........................................10
A. Section 2--Drug Manufacturer Price Transparency....... 10
B. Section 3--Requirement for manufacturers of certain
drugs, devices, biologicals, and medical supplies to
report on product samples provided to certain health
care providers....................................... 15
C. Section 4--Analysis and report on inpatient hospital
drug costs........................................... 18
D. Section 5--Public disclosure of drug discounts........ 19
E. Section 6--Requiring certain manufacturers to report
drug pricing information with respect to drugs under
the Medicare program................................. 21
III.VOTES OF THE COMMITTEE...........................................22
IV. BUDGET EFFECTS OF THE BILL.......................................23
A. Committee Estimate of Budgetary Effects............... 23
B. Statement Regarding New Budget Authority and Tax
Expenditures Budget Authority........................ 23
C. Cost Estimate Prepared by the Congressional Budget
Office............................................... 23
V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE.......29
A. Committee Oversight Findings and Recommendations...... 29
B. Statement of General Performance Goals and Objectives. 29
C. Information Relating to Unfunded Mandates............. 30
D. Congressional Earmarks, Limited Tax Benefits, and
Limited Tariff Benefits.............................. 30
E. Duplication of Federal Programs....................... 30
F. Hearings.............................................. 30
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED............30
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Prescription Drug Sunshine,
Transparency, Accountability and Reporting Act'' or the ``Prescription
Drug STAR Act''.
SEC. 2. DRUG MANUFACTURER PRICE TRANSPARENCY.
(a) In General.--Title XI of the Social Security Act (42 U.S.C. 1301
et seq.) is amended by inserting after section 1128K the following new
section:
``SEC. 1128L. DRUG MANUFACTURER PRICE TRANSPARENCY.
``(a) In General.--With respect to each year, beginning with 2021,
the Secretary shall, at least once during such year, determine if there
is a triggered SPIKE increase (in accordance with subsection (b)) with
respect to an applicable drug (as defined in subsection (f)(1)). If the
Secretary determines, with respect to a year, there is such an increase
with respect to an applicable drug, the manufacturer of the applicable
drug shall submit to the Secretary the justification described in
subsection (c), subject to subsection (b)(4), for each such triggered
SPIKE increase in accordance with the timing described in subsection
(d)).
``(b) Triggered SPIKE Increase.--
``(1) In general.--A triggered SPIKE increase occurs, with
respect an applicable drug and year (beginning with 2021 and
referred to in this paragraph as the `applicable year'), in any
of the following cases:
``(A) If there is at least a 10 percent (or $10,000)
cumulative increase with respect to the wholesale
acquisition cost (or alternative cost measure specified
by the Secretary under paragraph (3)) of such drug
during a calendar-year period beginning and ending
within the lookback period that is the 5-year period
preceding such applicable year.
``(B) If there is at least a 25 percent (or $25,000)
cumulative increase with respect to the wholesale
acquisition cost (or such alternative cost measure) of
such drug during any three-calendar-year period
beginning and ending within such lookback period.
``(C) In the case of such a drug that is first
covered under title XVIII with respect to such
applicable year, if the estimated cost or spending
under such title per individual or per user of such
drug (as estimated by the Secretary) for such
applicable year (or per course of treatment in such
applicable year, as defined by the Secretary) is at
least $26,000.
``(2) Indexing dollar amounts.--The dollar amounts applied
under paragraph (1) for 2022 and each subsequent year shall be
the dollar amounts specified in such paragraph for the previous
year increased by the annual percentage increase in the
consumer price index (all items; U.S. city average) as of
September of such previous year. If any amount established
under paragraph (1), after application of this paragraph, for a
year is not a multiple of $10, it shall be rounded to the
nearest multiple of $10.
``(3) Alternative to wac.--The Secretary may, for purposes of
making determinations under paragraph (1), in addition to using
the wholesale acquisition cost for an applicable drug, use
alternative cost measures of such drug, or use such alternative
cost measure if the wholesale acquisition cost is not
available.
``(4) Exception.--A justification under subsection (c) shall
not be required for a triggered SPIKE increase described in
paragraph (1) of an applicable drug of a manufacturer if--
``(A) there is any portion of the lookback period
described in the respective subparagraph of such
paragraph for such increase that is included within the
lookback period for another triggered SPIKE increase
(or combination of such increases) for which a
justification is made under this section for such drug
by such manufacturer; or
``(B) such increase is less than the wholesale
acquisition cost (or alternative cost measure specified
by the Secretary under paragraph (3)) of such drug
during the calendar-year period described in paragraph
(1)(A) or the three-calendar-year period described in
paragraph (1)(B), as applicable, for such increase,
increased by the percentage increase in the consumer
price index for all urban consumers (all items; United
States city average) for the 12-month period ending six
months prior to the calendar-year period so described
and for the 36-month period ending six months prior to
the three-calendar-year period so described,
respectively.
``(5) Unit determination.--For purposes of determining the
wholesale acquisition cost in carrying out this section, the
Secretary shall determine a unit (such as a unit size) to
apply.
``(6) Public posting.--Beginning with respect to 2021, the
Secretary shall publicly post on the Internet website of the
Department of Health and Human Services--
``(A) alternative percentages, dollar amounts, and
lookback periods that, if applied under paragraph (1),
would be projected to increase the number of applicable
drugs for which a triggered SPIKE increase would occur
for such year; and
``(B) the number of applicable drugs for which a
triggered SPIKE increase would occur for such year if
such an alternative percentage, dollar amount, or
period were applied for such year.
``(c) Justification Described.--
``(1) In general.--The justification described in this
subsection, with respect to a triggered SPIKE increase
described in subsection (b)(1) of an applicable drug of a
manufacturer, is--
``(A) all of the information described in paragraph
(2);
``(B) all of the information and supporting
documentation described in paragraph (3), as applicable
to the increase and drug; and
``(C) a certification described in paragraph (4).
``(2) Required information.--For purposes of paragraph (1),
the information described in this paragraph is the following:
``(A) The individual factors that have contributed to
the increase in the wholesale acquisition cost.
``(B) An explanation of the role of each factor in
contributing to such increase.
``(3) Information as applicable.--For purposes of paragraph
(1), the information and supporting documentation described in
this paragraph is the following, as applicable to the increase
of the drug:
``(A) Total expenditures of the manufacturer on--
``(i) materials and manufacturing for such
drug;
``(ii) acquiring patents and licensing for
each drug of the manufacturer; and
``(iii) costs to purchase or acquire the drug
from another company, if applicable.
``(B) The percentage of total expenditures of the
manufacturer on research and development for such drug
that was derived from Federal funds.
``(C) The total expenditures of the manufacturer on
research and development for such drug.
``(D) The total revenue and net profit generated from
the applicable drug for each calendar year since drug
approval.
``(E) The total costs associated with marketing and
advertising for the applicable drug.
``(F) Additional information specific to the
manufacturer of the applicable drug, such as--
``(i) the total revenue and net profit of the
manufacturer for the period of such increase,
as determined by the Secretary;
``(ii) metrics used to determine executive
compensation;
``(iii) total expenditures on--
``(I) drug research and development;
or
``(II) clinical trials on drugs that
failed to receive approval by the Food
and Drug Administration; and
``(iv) any additional information related to
drug pricing decisions of the manufacturer.
``(G) Any other relevant information and supporting
documentation necessary to justify the triggering SPIKE
increase.
``(H) Any other relevant information and supporting
documentation, as specified by the Secretary.
``(4) Certification.--For purposes of paragraph (1), the
certification described in this paragraph is a certification,
that all such information and documentation is accurate and
complete, by one of the following:
``(A) The chief executive officer of the
manufacturer.
``(B) The chief financial officer of the
manufacturer.
``(C) An individual who has delegated authority to
sign for, and who reports directly to, such chief
executive officer or chief financial officer.
``(d) Timing.--
``(1) Notification.--Not later than 60 days after the date on
which the Secretary makes the determination that there is a
triggering SPIKE increase with respect to an applicable drug,
the Secretary shall notify the manufacturer of the applicable
drug of such determination.
``(2) Submission of justification.--Not later than 90 days
after the date on which a manufacturer receives a notification
under paragraph (1), subject to subsection (b)(4), the
manufacturer shall submit to the Secretary the justification
required under subsection (a), including a summary of such
justification, in a form and manner specified by the Secretary.
In specifying such form, with respect to the summary required
under the previous sentence, the Secretary shall provide that
such summary shall be in an easily understandable format, as
specified by the Secretary, and shall permit the manufacturer
to exclude proprietary information from such summary.
``(3) Posting on internet website.--Not later than 30 days
after receiving the complete justification under paragraph (2),
the Secretary shall post on the Internet website of the Centers
for Medicare & Medicaid Services the summary included for such
justification.
``(e) Penalties.--
``(1) Failure to submit timely justification.--If the
Secretary determines that a manufacturer has failed to submit a
justification as required under this section, including in
accordance with the timing and form required, with respect to
an applicable drug, the Secretary shall apply a civil monetary
penalty in an amount of $10,000 for each day the manufacturer
has failed to submit such justification as so required.
``(2) False information.--Any manufacturer that submits a
justification under this section that knowingly provides false
information in such justification is subject to a civil
monetary penalty in an amount not to exceed $100,000 for each
item of false information.
``(3) Application of procedures.--The provisions of section
1128A (other than subsections (a) and (b)) shall apply to a
civil monetary penalty under this subsection in the same manner
as such provisions apply to a penalty or proceeding under
section 1128A(a). Civil monetary penalties imposed under this
subsection are in addition to other penalties as may be
prescribed by law.
``(f) Definitions.--In this section:
``(1) Applicable drug.--
``(A) In general.--Subject to subparagraph (B), the
term `applicable drug' means, with respect to a
lookback period described in subsection (b)(1), a
covered outpatient drug (as defined in paragraph (2) of
section 1927(k), without application of paragraph (3)
of such section) that is covered under title XVIII and
is not a low cost drug.
``(B) Exclusion of low cost drugs.--For purposes of
subparagraph (A), not later than January 1, 2021, the
Secretary shall specify a threshold (such as a cost or
spending threshold) for identifying (and shall
identify) low cost drugs to be excluded from the
definition of the term `applicable drug', such as a
drug that has a wholesale acquisition cost of less than
$10 per unit or less than $100 in average estimated
expenditures under title XVIII per individual per year
or per user of such drug per year. For purposes of this
section, a drug shall not be considered specified as a
low cost drug for a lookback period described in
subsection (b)(1) with respect to a year unless such
drug is identified as being below the specified
threshold for the entirety of the lookback period.
``(2) Manufacturer.--The term `manufacturer' has the meaning
given that term in section 1847A(c)(6)(A).
``(3) Wholesale acquisition cost.--The term `wholesale
acquisition cost' has the meaning given that term in section
1847A(c)(6)(B).''.
(b) Reporting to the Secretary of the Treasury.--
(1) In general.--Subpart A of part III of subchapter A of
chapter 61 of the Internal Revenue Code of 1986 is amended by
inserting after section 6039J the following new section:
``SEC. 6039K. DRUG PRICE SPIKE INCREASE REPORTING.
``Each manufacturer (within the meaning of section 1128L of the
Social Security Act) shall file a return (at such time and in such form
and manner as the Secretary may provide) showing for such year with
respect to which such section applies all information and supporting
documentation and the certification included within a justification
reported by the manufacturer under subsection (c)(1) of such
section.''.
(2) Clerical amendment.--The table of sections for subpart A
of part III of subchapter A of chapter 61 of such Code is
amended by inserting after the item relating to section 6039J
the following new item:
``Sec. 6039K. Drug price SPIKE increase reporting.''.
SEC. 3. REQUIREMENT FOR MANUFACTURERS OF CERTAIN DRUGS, DEVICES,
BIOLOGICALS, AND MEDICAL SUPPLIES TO REPORT ON
PRODUCT SAMPLES PROVIDED TO CERTAIN HEALTH CARE
PROVIDERS.
(a) In General.--Section 1128G(a) of the Social Security Act (42
U.S.C. 1320a-7h(a)) is amended by adding at the end the following new
paragraph:
``(3) Certain product samples.--
``(A) In general.--In addition to the requirements
under paragraphs (1)(A) and (2), on the 90th day of
each calendar year (beginning with 2023), any
applicable manufacturer that provides a payment or
other transfer of value that is a product sample
described in subparagraph (B) to any covered recipient
(or to an entity or individual at the request of, or
designated on behalf of, such a covered recipient)
shall submit to the Secretary, in such electronic form
as the Secretary shall require, the following
information (aggregated per each drug, device,
biological, or medical supply, as applicable) with
respect to the preceding calendar year:
``(i) The total quantity of all such payments
or other transfers of value provided to all
covered recipients.
``(ii) The total value of all such payments
or other transfers of value provided to all
covered recipients.
``(iii) If applicable, information described
in clauses (vii) and (viii) of paragraph (1)(A)
with respect to such a payment or other
transfer of value.
``(B) Product sample described.--For purposes of
subparagraph (A), a product sample described in this
subparagraph is a product sample that is not intended
to be sold and is intended for patient use.''.
(b) Public Availability of Information.--Section 1128G(c)(1)(C)(ii)
of the Social Security Act (42 U.S.C. 1320a-7h(c)(1)(C)(ii)) is
amended--
(1) by striking ``(ii) contains'' and inserting ``(ii)(I)
with respect to information that is not information submitted
under paragraph (3) of subsection (a), contains'';
(2) by striking ``, as applicable;'' and inserting ``, as
applicable; and''; and
(3) by adding at the end the following new subclause:
``(II) with respect to information submitted
under paragraph (3) of subsection (a), contains
information that is presented by the name of
the applicable manufacturer, the total amount
of all payments or other transfers of value
described in such paragraph provided to all
covered recipients, the total value of all such
payments or other transfers of value provided
to all covered recipients, and the name of the
covered drug, device, biological, or medical
supply, as applicable;''.
(c) Conforming Amendment.--Section 1128G(e)(10)(B)(ii) of the Social
Security Act (42 U.S.C. 1320a-7h(e)(10)(B)(ii)) is amended by striking
``Product samples'' and inserting ``Except for purposes of paragraph
(3) of subsection (a), product samples''.
(d) Reporting to the Secretary of the Treasury.--
(1) In general.--Subpart A of part III of subchapter A of
chapter 61 of the Internal Revenue Code of 1986, as amended by
section 2, is further amended by inserting after section 6039K
the following new section:
``SEC. 6039L. PRODUCT SAMPLES OF APPLICABLE MANUFACTURERS.
``Each applicable manufacturer (within the meaning of section
1128G(a)(3) of the Social Security Act) shall file a return (at such
time and in such form and manner as the Secretary may provide) showing
for such year to which such section applies--
``(1) the amount described in section 1128G(a)(3)(A)(ii) of
such Act with respect to such year, and
``(2) the portion of such amount for which a deduction was
claimed under section 162.''.
(2) Clerical amendment.--The table of sections for subpart A
of part III of subchapter A of chapter 61 of such Code, as
amended by section 2, is further amended by inserting after the
item relating to section 6039K the following new item:
``Sec. 6039L. Product samples of applicable manufacturers.''.
SEC. 4. ANALYSIS AND REPORT ON INPATIENT HOSPITAL DRUG COSTS.
(a) Analysis.--The Secretary of Health and Human Services shall
conduct an analysis that, to the extent practicable--
(1) focuses on drugs that are furnished in the inpatient
setting;
(2) includes data on inpatient hospital drug costs, Medicare
spending, volume, and spending per admission;
(3) considers trends in inpatient hospital drug costs, such
as trends by hospital size, classification of urban or rural,
whether the hospital is a teaching hospital, or other
categorization; and
(4) examines the impact of drug shortages on services that
are furnished in an inpatient hospital setting.
In conducting such analysis, the Secretary may conduct hospital
surveys, use data from hospital cost reports, or use other data as
determined by the Secretary.
(b) Report.--Not later than January 1, 2021, the Secretary shall
submit to the Committee on Ways and Means of the House of
Representatives and the Finance Committee of the Senate a report on
drug costs in the inpatient hospital setting, including the analyses
described in paragraphs (1) through (4) of subsection (a).
(c) Funding.--For purposes of carrying out this section, there shall
be transferred to the Secretary $3,000,000 from the Federal Hospital
Insurance Trust Fund under section 1817 of the Social Security Act (42
U.S.C. 1395i).
SEC. 5. PUBLIC DISCLOSURE OF DRUG DISCOUNTS.
Section 1150A of the Social Security Act (42 U.S.C. 1320b-23) is
amended--
(1) in subsection (c), in the matter preceding paragraph (1),
by inserting ``(other than as permitted under subsection (e))''
after ``disclosed by the Secretary''; and
(2) by adding at the end the following new subsection:
``(e) Public Availability of Certain Information.--
``(1) In general.--In order to allow the comparison of PBMs'
ability to negotiate rebates, discounts, and price concessions
and the amount of such rebates, discounts, and price
concessions that are passed through to plan sponsors, beginning
January 1, 2020, the Secretary shall make available on the
Internet website of the Department of Health and Human Services
the information with respect to the second preceding calendar
year provided to the Secretary on generic dispensing rates (as
described in paragraph (1) of subsection (b) and information
provided to the Secretary under paragraphs (2) and (3) of such
subsection that, as determined by the Secretary, is with
respect to each PBM.
``(2) Availability of data.--In carrying out paragraph (1),
the Secretary shall ensure the following:
``(A) Confidentiality.--The information described in
such paragraph is displayed in a manner that prevents
the disclosure of information on rebates, discounts,
and price concessions, with respect to an individual
drug or an individual plan.
``(B) Class of drug.--The information described in
such paragraph is made available by class of drug,
using an existing classification system, but only if
the class contains such number of drugs, as specified
by the Secretary, to ensure confidentiality of
proprietary information or other information that is
prevented to be disclosed under subparagraph (A).''.
SEC. 6. REQUIRING CERTAIN MANUFACTURERS TO REPORT DRUG PRICING
INFORMATION WITH RESPECT TO DRUGS UNDER THE
MEDICARE PROGRAM.
(a) In General.--Section 1847A of the Social Security Act (42 U.S.C.
1395w-3a) is amended--
(1) in subsection (b)--
(A) in paragraph (2)(A), by inserting ``or subsection
(f)(2), as applicable'' before the period at the end;
(B) in paragraph (3), in the matter preceding
subparagraph (A), by inserting ``or subsection (f)(2),
as applicable,'' before ``determined by''; and
(C) in paragraph (6)(A), in the matter preceding
clause (i), by inserting ``or subsection (f)(2), as
applicable,'' before ``determined by''; and
(2) in subsection (f)--
(A) by striking ``For requirements'' and inserting
the following:
``(1) In general.--For requirements''; and
(B) by adding at the end the following new paragraph:
``(2) Manufacturers without a rebate agreement under title
xix.--
``(A) In general.--In the case of a manufacturer of a
drug or biological described in subparagraph (C), (E),
or (G) of section 1842(o)(1) or in clause (ii) or (iii)
of section 1881(b)(14)(B) that does not have a rebate
agreement in effect under section 1927, for calendar
quarters beginning on or after January 1, 2020, such
manufacturer shall report to the Secretary the
information described in subsection (b)(3)(A)(iii) of
such section 1927 with respect to such drug or
biological in a time and manner specified by the
Secretary.
``(B) Audit.--Information reported under subparagraph
(A) is subject to audit by the Inspector General of the
Department of Health and Human Services.
``(C) Verification.--The Secretary may survey
wholesalers and manufacturers that directly distribute
drugs described in subparagraph (A), when necessary, to
verify manufacturer prices and manufacturer's average
sales prices (including wholesale acquisition cost) if
required to make payment reported under subparagraph
(A). The Secretary may impose a civil monetary penalty
in an amount not to exceed $100,000 on a wholesaler,
manufacturer, or direct seller, if the wholesaler,
manufacturer, or direct seller of such a drug refuses a
request for information about charges or prices by the
Secretary in connection with a survey under this
subparagraph or knowingly provides false information.
The provisions of section 1128A (other than subsections
(a) (with respect to amounts of penalties or additional
assessments) and (b)) shall apply to a civil money
penalty under this subparagraph in the same manner as
such provisions apply to a penalty or proceeding under
section 1128A(a).
``(D) Confidentiality.--Notwithstanding any other
provision of law, information disclosed by
manufacturers or wholesalers under this paragraph
(other than the wholesale acquisition cost for purposes
of carrying out this section) is confidential and shall
not be disclosed by the Secretary in a form which
discloses the identity of a specific manufacturer or
wholesaler or prices charged for drugs by such
manufacturer or wholesaler, except--
``(i) as the Secretary determines to be
necessary to carry out this section (including
the determination and implementation of the
payment amount), or to carry out section 1847B;
``(ii) to permit the Comptroller General to
review the information provided; and
``(iii) to permit the Director of the
Congressional Budget Office to review the
information provided.''.
(b) Enforcement.--Section 1847A such Act (42 U.S.C. 1395w-3a) is
further amended--
(1) in subsection (d)(4)--
(A) in subparagraph (A), by striking ``In general''
and inserting ``Misrepresentation'';
(B) in subparagraph (B), by striking ``subparagraph
(B)'' and inserting ``subparagraph (A), (B), or (C)'';
(C) by redesignating subparagraph (B) as subparagraph
(D); and
(D) by inserting after subparagraph (A) the following
new subparagraphs:
``(B) Failure to provide timely information.--If the
Secretary determines that a manufacturer described in
subsection (f)(2) has failed to report on information
described in section 1927(b)(3)(A)(iii) with respect to
a drug or biological in accordance with such
subsection, the Secretary shall apply a civil money
penalty in an amount of $10,000 for each day the
manufacturer has failed to report such information and
such amount shall be paid to the Treasury.
``(C) False information.--Any manufacturer required
to submit information under subsection (f)(2) that
knowingly provides false information is subject to a
civil money penalty in an amount not to exceed $100,000
for each item of false information. Such civil money
penalties are in addition to other penalties as may be
prescribed by law.''; and
(2) in subsection (c)(6)(A), by striking the period at the
end and inserting ``, except that, for purposes of subsection
(f)(2), the Secretary may, if the Secretary determines
appropriate, exclude repackagers of a drug or biological from
such term.''.
(c) Report.--Not later than January 1, 2021, the Inspector General of
the Department of Health and Human Services shall assess and submit to
Congress a report on the accuracy of average sales price information
submitted by manufacturers under section 1847A of the Social Security
Act (42 U.S.C. 1395w-3a). Such report shall include any recommendations
on how to improve the accuracy of such information.
I. SUMMARY AND BACKGROUND
A. Purpose and Summary
The bill, H.R. 2113, the ``Prescription Drug Sunshine,
Transparency, Accountability and Reporting (STAR) Act of 2019''
as ordered reported by the Committee on Ways and Means on April
9, 2019, includes several provisions that amend Titles XI and
XVIII of the Social Security Act (SSA) and focuses on
increasing transparency in the pharmaceutical marketplace.
Specifically, H.R. 2113 requires pharmaceutical manufacturers
to justify drug price increases or market introduction prices
that exceed a threshold amount, including reporting
expenditures for research and development and other costs; adds
new reporting requirements for medical product samples under
the existing federal Open Payments program; and requires the
Secretary of the Department of Health and Human Services (HHS)
to post on the public HHS website the aggregate rebates and
discounts that Pharmacy Benefit Managers (PBMs) receive from
drug manufacturers, by class of drug. The bill also requires
drug manufacturers that do not currently report Medicare Part B
drug prices to report those prices, and it requires the
Secretary to collect additional information on prescription
drugs used for inpatient hospital care covered under Medicare
Part A.
H.R. 2113 incorporates provisions that are substantially
similar to a number of bills that have been introduced as
standalone measures this Congress. Notably, section 2 is
adapted from H.R. 2069, introduced by Representative Horsford
(D-NV) and Representative Reed (R-NY). In addition, section 3
is adapted from H.R. 2064, introduced by Representative Chu (D-
CA) and Representative Nunes (R-CA); section 5 is adapted from
H.R. 2115, introduced by Representative Spanberger (D-VA),
Arrington, (R-TX), and Boyle (D-PA); and section 6 is adapted
from H.R. 2087, which was introduced by Subcommittee on Health
Chairman Doggett (D-TX) and Representative Buchanan (R-FL).
B. Background and Need for Legislation
The United States spent $457 billion on prescription drugs
in 2016, consisting of $328 billion on retail drugs and $128
billion on non-retail drugs. This figure represents
approximately 17 percent of all health care spending.\1\
Between 2011 and 2016, drug spending nationwide grew by 27
percent, more than 2.5 times the rate of growth in
inflation.\2\ Medicare alone spent nearly $130 billion on
prescription drugs in 2016, $99.5 billion of which was for Part
D drugs (drugs at the pharmacy counter) and $29.1 billion of
which was for Part B drugs (drugs in a physician's office).\3\
In total, 20 percent of Medicare spending went to prescription
drug costs in 2016.\4\
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\1\Assistant Secretary for Planning and Evaluation: Department of
Health and Human Services. Observations on Trends in Prescription Drug
Spending. March 8, 2016. https://aspe.hhs.gov/system/files/pdf/187586/
Drugspending.pdf.
\2\Office of the Actuary: Center for Medicare and Medicaid Services
(CMS). 2016 National Health Expenditures: National Health Prescription
Drug Spending Data, Table 11, BLS data on CPI-U 2011-2016. December 6,
2017. https://www.cms.gov/Research-Statistics-Data-and-Systems/
Statistics-Trends-and-Reports/NationalHealthExpendData/
NationalHealthAccountsHistorical.html.
\3\Kaiser Family Foundation, 10 Essential Facts About Medicare and
Prescription Drug Spending. Jan 2019.
\4\Id.
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Pharmaceutical spending has risen at an accelerated pace in
recent years due to increased utilization, price increases for
existing drugs, high launch prices of new products, and a
diminishing impact from the introduction of lower cost generic
drugs to the market. According to National Health Expenditure
data, spending for outpatient drugs rose 29 percent from 2011
2017.\5\
---------------------------------------------------------------------------
\5\Office of the Actuary: Center for Medicare and Medicaid Services
(CMS). 2016 National Health Expenditures: Historical. December 6, 2017.
https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-
Trends-and-Reports/NationalHealthExpendData/
NationalHealthAccountsHistorical.html. The rate of spending increase
has slowed to 0.4% in 2017 from a recent peak of 12.4% in 2014.
---------------------------------------------------------------------------
Manufacturers set list prices for drugs, which are subject
to markups and discounts by wholesalers, pharmacies, and other
entities along the drug distribution chain. Manufacturers also
negotiate price concessions with PBMs that contract with, or
are owned by, health plans that pay for health services.\6\
Manufacturers may provide rebates or other price concessions to
PBMs to have their drugs listed on health plan formularies
(i.e., lists of covered drugs).
---------------------------------------------------------------------------
\6\Ernst Berndt, National Bureau of Economic Research, Pricing and
Reimbursement in U.S. Pharmaceutical Markets. Working Paper 16297.
(September 2010).
---------------------------------------------------------------------------
Much of the data on pharmaceutical pricing is confidential,
through either contract or statutory provision. This makes it
difficult for researchers and policymakers to determine the
dollar amount of markups and discounts by wholesalers, PBMs,
and pharmacies, as well as final or net prices of drugs
purchased through payers, including the Medicare program and
commercial health plans.\7\ For example, HHS collects
information about drug prices for the Medicare Part D
outpatient prescription drug program, but much of the data may
not be released to the public.\8\
---------------------------------------------------------------------------
\7\Id.
\8\42 U.S.C. Sec. 1396r-8(b)(3)(D). (2009).
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In a 2017 report on pharmaceutical pricing, the National
Academies of Sciences, Engineering, and Medicine noted that
manufacturers, health plans, PBMs and other market participants
offered contrasting statements about which players bore
responsibility for rising drug prices, often without relevant
evidence to support the claims.\9\ According to the report,
greater disclosure and public reporting of reliable information
about prescription drug prices could improve market
performance, as has been the case with data reporting
requirements for other U.S. industries. Several states have
enacted legislation requiring pharmaceutical manufacturers to
publicly disclose drug pricing data.\10\
---------------------------------------------------------------------------
\9\National Academies of Sciences, Engineering, and Medicine,
Making Medicines affordable: A National Imperative. The National
Academies Press, p. 63. (2017) https://doi.org/10.17226/24946.
\10\ National Academy for State Health Policy, State Laws Help Spur
Congressional Action on Drug Prices. (February 19, 2019) https://
nashp.org/state-laws-help-spur-congressional-action-on-drug-prices/.
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C. Legislative History
Background
H.R. 2113 was introduced on April 8, 2019, and was referred
to the Committee on Ways and Means and additionally to the
Committee on Energy and Commerce.
Committee hearings
On February 12, 2019, the Committee on Ways and Means held
a full committee hearing to examine the cost of rising
prescription drug prices. Specifically, the hearing focused on:
rapidly escalating prices of older medications, high launch
prices, misaligned incentives for responsibly pricing products,
and high costs to patients. Members discussed the importance of
price transparency, reforms to Medicare Parts B and D, and
changes in ASP reporting. Among the Witnesses were Rachel
Sachs, Professor of Law at Washington University in St. Louis,
who spoke about the misaligned incentives for pharmaceutical
payment systems and Alan Reuther, Legislative Consultant at the
UAW Retiree Medical Benefits Trust who spoke about increased
pharmaceutical costs for their beneficiaries.
On March 7, 2019, the Committee on Ways and Means
Subcommittee on Health held a hearing to examine the
complicated drug pricing landscape, exploring ways to lower
prescription drug prices--particularly as they pertain to
patient out-of-pocket costs--through competition and value-
based payments. Witnesses, such as Mark Miller, Executive Vice
President at Arnold Ventures, discussed the importance of
closing tax loopholes in the pharmaceutical market, including
the implications of reporting free samples.
Committee action
The Committee on Ways and Means marked up H.R. 2113, the
Prescription Drug STAR Act, on April 9, 2019, and ordered the
bill, as amended, favorably reported by a voice vote (with a
quorum being present).
II. EXPLANATION OF THE BILL
A. Section 2--Drug Manufacturer Price Transparency
CURRENT LAW\11\
---------------------------------------------------------------------------
\11\All discussions of Current Law in this report refer to current
law as of the date of the markup (i.e., April 9, 2019) and do not
reflect subsequent law changes.
---------------------------------------------------------------------------
Under current law, the HHS Secretary has the authority to
monitor federal health care drug expenditures under Medicare,
the Veterans Health Administration, Medicaid, the state
Children's Health Insurance Program, the Public Health Service,
and other federal agencies. Generally, federal health program
payments for prescription drugs are statutorily determined and
often require drug manufacturers to provide price concessions,
purchase discounts, or rebates. The HHS Secretary uses a
variety of methods to monitor federal drug purchases to ensure
compliance with statutory requirements. However, drug
manufacturers are not required to explain or justify their
pricing strategies and patients are expected to pay the price
or risk health complications, bankruptcy, or even death.\12\
---------------------------------------------------------------------------
\12\D. Herkert, P Vijayakumar, J Luo, et al., Cost-Related Insulin
Underuse Among Patients with Diabetes. JAMA Intern Med. 179(1):112 114
(2019); Bram Sable-Smith, Insulin's High Cost Leads To Lethal
Rationing. NPR. (2018) https://www.npr.org/sections/health-shots/2018/
09/01/641615877/insulins-high-cost-leads-to-lethal-rationing. Micaela
Marini Higgs, The High Price of Insulin Is Literally Killing People.
Vice. (2017) https://tonic.vice.com/en_us/article/ezwwze/the-high-
price-of-insulin-is-literally-killing-people. Amanda Gilbert, Dubuque
County Mom Says Diabetic Son Rationed Insulin, Died. KWWL. (2018)
https://kwwl.com/news/2018/11/20/dubuque-county-mom-says-diabetic-son-
rationed-insulin-died/.
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To comply with federal statute, drug manufacturers and
other entities, such as health insurers and PBMs, are required
to regularly report certain drug prices and related information
to the HHS Secretary. Some statutorily required drug price data
may be limited to specific programs or agencies, and most
reported pricing information is statutorily protected and
confidential as drug manufacturers and other entities consider
drug prices to be competitive information. Most drug price data
are limited to use by the HHS Secretary for program
administration and for review by federal oversight agencies.
However, some drug price information is publicly available in
aggregate or in other form provided that an individual drug,
manufacturer, or payer is not identifiable.
REASONS FOR CHANGE
Drafted into Title XI of the SSA alongside a number of
other Medicare-related transparency provisions (e.g., Open
Payments, PBMs), section 2 of H.R. 2113 requires drug
manufacturers to justify to the Secretary of HHS any drug price
hikes above 10 percent or $10,000 per year, or 25 percent or
$25,000 in three years, and for new drugs with a launch price
at or above $26,000 per year. Section 2 of H.R. 2113 provides
that the $10,000, $25,000, and $26,000 thresholds will be
adjusted by the consumer price index for urban customers (CPI-
U) over time.
Drug prices have been increasing astronomically over the
past 20 years, and the lack of transparency creates an
information asymmetry between the buyer and the seller. For
example, the price of Evzio, an opioid overdose medication,
increased 508 percent between 2015 and 2016; while the cost of
the Epipen 2-pack increased more than 28 percent for the third
year in a row.13}14}15 In addition, per-capita
retail prescription drug spending has almost tripled since
2000.\16\ From 2008 to 2016, oral brand name drugs increased
9.2 percent per year, oral specialty drugs increased 20.6
percent per year, and generic drugs have increased at twice the
rate of inflation.\17\ The Congressional Budget Office (CBO)
recently published a report that pointed to launch prices as
the culprit in higher prices for specialty drugs in Part D:
``The much higher prices of specialty drugs . . . was
attributable to the higher prices at which those drugs were
introduced, not to more rapid growth in prices following their
introduction.''\18\
---------------------------------------------------------------------------
\13\Darrell Hulisz et. al, The Soaring Price of EpiPen. RN. (2016)
https://www.rn.com/featured-stories/the-soaring-price-of-epipen/.
\14\C. Koons & R. Langreth, How Marketing Turned the EpiPen into a
Billion-Dollar Business Bloomberg.com (2015) https://www.bloomberg.com/
news/articles/2015-09-23/how-marketing-turned-the-epipen-into-a-
billion-dollar-business.
\15\Centers for Medicare & Medicaid Services, Medicare Part D
Spending Dashboard and Data. (2019) https://www.cms.gov/Research-
Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Information-
on-Prescription-Drugs/MedicarePartD.html.
\16\Peterson-Kaiser Health System Tracker, What are the recent and
forecasted trends in prescription drug Spending? (2017) https://
www.healthsystemtracker.org/chart-collection/recent-forecasted-trends-
prescription-drug-spending/#item-nominal-and-inflation-adjusted-
increase-in-rx-spending_2017.
\17\Hernandez I, Good CB, Cutler DM, et al. The Contribution of New
Product Entry versus Existing Product Inflation in the Rising Costs of
Drugs. Health Affairs 38. No. 1: 76 83 (2019).
\18\Congressional Budget Office, Prices for and Spending on
Specialty Drugs in Medicare Part D and Medicaid: An In-Depth Analysis,
Working Paper. (2019) https://www.cbo.gov/publication/5501.
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This provision does not outlaw increases in drug prices or
high launch prices--it simply requires an explanation. This
provision of the STAR Act requires a public explanation for the
rationale behind price increases and high launch prices. The
provision includes certain guardrails for drug companies,
allowing proprietary information to remain confidential, but it
requires drug manufacturers to submit all information as
applicable to justifying the price. Due to the heterogeneity of
drug pricing across manufacturers and drugs, the bill leaves
the required elements used to justify price increases to the
discretion of the Secretary, which will be determined through
the public comment and rulemaking process. While the elements
included in a given submission will ultimately be the
responsibility of the manufacturers, the provision requires
each manufacturer to attest to the veracity of the
justification in writing and manufacturers will be subject to a
civil monetary penalty (CMP) for the provision of false
information.
When this provision takes effect in 2021, the first
reporting period will look back over the preceding five years
(increases that occurred from 2016 on) to determine whether a
drug qualifies for reporting under the Act. The provision's
thresholds and lookback are based on the model law drafted by
the National Academy of State Health Policy.\19\ Without this
lookback period, manufacturers could undermine the goal of
transparency by raising their prices as high as possible until
2021 to avoid having to report under the provision. Prices have
been continuing to skyrocket and eliminating the lookback on
enactment would allow manufacturers to continue their current
trend of price increases for their products until 2021 with no
justification and no relief in sight for consumers.
---------------------------------------------------------------------------
\19\NASHP, Drug Price Transparency Model Legislation and Resources,
https://nashp.org/drug-price-transparency/.
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This provision also would require reporting for any drug
that launches with an annual price of $26,000 or more. The goal
of this provision is to shed light on the factors driving high
launch prices and exert pressure on manufacturers to only set
high prices when they can be adequately justified. The
threshold is set at the median annual income of a Medicare
beneficiary. The majority of seniors and Medicare beneficiaries
in this country live on fixed income and do not have the
flexibility needed to absorb the costs of unexpected medical
expenses and increasing drug prices. Half of Medicare
beneficiaries have an annual income of less than $26,200.\20\
One quarter of Medicare beneficiaries live on less than $15,250
per year.\21\
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\20\Gretchen Jacobson et al., Income and Assets of Medicare
Beneficiaries, 2016-2035. The Henry J. Kaiser Family Foundation. (2017)
https://www.kff.org/medicare/issue-brief/income-and-assets-of-medicare-
beneficiaries-2016-2035/.
\21\Id.
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Representative George Holding (R-NC) offered and withdrew
an amendment that would have exempted price justifications for
drugs launching at or above the $26,000 threshold if those
drugs were the first Food and Drug Administration (FDA)-
approved drug for an indication or had fast-track,
breakthrough, or orphan drug status. This amendment would have
undercut the provision, creating a loophole for drug companies
justifying the price of some of the highest cost drugs on the
market. Seven of the top ten best-selling drugs in the country
in 2015 were orphan drugs, and the median launch price of
orphan drugs has doubled every five years since
1983.22}23
---------------------------------------------------------------------------
\22\Tribble, SJ & Lupkin, S. Drugmakers Manipulate Orphan Drug
Rules to Create Prized Monopolies, Kaiser Health News. (January 17,
2017) https://khn.org/news/drugmakers-manipulate-orphan-drug-rules-to-
create-prized-monopolies/.
\23\Johnson, CY. High Prices Make Once-neglected `orphan' drugs a
booming business, The Washington Post. (August 4, 2016) https://
www.washingtonpost.com/business/economy/high-prices-make-once-
neglected-orphan-drugs-a-booming-business/2016/08/04/539d0968-1e10-11e6
9c81-4be1c14fb8c8_story.html?utm_term=.a5848b6c94f6.
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Many drugs with a high launch price represent a new
treatment or cure for previously unmanageable conditions. This
law will provide an opportunity for manufacturers to describe
their achievements and the incredible value of their
innovation, while discouraging needlessly high launch prices
for drugs that are not novel cures and may be repackaged as
generics.
EXPLANATION OF PROVISIONS
This legislation will bring much-needed transparency and
accountability in drug prices by requiring that manufacturers
justify certain price increases or price launches in excess of
the median Medicare beneficiary income.\24\ Specifically,
section 2 amends the SSA Section 1128 by adding a new section
that would require the HHS Secretary to determine at least
annually if drug manufacturers have increased currently
marketed or newly introduced prescription drug prices by more
than certain threshold amounts beginning in 2021. If the HHS
Secretary determines a drug's price increased or an
introductory price was above the threshold, then drug
manufacturers will be required to submit information to justify
drug price increase. (Hereinafter the justification required by
drug manufacturers that would apply to both drug price
increases and introductory prices above a threshold is referred
to as the ``drug price increase justification.'')
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\24\Gretchen Jacobson et al., Income and Assets of Medicare
Beneficiaries, 2016-2035 The Henry J. Kaiser Family Foundation (2017)
https://www.kff.org/medicare/issue-brief/income-and-assets-of-medicare-
beneficiaries-2016-2035/.
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Beginning in 2021, the HHS Secretary would be authorized to
require drug manufacturers to justify individual drug price
increases when a drug's wholesale acquisition cost (WAC), or
list price, had:\25\
---------------------------------------------------------------------------
\25\1847A(c)(6)(B).
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1. a cumulative WAC (or alternative cost measure
specified by the HHS Secretary) increase of at least 10
percent (or $10,000) within a calendar year period
beginning and ending within the five-year lookback
period preceding the applicable year;
2. a cumulative WAC (or alternative cost measure)
increase of at least 25 percent (or $25,000) during any
three-year period beginning and ending within the
lookback period; or
3. an introductory (launch) price of at least $26,000
per individual or per drug user expenditure (as
estimated by the HHS Secretary) for an applicable year
or per course of treatment (as defined by the HHS
Secretary) for a drug first covered by Medicare.
Beginning with 2022, the drug price thresholds will be
adjusted annually for inflation based on the CPI-U as of
September of the previous year and rounded to the nearest $10
multiple. A price increase justification would not be required
if: (1) a prior justification occurring within the lookback
period had already been triggered, or (2) if the increase were
to be less than the inflation adjustment.
Beginning in 2021 and annually thereafter, the HHS
Secretary is required to post on a public HHS website
information about affected drugs if different price increase or
introductory price criteria were applied.
Drug manufacturers will be required to justify drug price
increases or introductory prices by identifying factors that
contributed to the drug's price and the role each factor played
in the increase or introductory price. Section 2 requires drug
manufacturers to submit the following supporting documentation,
as relevant:
total drug manufacturer expenditures on the
following: materials and manufacturing for the drug,
patents and licensing acquisition for each drug of the
manufacturer, and costs of purchasing or acquiring the
drug from another company, if applicable;
the percentage of the manufacturer's total
research and development expenditures for the drug that
were derived from federal funds;
the drug manufacturer's total research and
development expenditures for the drug;
the total revenue and net profit generated
by the applicable drug for each calendar year since the
drug was approved;
the drug manufacturer's total marketing and
advertising costs for the drug;
the following additional information
specific to the manufacturer such as: the drug
manufacturer's total revenue and net profit for the
reporting period (as determined by the HHS Secretary),
metrics used to determine executive compensation, total
expenditures on research and development, total
expenditures on clinical trials that failed to gain
approval, and any information related to the drug
pricing decision;
any other relevant information and
supporting documentation necessary to justify a drug's
price increase or introductory price; and
any other relevant information and
supporting documentation as specified by the HHS
Secretary.
Drug manufacturers are required to submit a certification
signed by the manufacturer's officers (or designees) that the
justification information provided was complete and accurate.
The HHS Secretary is required to notify a drug manufacturer
within 60 days from the date the HHS Secretary determined that
a drug's price increase or introductory price would require
justification. Drug manufacturers are required to submit the
drug price increase justification, including a summary, within
90 days after being notified by the HHS Secretary. In
specifying the justification, the HHS Secretary will be
required to permit drug manufacturers to exclude proprietary
information from the summary. The HHS Secretary is required to
publicly post the summary of the drug price increase
justification on the Centers for Medicare & Medicaid Services
(CMS) website within 30 days after receiving the drug
manufacturer's complete drug price increase justification.
The HHS Secretary is required to apply a $10,000 per day
CMP for each day a drug manufacturer failed to submit a timely
drug price increase justification, including failure to submit
the justification in the required form and manner. Drug
manufacturers that knowingly submitted false price increase
justification information would be subject to CMPs up to
$100,000 for each false information item. Other federal health
care CMPs would also apply to reporting of the drug price
increase justification.\26\
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\26\42 U.S.C. Sec. 1320(a)-7(a).
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Section 2 defines applicable drugs as prescription drugs
(and biologic products), including insulin, but not vaccines,
drugs covered by Medicare during a lookback period that were
not low-cost drugs, were approved by the FDA, and were
inpatient drugs, physician-administered drugs, or drugs that
could be paid for as part of another service.\27\ By January 1,
2021, the HHS Secretary would be required to specify a
threshold, such as a cost or spending threshold, and to
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\27\Covered outpatient drugs, as defined under Medicaid.
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identify low-cost drugs to exclude from the definition of an
applicable drug. Drug manufacturers and WAC are defined
consistent with Medicare and Medicaid statute.\28\
---------------------------------------------------------------------------
\28\ Wholesale Acquisition Cost: 42 U.S.C. Sec. 1395w-3a;
Manufacturer: 42 U.S.C. Sec. 1396r-8.
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Section 2 also requires the Secretary of Treasury to
establish a tax return for drug manufacturers if they were
required to submit a drug price increase justification. The
return would include all the information, supporting
documentation, and the certification required in the price
justification.
EFFECTIVE DATE
The effective date of Section 2 is January 1, 2021.
B. Section 3--Requirement for Manufacturers of Certain Drugs, Devices,
Biologicals, and Medical Supplies to Report on Product Samples Provided
to Certain Health Care Providers
CURRENT LAW
To promote transparency and prevent inappropriate
relationships, Section 1128G of the Social Security Act (SSA)
generally requires ``manufacturers of a covered drug, device,
biological, or medical supply''\29\ (manufacturers) to report
payments or transfers of value to ``covered recipients'''
annually to the HHS Secretary.\30\ Under Section 1128G, covered
recipients include teaching hospitals and physicians but
exclude manufacturers' employees.\31\ Examples of reportable
payments and transfers of value include research support,
gifts, entertainment, consulting fees, grants, meals, or
travel,\32\ but exclude certain small payments or transfers of
value and product samples that are not intended to be sold and
are for patient use.\33\ Additionally, Section 1128G directs
the HHS Secretary to make submitted information publicly
available, including through a searchable Internet website,\34\
a requirement currently met through the Open Payments
program.\35\
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\29\A ``covered drug, device, biological, or medical supply'' is
generally defined as ``any drug, biological product, device, or medical
supply for which payment is available under Medicare, Medicaid, or CHIP
(or a waiver of such a plan). See 42 U.S.C. Sec. 1320a-7h(e)(5).
\30\See id. 42 U.S.C. Sec. 1320a-7h(a).
\31\See id. Sec. 1320a-7h(e)(6). Section 6111 of the Substance Use-
Disorder Prevention that Promotes Opioid Recovery and Treatment for
Patients and Communities Act (SUPPORT Act) amends Section 1128G(e)(6)
to expand the definition of covered recipient to encompass physician
assistants, nurse practitioners, clinical nurse specialists, certified
registered nurse anesthetists, and certified nurse midwives. Pub. L.
No. 115-271, Sec. 6011(a). The amendments made by this section apply to
information required to be submitted on or after January 1, 2022.
\32\42 U.S.C. Sec. 1320a-7h(a)(1)(A)(vi).
\33\Id. Sec. 1320a-7h(e)(10)(B).
\34\See id. Sec. 1320a-7h(c).
\35\Centers for Medicare and Medicaid Services, Open Payments.
(2019) https://www.cms.gov/OpenPayments/index.html/.
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In addition, Section 162 of the Internal Revenue Code
permits a deduction for ordinary and necessary expenses paid or
incurred during the taxable year in carrying on any trade or
business.\36\ Under this section, the cost of producing
pharmaceutical product samples may be claimed by a manufacturer
as an ordinary and necessary business expense deduction to
lower the manufacturer's federal income tax liability for the
year in which the samples are distributed to providers.\37\
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\36\26 U.S.C. Sec. 162(a).
\37\Department of the Treasury, I.R.S. Nat'l Office Field Serv.
Adv. Mem. 199925009. (June 25, 1999) https://www.irs.gov/pub/irs-wd/
9925009.pdf.
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REASONS FOR CHANGE
In 2016, pharmaceutical companies gave the equivalent of
$13.5 billion in free samples to medical care
providers.\38\However, little is known about the quantities of
products these companies provide. While free drug samples can
be incredibly important to patients both for the purposes of
trying a new drug to determine its effectiveness or for helping
patients afford high-cost drugs, they can also serve as a
marketing tool and may have the potential to affect the
behavior of patients and providers.\39\
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\38\Schwartz, L. & Woloshin, S. Medical Marketing in the United
States, 1997-2016. JAMA. (January 2019) https://jamanetwork.com/
journals/jama/fullarticle/2720029?alert=article&utm_
source=newsletter&utm_medium=email&utm_campaign=newsletter_axiosvitals&s
tream=top.
\39\Chew LD, O'Young TS, Hazlet TK, Bradley KA, Maynard C, Lessler
DS. A Physician Survey of The Effect of Drug Sample Availability on
Physicians' Behavior. J Gen Intern Med. 15:478--483. (2000). See e.g.,
Lahey, T, The High Costs of ``Free'' Drug Samples. (December 2014)
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4274368/. See e.g.,
Chimonas, S & Kassirer, J, No more free drug samples? PloS Med.
(2009).https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2669216/.
---------------------------------------------------------------------------
Accordingly, the Medicare Payment Advisory Commission
(MedPAC) recommended that Congress collect data and allow
public availability of data on free samples. In its report to
Congress, MedPac, stated:
``While free samples may benefit the patient, there
are concerns they may influence physicians' prescribing
decisions and lead physicians and patients to rely on
more expensive drugs when less expensive medications
might be equally effective. More information about the
distribution of samples would enable researchers to
study their impact on prescribing patterns and overall
drug costs and could help payers and health plans
target their counter detailing programs. Therefore, the
Commission recommends that the Congress require
pharmaceutical manufacturers to report information
about samples and their recipients.''\40\
---------------------------------------------------------------------------
\40\Medicare Payment Advisory Committee, Report to Congress:
Medicare Payment Policy. (March 2009) http://www.medpac.gov/docs/
default-source/reports/march-2009-report-to-congress-medicare-payment-
policy.pdf .
Beyond drugs, transparency is needed for free medical
devices. Free samples for devices are no different than free
samples of prescription drugs: they are a marketing tool to
develop brand loyalty. Little is known, however about the value
of many of these products or how many of these products are
given out for ``free'' as a marketing tool to help build brand
loyalty. Free products can drive consumers to more expensive
devices, which then increase health costs overall. Current
physician sunshine reporting shows that device manufacturers
provide more ``transfers of value'' to physicians and teaching
hospitals than drug manufacturers: Device donations accounted
for $1.7 billion of the $2.8 billion in non-research payments
to physicians in 2015, or 59 percent of the total. However,
that information has yet to be publicly reported.\41\
---------------------------------------------------------------------------
\41\Medicare Payment Advisory Committee, Report to Congress--
Medicare and the Healthcare Delivery System: An Overview of the Medical
Device Industry. (June 2017) http://www.medpac.gov/docs/default-source/
reports/march-2009-report-to-congress-medicare-payment-policy.pdf.
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EXPLANATION OF PROVISIONS
Section 3 would give the public better insight into the
number and value of samples, as well as what drug, device, or
other medical supplies manufacturers give to health care
providers for patient consumption. Specifically, section 3
amends SSA Section 1128G to add new reporting requirements for
medical product samples under the Open Payments program. More
specifically, beginning in 2023, manufacturers that provide a
payment or transfer of value that is a product sample to
covered recipients (or a recipient's designee) would be
required to electronically submit to the HHS Secretary certain
information concerning the quantity and value of such samples,
as well as additional data under specified circumstances.
Manufacturers would be compelled to report aggregated data for
the provided samples of each drug, device, biological, or
medical supply. For purposes of the provision, product samples
would be those that are not intended to be sold and are for
patient use.
Additionally, the Open Payments website is required to
display the total amount and total value of all samples
provided to all covered recipients, and the name of covered
drugs or other medical products, as applicable.
Section 3 also requires some of the information provided to
the HHS Secretary to be reported separately to the Secretary of
Treasury. Specifically, each manufacturer is required to report
to the Secretary of Treasury the total value of all public
samples it provided to covered recipients, as well as the
portion of that amount for which an income tax deduction as an
ordinary and necessary business expense was claimed by the
manufacturer.
Nothing in this provision prevents drug and device
manufacturers from continuing to provide free samples, nor does
it add any new burdens to providers under the Open Payments
Program. It only requires the disclosure of the total value and
quantity of these samples.
EFFECTIVE DATE
The effective date of Section 3 is January 1, 2023.
C. Section 4--Analysis and Report on Inpatient Hospital Drug Costs
CURRENT LAW
Under Medicare Part A, HHS pays most hospitals a pre-
determined, per-discharge payment using a prospective payment
system (or PPS) for covered inpatient services furnished to
Medicare beneficiaries.\42\ This PPS payment generally includes
all inpatient hospital services that are furnished during an
inpatient hospital stay, including drugs and biologicals
ordinarily furnished by the hospital for the care and treatment
of inpatients. Medicare PPS payments for drugs made up about 16
percent of total Medicare spending for pharmaceuticals in
2016.\43\
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\42\Center for Medicare and Medicaid Services, Medicare Benefit
Policy Manual, Chapter 1, ``Inpatient Hospital Services Covered Under
Part A,'' Section 30. (Rev. March 10, 2017) https://www.cms.gov/
Regulations-and-Guidance/Guidance/Manuals/Downloads/bp102c01.pdf.
\43\MedPAC, Overview: Medicare Drug Spending, p. 7. (June 16, 2016)
http://medpac.gov/docs/default-source/fact-sheets/overview-of-medicare-
drug-spending.pdf?sfvrsn=0. Medicare also covered drugs under Part A
through Medicare Advantage plans (Part C) which provide coverage for
some Part A and Part B services.
---------------------------------------------------------------------------
Although Part A payments for hospital inpatient drugs and
biologicals are generally bundled into the PPS payment, there
are exceptions for certain qualifying new, high-cost medical
services or technologies including drugs, hemophilia clotting
factors, and certain vaccines.\44\
---------------------------------------------------------------------------
\44\Center for Medicare and Medicaid Services, Medicare Claims
Policy Manual, Chapter: Inpatient Patient Billing. Section 30 (Rev.
October 26, 2018) https://www.cms.gov/Regulations-and-Guidance/
Guidance/Manuals/Downloads/clm104c03.pdf.
---------------------------------------------------------------------------
REASONS FOR CHANGE
Drug prices are skyrocketing across the health care sector
with scrutiny focused on outpatient--and not inpatient--costs.
Yet, because Medicare typically pays for inpatient prescription
drugs on a bundled basis, little information is known about the
costs of individual drugs in this setting because hospitals do
not report the individual drug costs on their cost reports.
This provision requires the Secretary of HHS to conduct a study
to submit to Congress on inpatient (Medicare Part A) drug
costs, including trends in the use of inpatient drugs by
hospital type and an analysis of potential limitations in
reporting such costs on the Medicare Cost Reports.
EXPLANATION OF PROVISIONS
This provision requires the HHS Secretary to submit a
report to the Committee on Ways and Means and the Senate
Committee on Finance by January 1, 2021 regarding drug cost
trends in the hospital inpatient setting. The report would
include Medicare spending and inpatient drug cost and
utilization trends by hospital characteristics such as hospital
size, urban or rural location, teaching hospital status, and
other hospital characteristics as determined by the HHS
Secretary. The report is also required to address the effect of
drug shortages on inpatient services. The HHS Secretary is
authorized to conduct hospital surveys, and to use existing
sources such as cost report data, or other data as determined
appropriate. Section 4 would transfer $3 million from the
Hospital Insurance (Medicare Part A) Trust Fund to the HHS
Secretary to carry out Section 4.
EFFECTIVE DATE
The effective date of Section 4 is the date of enactment;
while the study is required to be transmitted to Congress no
later than January 1, 2021.
D. Section 5--Public Disclosure of Drug Discounts
CURRENT LAW
Health plans typically contract with, or own, PBMs that
perform a range of services including designing health plan
formularies, creating lists of covered drugs; setting up
contracted networks of retail pharmacies that dispense drugs to
health plan enrollees for set reimbursement, and negotiating
drug price concessions from pharmaceutical manufacturers--
including up-front discounts or rebates after the point of
sale. PBMs generally set prices for drugs, but in some cases
PBMs dispense drugs from their own mail-order or specialty
pharmacies.
PBM contract terms, and information about net drug prices
negotiated by PBMs, generally are confidential due to market
competition considerations. Some states have enacted
legislation requiring health insurers and PBMs serving the
commercial market to report aggregate information about drug
price concessions.\45\ In the Medicare Part D program, private
insurers that offer Part D plans must report price data to the
HHS Secretary to allow for benefit administration.\46\ Much of
the information is confidential, but the HHS Secretary is
authorized to conduct periodic audits to protect against fraud
and abuse and to ensure proper program disclosures and
accounting.
---------------------------------------------------------------------------
\45\National Academy for State Health Policy, State Laws Help Spur
Congressional Action on Drug Prices. (February 19, 2019) https://
nashp.org/state-laws-help-spur-congressional-action-on-drug-prices/.
\46\42 C.F.R. Sec. 423.104(g)(3).
---------------------------------------------------------------------------
As part of the 2010 Patient Protection and Affordable Care
Act (ACA, P.L. 111-148, as amended), Congress required PBMs and
health payers to report additional data about prescription drug
sales and prices for Part D plans and Qualified Health Plans
(QHPs) sold on state ACA insurance exchanges. QHPs are
individual health insurance plans that undergo an additional
HHS certification process, compared to other plans in the non-
group market.\47\
---------------------------------------------------------------------------
\47\42 U.S.C. Sec. 18021.
---------------------------------------------------------------------------
Under the ACA provisions, SSA Section 1150A, a health plan
or PBM that manages prescription drug coverage for a Part D
plan or QHP, must report the following information to the HHS
Secretary for a contract year:\48\
---------------------------------------------------------------------------
\48\42 C.F.R Sec. 423.514(d); 45 C.F.R Sec. 156.295.
---------------------------------------------------------------------------
The percentage of prescriptions provided
through retail pharmacies as compared to mail order
pharmacies.
The percentage of prescriptions for which a
generic drug was available and dispensed by a pharmacy,
broken down by pharmacy type: mail order pharmacies,
independent pharmacies, supermarket pharmacies, and
mass merchandiser pharmacies.
The aggregate amount of rebates, discounts,
or price concessions (excluding certain bona fide
service fees), negotiated by a PBM under a health plan
that are attributable to patient utilization under the
plan; the aggregate amount of rebates, discounts, or
price concessions passed through by the PBM to a plan
sponsor; and the total number of dispensed
prescriptions.
The aggregate amount of the difference
between what a health plan pays a PBM, and what a PBM
pays retail pharmacies, mail order pharmacies, and the
total prescriptions dispensed.
The reported data are confidential and may not be disclosed
by the HHS Secretary or by a plan receiving the information
from a PBM, with limited exceptions. The HHS Secretary may
disclose information--in a form that does not disclose the
identity of a PBM or health plan, or prices charged for
individual drugs--to administer certain provisions of the ACA,
to administer Part D, or for review by the Government
Accountability Office (GAO) or CBO. PBMs and health plans that
do not comply with the provisions or that provide false
information are subject to penalties.
REASONS FOR CHANGE
This provision requires the Secretary of HHS to post on the
public HHS website the aggregate rebates and discounts PBMs
receive from drug manufacturers, by class of drug. While PBMs
already report this information to the Secretary under current
law, transparency will help ensure that all plans, payers, and
consumers have information to better understand how PBMs work
and whether the discounts they achieve get passed on to lower
costs. While PBMs negotiate lower drug prices through rebates,
consumers still pay coinsurance off the list price, not the
price the PBM negotiates--meaning that consumer costs remain
high. Rebates can be used to lower patient premiums but
policymakers do not understand if the increase in drug prices
and patient cost-sharing is offset by any decrease in patient
premiums.
With more transparency into the discounts PBMs achieve on
different classes of drugs, insurance companies and large
purchasers will be able to better evaluate PBM services and
select PBMs that get the best discounts on the medicines their
consumers use most. This policy could also help policymakers
develop strategies to ensure lower drug prices and premiums.
This public reporting will not reveal proprietary
information--it simply requires that the Secretary posts to a
public website aggregate information that the PBMs already
report. Reporting rebates and discounts in the aggregate (i.e.,
across PBMs) would be insufficient for policymakers and
consumers to understand the types of discounts PBMs receive and
the way those rebates impact health care costs.
EXPLANATION OF PROVISIONS
This provision would amend SSA Section 1150A to require the
HHS Secretary to publicly release data on PBM-negotiated
rebates, discounts, and other price concessions, as well as
information on generic drug dispensing rates. Starting in 2020,
the HHS Secretary would post aggregate data on the HHS website.
The data, to be provided with a one-year lag, would be
displayed in a way that would prevent disclosure of price
information about individual drugs or health plans. The HHS
Secretary would be allowed to make information available about
specific drug classes, if the HHS Secretary determined that the
class contained a sufficient number of drugs to ensure
confidentiality of proprietary information and did not allow
for identification of individual drugs or health plans.
EFFECTIVE DATE
The effective date of Section 5 is January 1, 2020.
E. Section 6--Requiring Certain Manufacturers To Report Drug Pricing
Information With Respect to Drugs Under the Medicare Program
CURRENT LAW
In general, as a condition of participation in the Medicaid
drug rebate program (MDRP), prescription drug and biological
manufacturers are required to report certain drug price
information to the HHS Secretary quarterly.\49\ The MDRP
agreement also requires drug and biological manufacturers to
provide discounts to other federal programs.\50\ The drug price
information required from MDRP-participating drug manufacturers
includes Medicaid ``best price,'' the average manufacturer
price (AMP), the average sales price (ASP), and, in some
situations, WAC.\51\
---------------------------------------------------------------------------
\49\Manufacturer Provision of Price Information: 42 U.S.C.
Sec. 1396r-8.
\50\The Veterans Health Administration, the Coast Guard, Department
of Defense, the Public Health Service Act (Section 340B Drug Pricing
Program), and other federal agencies [Requirement for a Rebate
Agreement, 42 U.S.C. Sec. 1396r-8.
\51\Best Price Defined, Average manufacturer price (AMP): 42 U.S.C.
Sec. 1396r-8; Manufacturers Average Sales Price: 42 U.S.C. Sec. 1395w-
3a.
---------------------------------------------------------------------------
Best price and AMP are used in determining the amount of
statutory rebates drug and biological manufacturers owe for a
drug during a rebate period. ASP and WAC are used in
determining Medicare Part B drug payments to providers.\52\ The
HHS Secretary is authorized to use the required price
information to administer the programs but otherwise is
prohibited from disclosing individual drug price information or
making it public.\53\
---------------------------------------------------------------------------
\52\Use of Average Sales Price Methodology: 42 U.S.C. Sec. 1395w-
3a.
\53\Confidentiality of Price Information: 42 U.S.C. Sec. 1396r-8.
---------------------------------------------------------------------------
Medicare covers most drugs under Medicare Part D, but some
drugs are only available when administered by a physician under
Medicare Part B. For Part B drugs, providers buy the
appropriate drug and then are paid by Medicare after the drug
is administered to a beneficiary. Even though drug
manufacturers are required to submit timely ASP information for
each Part B drug so those prices can be used to calculate what
Medicare will pay providers for drugs, some drug manufacturers
fail to submit each drug's ASP or fail to submit the ASP within
the specified time.\54\ In addition, some drug and biological
manufacturers do not participate in the MDRP and as a result
are not required to submit the ASP for their products.\55\
---------------------------------------------------------------------------
\54\Department of Health and Human Services Office of Inspector
General, Limitations in Manufacturer Reporting of Average Sales Price
Data for Part B Drugs: OEI-12-13 00040 (July 2014).
\55\Ibid.
---------------------------------------------------------------------------
REASONS FOR CHANGE
This provision would make ASP data more accurate by
requiring all manufacturers of drugs covered by Medicare Part B
to report ASP data to the Secretary, mirroring the requirements
and enforcement mechanism to which drug manufacturers with
Medicaid agreements are currently subject. This provision is a
commonsense policy recommended by a number of federal agencies:
MedPAC, the GAO, the HHS Office of Inspector General (OIG), and
the Administration in the fiscal year (FY) 2019 and 2020
President's budgets. According to MedPAC:
``Failing to report ASPs can impact prices for Part B
drugs in several ways. For drugs with partially
complete ASP data--that is, drugs for which some
manufacturers report ASPs but others do not--payment
rates based on only the reported ASP data might not
reflect average prices of all manufacturers accurately.
For drugs with no ASP data--that is, drugs for which no
manufacturer reports ASPs--CMS might resort to pricing
drugs using alternative and potentially inflated
measures of price such as WACs.''
EXPLANATION OF PROVISIONS
This provision would amend SSA Section 1847A to require
drug and biological manufacturers that do not participate in
the MDRP, but have products that are separately payable under
Medicare Part B, to report specified Medicare Part B drug price
information to the HHS Secretary beginning January 1, 2020. The
reported price information would be subject to audit by the HHS
OIG.
Section 6 would authorize the HHS Secretary, when
necessary, to survey wholesalers and drug and biological
manufacturers that directly distribute Medicare Part B drugs to
verify specified price information. The HHS Secretary would be
authorized to impose a not-to-exceed $100,000 CMP on drug
manufacturers or drug suppliers if they refused a request from
the HHS Secretary to provide price information or knowingly
provided false information about charges or prices in
connection with a verification survey. In addition, the HHS
Secretary would be authorized to impose additional CMPs
applicable under federal statute.
The information that this provision requires drug
manufacturers or wholesalers to report would be kept
confidential, and the HHS Secretary would be prohibited from
disclosing that information in a form that identifies a
specific manufacturer, wholesaler, or the drug prices charged
except as necessary for GAO and CBO to review the information.
The HHS Secretary would be required to submit a report to
Congress by January 1, 2021, that assesses the accuracy of the
Medicare Part B ASP information submitted by drug and
biological manufacturers. The report would be required to
include recommendations on how to improve the accuracy of the
ASP information.
EFFECTIVE DATE
The effective date of Section 6 is January 1, 2020.
III. VOTES OF THE COMMITTEE
In compliance with clause 3(b) of rule XIII of the Rules of
the House of Representatives, the following statement is made
concerning the vote of the Committee on Ways and Means in its
consideration of H.R. 2113, ``Prescription Drug Sunshine,
Transparency, Accountability and Reporting (STAR) Act of 2019''
on April 9, 2019.
The Amendment in the Nature of a Substitute was agreed to
by a roll call vote of 40 yeas to 0 nays. The vote was as
follows.
----------------------------------------------------------------------------------------------------------------
Representative Yea Nay Present Representative Yea Nay Present
----------------------------------------------------------------------------------------------------------------
MR. NEAL..................... X ......... ......... MR. BRADY...... X ......... .........
MR. LEWIS.................... X ......... ......... MR. NUNES...... X ......... .........
MR. DOGGETT.................. X ......... ......... MR. BUCHANAN... X ......... .........
MR. THOMPSON................. X ......... ......... MR. SMITH (NE). X ......... .........
MR. LARSON................... X ......... ......... MR. MARCHANT... X ......... .........
MR. BLUMENAUER............... ......... ......... ......... MR. REED....... X ......... .........
MR. KIND..................... X ......... ......... MR. KELLY...... X ......... .........
MR. PASCRELL................. X ......... ......... MR. HOLDING.... X ......... .........
MR. DAVIS.................... X ......... ......... MR. SMITH (MO). X ......... .........
MS. SANCHEZ.................. ......... ......... ......... MR. RICE....... X ......... .........
MR. HIGGINS.................. X ......... ......... MR. SCHWEIKERT. X ......... .........
MS. SEWELL................... X ......... ......... MS. WALORSKI... X ......... .........
MS. DELBENE.................. X ......... ......... MR. LAHOOD..... X ......... .........
MS. CHU...................... X ......... ......... MR. WENSTRUP... X ......... .........
MS. MOORE.................... X ......... ......... MR. ARRINGTON.. X ......... .........
MR. KILDEE................... X ......... ......... MR. FERGUSON... X ......... .........
MR. BOYLE.................... X ......... ......... MR. ESTES...... X ......... .........
MR. BEYER.................... X ......... .........
MR. EVANS.................... X ......... .........
MR. SCHNEIDER................ X ......... .........
MR. SUOZZI................... X ......... .........
MR. PANETTA.................. X ......... .........
MS. MURPHY................... X ......... .........
MR. GOMEZ.................... X ......... .........
MR. HORSFORD................. X ......... .........
----------------------------------------------------------------------------------------------------------------
H.R. 2113 was ordered favorably reported to the House of
Representatives by voice vote (with a quorum being present).
IV. BUDGET EFFECTS OF THE BILL
A. Committee Estimate of Budgetary Effects
In compliance with clause 3(d) of rule XIII of the Rules of
the House of Representatives, the following statement is made
concerning the effects on the budget of the bill, H.R. 2113, as
reported. The Committee agrees with the estimate prepared by
CBO, which is included below.
B. Statement Regarding New Budget Authority and Tax Expenditures Budget
Authority
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee states that the
bill involves no new or increased budget authority. The
Committee states further that the bill involves no new or
increased tax expenditures.
C. Cost Estimate Prepared by the Congressional Budget Office
In compliance with clause 3(c)(3) of rule XIII of the Rules
of the House of Representatives, requiring a cost estimate
prepared by the CBO, the following statement by CBO is
provided.
U.S. Congress,
Congressional Budget Office,
Washington, DC, June 24, 2019.
Hon. Richard Neal,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 2113, the
Prescription Drug STAR Act.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contacts are Lara
Robillard and Rebecca Yip.
Sincerely,
Phillip L. Swagel,
Director.
Enclosure.
The bill would
Require prescription drug manufacturers to
provide information to the Secretary of Health and
Human Services (HHS) about the factors (including
expenditures and revenue items) that contribute to
increases in drug prices that exceed thresholds
established in the bill
Require drug manufacturers to disclose
information about samples provided to physicians
Direct the Secretary of HHS to study
spending on drugs furnished in hospitals and to publish
data about prices and discounts under Medicare Part D
Require drug manufacturers to report the
sales prices used to calculate payments for drugs
covered under Medicare Part B
Estimated budgetary effects would primarily stem from
Requiring drug manufacturers to report
prices used to calculate Medicare payment rates for
their products administered in physicians' offices and
hospital outpatient departments
Appropriating $3 million to the Secretary of
HHS to study hospitals' drug costs
Areas of significant uncertainty include accurately
projecting
The ways that new disclosure requirements
would affect the behavior of drug manufacturers or
medical providers
Drug manufacturers' responses to possible
changes in the regulatory status of certain products
Bill summary: H.R. 2113 would require prescription drug
manufacturers to submit information--including data about drug
prices, price increases, and distribution of samples--to the
Department of Health and Human Services. In addition, the bill
would direct the Secretary of HHS to publish information about
prescription drug prices and discounts.
Estimated Federal cost: The estimated budgetary effect of
H.R. 2113 is shown in Table 1. The costs of the legislation
fall within budget function 570 (Medicare).
TABLE 1.--ESTIMATED BUDGETARY EFFECTS OF H.R. 2113
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, millions of dollars--
--------------------------------------------------------------------------------------------------------------------------------------------------------
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2019-2024 2019-2029
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Increases or Decreases (-) in Direct Spending
Require Manufacturers to Report Drug
Pricing With Respect to Drugs Under
the Medicare Program:
Estimated Budget Authority......... 0 -20 -150 -170 -170 -170 -190 -200 -210 -230 -220 -680 -1,730
Estimated Outlays.................. 0 -20 -150 -170 -170 -170 -190 -200 -210 -230 -220 -680 -1,730
Report on Inpatient Hospital Drug
Costs:
Budget Authority................... 0 3 0 0 0 0 0 0 0 0 0 3 3
Estimated Outlays.................. 0 3 0 0 0 0 0 0 0 0 0 3 3
Total Changes in Direct Spending
Estimated Budget Authority......... 0 -17 -150 -170 -170 -170 -190 -200 -210 -230 -220 -677 -1,727
Estimated Outlays.................. 0 -17 -150 -170 -170 -170 -190 -200 -210 -230 -220 -677 -1,727
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Components may not sum to totals because of rounding.
Basis of estimate: H.R. 2113 would increase the information
available to the Secretary of HHS, researchers, and the general
public about prescription drug prices and spending. For this
estimate, CBO assumes that the bill will be enacted near the
end of fiscal year 2019.
Direct spending: Two provisions of H.R. 2113 would affect
direct spending.
Require manufacturers to report drug pricing with respect to drugs
under the Medicare program
The bill would enhance reporting requirements for
manufacturers of products covered under Part B. CMS uses such
data to calculate average sales prices (ASPs)--the average
prices at which manufacturers sell their products. ASPs are the
basis of Medicare's payments for infused and injected drugs.
When ASP data are not available for a drug--for example, when
it is first marketed and no sales have occurred--Medicare's
payments usually are based on the Wholesale Acquisition Cost
(WAC). WACs are generally higher than ASPs. The bill would make
changes, as described below, which would have the effect of
establishing the ASP for some drugs that are currently paid for
based on the WAC. CBO estimates those changes would reduce
federal spending by $1.7 billion over the 2019-2029 period.
To ensure full reporting of ASP data to the Secretary and
thus enable ASP-based payment, manufacturers with drug rebate
agreements (as required for drugs that are covered by state
Medicaid programs) also must report their ASP data to CMS, with
some exceptions. In particular, under current law, the Medicaid
rebate applies to products that are approved as drugs under the
Federal Food, Drug, and Cosmetic Act. Among the products that
do not require Medicaid rebate agreements and that are
therefore exempt from ASP reporting are those that incorporate
hyaluronic acid, which is used to treat osteoarthritis of the
knee. The Food and Drug Administration (FDA) regulates such
products as medical devices, not as drugs, although Medicare
pays for them as drugs. Medicare Part B currently covers
several such products. Recently, some manufacturers of those
products stopped reporting ASP data to CMS. As a result,
Medicare is paying for a subset of hyaluronic acid products
based on their higher WACs.\1\
---------------------------------------------------------------------------
\1\For more information, see Medicare Payment Advisory Commission,
The MedPAC Blog, ``Improving Medicare 's payment for Part B drugs:
Requiring pharmaceutical manufacturer reporting of sales price data,''
June 14, 2019, http://www.medpac.gov/-blog-/requiring-reporting-of-
sales-price-data/2019/06/14/payment-for-part-b-drugs
---------------------------------------------------------------------------
CBO analyzed data from the CMS website concerning payment
for and use of hyaluronic acid products, along with information
on the difference between their ASPs (when they were available)
and WACs. CBO estimates that requiring manufacturers to report
ASP data would reduce direct spending by about $3.6 billion
over the 2019-2029 period, a result of lower, ASP-based
benchmarks for Part B drug payment.
However, in December 2018, the FDA published a notice in
which it indicated that it is considering regulating hyaluronic
acid products as drugs, not as devices.\2\ The implications of
that notice for products currently on the market are unclear.
It is possible that current products would be considered drugs
and require rebate agreements, thus triggering mandatory ASP
reporting. Accounting for the possibility that the FDA could
decide to regulate those products as drugs, CBO has lowered its
estimated savings of this bill to $1.7 billion over the 2019-
2029 period, to reflect a 50 percent probability that the
hyaluronic acid products would come to be regulated as drugs
under current law.
---------------------------------------------------------------------------
\2\See Food and Drug Administration, ``Intent to Consider the
Appropriate Classification of Hyaluronic Acid Intra-articular Products
Intended for the Treatment of Pain in Osteoarthritis of the Knee Based
on Scientific Evidence,'' Federal Register (December 18, 2018), vol.
83, no. 242, pp. 64844-64845, https://go.usa.gov/xyx3Q.
---------------------------------------------------------------------------
Report on inpatient hospital drug costs
The bill also would appropriate $3 million to the Secretary
of HHS to study spending for drugs used by hospital inpatients.
CBO estimates that implementing that provision would increase
direct spending by $3 million over the 2019-2029 period (see
Table 1).
Reporting and penalties
Other provisions of the bill would require other reporting
by pharmaceutical manufacturers:
Drug manufacturers would have to explain
increases in drug prices that exceed a threshold amount
established in the bill. The manufacturer also would be
obliged to report how much it had spent on
manufacturing the drug, its overall investments in
research and development, and its net profits for the
drug from the time of introduction to the market.
Failure to submit that information could subject the
manufacturer to a civil monetary penalty of $10,000 for
each day that the manufacturer did not report.
The bill would require drug manufacturers to
report data about drug samples they supply to providers
to enable providers to start patients on drugs and to
save patients from initial costs and pharmacy visits.
Under current law, health plans and pharmacy
benefit managers that participate in Medicare Part D or
in the health insurance marketplaces established under
the Affordable Care Act (ACA) must report to the
Secretary on the aggregated amounts they negotiate in
discounts, rebates, and price concessions. The ACA
requires the Secretary to keep that information
confidential. H.R. 2113 would direct the Secretary to
make that information public after two years, with
restrictions on plan- or drug-specific information.
Requiring manufacturers to report on drug samples and
discounts would not affect Medicare spending or spending by
other payers. Although the legislation would impose civil
monetary penalties on manufacturers who fail to meet new
reporting requirements, CBO expects that all manufacturers
would meet reporting requirements. Therefore, CBO estimates
that no penalties would be collected and enacting the bill
would have no budgetary effect.\3\
---------------------------------------------------------------------------
\3\In general, however, such penalties, once collected, may be
spent without further appropriation action. As a result, CBO usually
estimates new mandatory outlays in an amount that offsets those
revenues.
---------------------------------------------------------------------------
Spending subject to appropriation: Many of the activities
required by H.R. 2113 would add to the responsibilities of the
Secretary of HHS in managing Medicare and in overseeing the
health insurance marketplaces. Funding for most program
management activities is subject to appropriation. In CBO's
judgment, the new activities required by H.R. 2113 would not
significantly increase the department's workload and thus
implementing the bill would not result in significant
additional discretionary costs.
Uncertainty: It is possible that the information made
available under H.R. 2113 could change the behavior of drug
manufacturers or medical providers in ways that CBO did not
anticipate. For example, requiring manufacturers to report
their sample distributions could make them less likely to
provide samples, or it could make providers less willing to
accept them. However, CBO estimates that any such behavioral
effect would be small enough to have no significant budgetary
effect.
As noted above, the FDA regulatory status of certain
products is uncertain, and CBO's estimate reflects the
possibility that their classification could change in such a
way that manufacturers would be required to report ASP data
rather than WAC data. If, however, FDA regulations do not
change, savings would probably be higher than CBO has
estimated.
Pay-As-You-Go considerations: The Statutory Pay-As-You-Go
Act of 2010 establishes budget-reporting and enforcement
procedures for legislation affecting direct spending or
revenues. The net changes in outlays that are subject to those
pay-as-you-go procedures are shown in Table 1.
Increase in long-term deficits: None.
Mandates: H.R. 2113 contains no intergovernmental or
private-sector mandates as defined in the Unfunded Mandates
Reform Act (UMRA). Participation in Medicare is voluntary for
private entities. Therefore, the reporting requirements in the
bill arising from participation in those programs would not
constitute private-sector mandates as defined in UMRA.
Estimate prepared by: Federal costs: Lara Robillard and
Rebecca Yip; Mandates: Andrew Laughlin.
Estimate reviewed by: Tom Bradley, Chief, Health Systems
and Medicare Cost Estimates Unit; Susan Willie, Chief, Mandates
Unit; Leo Lex, Deputy Assistant Director for Budget Analysis;
Theresa Gullo, Assistant Director for Budget Analysis.
V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE
A. Committee Oversight Findings and Recommendations
With respect to clause 3(c)(1) of rule XIII and clause
2(b)(1) of rule X of the Rules of the House of Representatives,
the Committee made findings and recommendations that are
reflected in this report.
B. Statement of General Performance Goals and Objectives
With respect to clause 3(c)(4) of rule XIII of the Rules of
the House of Representatives, the Committee advises that the
bill contains no measure that authorizes funding, so no
statement of general performance goals and objectives for which
any measure authorizes funding is required.
C. Information Relating to Unfunded Mandates
This information is provided in accordance with section 423
of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104-
4).
The Committee has determined that the bill does not contain
Federal mandates on the private sector. The Committee has
determined that the bill does not impose a Federal
intergovernmental mandate on State, local, or tribal
governments.
D. Congressional Earmarks, Limited Tax Benefits, and Limited Tariff
Benefits
With respect to clause 9 of rule XXI of the Rules of the
House of Representatives, the Committee has carefully reviewed
the provisions of the bill, and states that the provisions of
the bill do not contain any congressional earmarks, limited tax
benefits, or limited tariff benefits within the meaning of the
rule.
E. Duplication of Federal Programs
On a bill that establishes or reauthorizes a federal
program. In compliance with clause 3(c)(5) of rule XIII of the
Rules of the House of Representatives, the Committee states
that no provision of the bill establishes or reauthorizes: (1)
a program of the Federal Government known to be duplicative of
another Federal program; (2) a program included in any report
to Congress pursuant to section 21 of Public Law 111-139; or
(3) a program related to a program identified in the most
recent Catalog of Federal Domestic Assistance, published
pursuant section 6104 of title 31, United States Code.
F. Hearings
In compliance with Sec. 103(i) of H. Res. 6 (116th
Congress) the following hearings were used to develop or
consider H.R. 2113:
(1) Committee on Ways and Means Hearing on ``The Cost
of Rising Prescription Drug Price,'' held on February
12, 2019.
(2) Committee on Ways and Means Subcommittee on
Health Hearing on ``Promoting Competition to Lower
Medicare Drug Prices,'' held on March 7, 2019.
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED
In compliance with clause 3(e)(1)(B) of rule XIII of the
Rules of the House of Representatives, changes in existing law
proposed by the bill, as reported, are shown as follows
(existing law proposed to be omitted is enclosed in black
brackets, new matter is printed in italics, existing law in
which no change is proposed is shown in roman):
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italics, and existing law in which no
change is proposed is shown in roman):
SOCIAL SECURITY ACT
* * * * * * *
TITLE XI--GENERAL PROVISIONS, PEER REVIEW, AND ADMINISTRATIVE
SIMPLIFICATION
* * * * * * *
Part A--General Provisions
* * * * * * *
SEC. 1128G. TRANSPARENCY REPORTS AND REPORTING OF PHYSICIAN OWNERSHIP
OR INVESTMENT INTERESTS.
(a) Transparency Reports.--
(1) Payments or other transfers of value.--
(A) In general.--On March 31, 2013, and on
the 90th day of each calendar year beginning
thereafter, any applicable manufacturer that
provides a payment or other transfer of value
to a covered recipient (or to an entity or
individual at the request of or designated on
behalf of a covered recipient), shall submit to
the Secretary, in such electronic form as the
Secretary shall require, the following
information with respect to the preceding
calendar year:
(i) The name of the covered
recipient.
(ii) The business address of the
covered recipient and, in the case of a
covered recipient who is a physician,
the specialty and National Provider
Identifier of the covered recipient.
(iii) The amount of the payment or
other transfer of value.
(iv) The dates on which the payment
or other transfer of value was provided
to the covered recipient.
(v) A description of the form of the
payment or other transfer of value,
indicated (as appropriate for all that
apply) as--
(I) cash or a cash
equivalent;
(II) in-kind items or
services;
(III) stock, a stock option,
or any other ownership
interest, dividend, profit, or
other return on investment; or
(IV) any other form of
payment or other transfer of
value (as defined by the
Secretary).
(vi) A description of the nature of
the payment or other transfer of value,
indicated (as appropriate for all that
apply) as--
(I) consulting fees;
(II) compensation for
services other than consulting;
(III) honoraria;
(IV) gift;
(V) entertainment;
(VI) food;
(VII) travel (including the
specified destinations);
(VIII) education;
(IX) research;
(X) charitable contribution;
(XI) royalty or license;
(XII) current or prospective
ownership or investment
interest;
(XIII) direct compensation
for serving as faculty or as a
speaker for a medical education
program;
(XIV) grant; or
(XV) any other nature of the
payment or other transfer of
value (as defined by the
Secretary).
(vii) If the payment or other
transfer of value is related to
marketing, education, or research
specific to a covered drug, device,
biological, or medical supply, the name
of that covered drug, device,
biological, or medical supply.
(viii) Any other categories of
information regarding the payment or
other transfer of value the Secretary
determines appropriate.
(B) Special rule for certain payments or
other transfers of value.--In the case where an
applicable manufacturer provides a payment or
other transfer of value to an entity or
individual at the request of or designated on
behalf of a covered recipient, the applicable
manufacturer shall disclose that payment or
other transfer of value under the name of the
covered recipient.
(2) Physician ownership.--In addition to the
requirement under paragraph (1)(A), on March 31, 2013,
and on the 90th day of each calendar year beginning
thereafter, any applicable manufacturer or applicable
group purchasing organization shall submit to the
Secretary, in such electronic form as the Secretary
shall require, the following information regarding any
ownership or investment interest (other than an
ownership or investment interest in a publicly traded
security and mutual fund, as described in section
1877(c)) held by a physician (or an immediate family
member of such physician (as defined for purposes of
section 1877(a))) in the applicable manufacturer or
applicable group purchasing organization during the
preceding year:
(A) The dollar amount invested by each
physician holding such an ownership or
investment interest.
(B) The value and terms of each such
ownership or investment interest.
(C) Any payment or other transfer of value
provided to a physician holding such an
ownership or investment interest (or to an
entity or individual at the request of or
designated on behalf of a physician holding
such an ownership or investment interest),
including the information described in clauses
(i) through (viii) of paragraph (1)(A), except
that in applying such clauses, ``physician''
shall be substituted for ``covered recipient''
each place it appears.
(D) Any other information regarding the
ownership or investment interest the Secretary
determines appropriate.
(3) Certain product samples.--
(A) In general.--In addition to the
requirements under paragraphs (1)(A) and (2),
on the 90th day of each calendar year
(beginning with 2023), any applicable
manufacturer that provides a payment or other
transfer of value that is a product sample
described in subparagraph (B) to any covered
recipient (or to an entity or individual at the
request of, or designated on behalf of, such a
covered recipient) shall submit to the
Secretary, in such electronic form as the
Secretary shall require, the following
information (aggregated per each drug, device,
biological, or medical supply, as applicable)
with respect to the preceding calendar year:
(i) The total quantity of all such
payments or other transfers of value
provided to all covered recipients.
(ii) The total value of all such
payments or other transfers of value
provided to all covered recipients.
(iii) If applicable, information
described in clauses (vii) and (viii)
of paragraph (1)(A) with respect to
such a payment or other transfer of
value.
(B) Product sample described.--For purposes
of subparagraph (A), a product sample described
in this subparagraph is a product sample that
is not intended to be sold and is intended for
patient use.
(b) Penalties for Noncompliance.--
(1) Failure to report.--
(A) In general.--Subject to subparagraph (B)
except as provided in paragraph (2), any
applicable manufacturer or applicable group
purchasing organization that fails to submit
information required under subsection (a) in a
timely manner in accordance with rules or
regulations promulgated to carry out such
subsection, shall be subject to a civil money
penalty of not less than $1,000, but not more
than $10,000, for each payment or other
transfer of value or ownership or investment
interest not reported as required under such
subsection. Such penalty shall be imposed and
collected in the same manner as civil money
penalties under subsection (a) of section 1128A
are imposed and collected under that section.
(B) Limitation.--The total amount of civil
money penalties imposed under subparagraph (A)
with respect to each annual submission of
information under subsection (a) by an
applicable manufacturer or applicable group
purchasing organization shall not exceed
$150,000.
(2) Knowing failure to report.--
(A) In general.--Subject to subparagraph (B),
any applicable manufacturer or applicable group
purchasing organization that knowingly fails to
submit information required under subsection
(a) in a timely manner in accordance with rules
or regulations promulgated to carry out such
subsection, shall be subject to a civil money
penalty of not less than $10,000, but not more
than $100,000, for each payment or other
transfer of value or ownership or investment
interest not reported as required under such
subsection. Such penalty shall be imposed and
collected in the same manner as civil money
penalties under subsection (a) of section 1128A
are imposed and collected under that section.
(B) Limitation.--The total amount of civil
money penalties imposed under subparagraph (A)
with respect to each annual submission of
information under subsection (a) by an
applicable manufacturer or applicable group
purchasing organization shall not exceed
$1,000,000.
(3) Use of funds.--Funds collected by the Secretary
as a result of the imposition of a civil money penalty
under this subsection shall be used to carry out this
section.
(c) Procedures for Submission of Information and Public
Availability.--
(1) In general.--
(A) Establishment.--Not later than October 1,
2011, the Secretary shall establish
procedures--
(i) for applicable manufacturers and
applicable group purchasing
organizations to submit information to
the Secretary under subsection (a); and
(ii) for the Secretary to make such
information submitted available to the
public.
(B) Definition of terms.--The procedures
established under subparagraph (A) shall
provide for the definition of terms (other than
those terms defined in subsection (e)), as
appropriate, for purposes of this section.
(C) Public availability.--Except as provided
in subparagraph (E), the procedures established
under subparagraph (A)(ii) shall ensure that,
not later than September 30, 2013, and on June
30 of each calendar year beginning thereafter,
the information submitted under subsection (a)
with respect to the preceding calendar year is
made available through an Internet website
that--
(i) is searchable and is in a format
that is clear and understandable;
[(ii) contains] (ii)(I) with respect
to information that is not information
submitted under paragraph (3) of
subsection (a), contains information
that is presented by the name of the
applicable manufacturer or applicable
group purchasing organization, the name
of the covered recipient, the business
address of the covered recipient, the
specialty of the covered recipient, the
value of the payment or other transfer
of value, the date on which the payment
or other transfer of value was provided
to the covered recipient, the form of
the payment or other transfer of value,
indicated (as appropriate) under
subsection (a)(1)(A)(v), the nature of
the payment or other transfer of value,
indicated (as appropriate) under
subsection (a)(1)(A)(vi), and the name
of the covered drug, device,
biological, or medical supply[, as
applicable;], as applicable; and
(II) with respect to information
submitted under paragraph (3) of
subsection (a), contains information
that is presented by the name of the
applicable manufacturer, the total
amount of all payments or other
transfers of value described in such
paragraph provided to all covered
recipients, the total value of all such
payments or other transfers of value
provided to all covered recipients, and
the name of the covered drug, device,
biological, or medical supply, as
applicable;
(iii) contains information that is
able to be easily aggregated and
downloaded;
(iv) contains a description of any
enforcement actions taken to carry out
this section, including any penalties
imposed under subsection (b), during
the preceding year;
(v) contains background information
on industry-physician relationships;
(vi) in the case of information
submitted with respect to a payment or
other transfer of value described in
subparagraph (E)(i), lists such
information separately from the other
information submitted under subsection
(a) and designates such separately
listed information as funding for
clinical research;
(vii) contains any other information
the Secretary determines would be
helpful to the average consumer;
(viii) in the case of information
made available under this subparagraph
prior to January 1, 2022, does not
contain the National Provider
Identifier of the covered recipient,
and
(ix) subject to subparagraph (D),
provides the applicable manufacturer,
applicable group purchasing
organization, or covered recipient an
opportunity to review and submit
corrections to the information
submitted with respect to the
applicable manufacturer, applicable
group purchasing organization, or
covered recipient, respectively, for a
period of not less than 45 days prior
to such information being made
available to the public.
(D) Clarification of time period for review
and corrections.--In no case may the 45-day
period for review and submission of corrections
to information under subparagraph (C)(ix)
prevent such information from being made
available to the public in accordance with the
dates described in the matter preceding clause
(i) in subparagraph (C).
(E) Delayed publication for payments made
pursuant to product research or development
agreements and clinical investigations.--
(i) In general.--In the case of
information submitted under subsection
(a) with respect to a payment or other
transfer of value made to a covered
recipient by an applicable manufacturer
pursuant to a product research or
development agreement for services
furnished in connection with research
on a potential new medical technology
or a new application of an existing
medical technology or the development
of a new drug, device, biological, or
medical supply, or by an applicable
manufacturer in connection with a
clinical investigation regarding a new
drug, device, biological, or medical
supply, the procedures established
under subparagraph (A)(ii) shall
provide that such information is made
available to the public on the first
date described in the matter preceding
clause (i) in subparagraph (C) after
the earlier of the following:
(I) The date of the approval
or clearance of the covered
drug, device, biological, or
medical supply by the Food and
Drug Administration.
(II) Four calendar years
after the date such payment or
other transfer of value was
made.
(ii) Confidentiality of information
prior to publication.--Information
described in clause (i) shall be
considered confidential and shall not
be subject to disclosure under section
552 of title 5, United States Code, or
any other similar Federal, State, or
local law, until on or after the date
on which the information is made
available to the public under such
clause.
(2) Consultation.--In establishing the procedures
under paragraph (1), the Secretary shall consult with
the Inspector General of the Department of Health and
Human Services, affected industry, consumers, consumer
advocates, and other interested parties in order to
ensure that the information made available to the
public under such paragraph is presented in the
appropriate overall context.
(d) Annual Reports and Relation to State Laws.--
(1) Annual report to congress.--Not later than April
1 of each year beginning with 2013, the Secretary shall
submit to Congress a report that includes the
following:
(A) The information submitted under
subsection (a) during the preceding year,
aggregated for each applicable manufacturer and
applicable group purchasing organization that
submitted such information during such year
(except, in the case of information submitted
with respect to a payment or other transfer of
value described in subsection (c)(1)(E)(i),
such information shall be included in the first
report submitted to Congress after the date on
which such information is made available to the
public under such subsection).
(B) A description of any enforcement actions
taken to carry out this section, including any
penalties imposed under subsection (b), during
the preceding year.
(2) Annual reports to states.--Not later than
September 30, 2013 and on June 30 of each calendar year
thereafter, the Secretary shall submit to States a
report that includes a summary of the information
submitted under subsection (a) during the preceding
year with respect to covered recipients in the State
(except, in the case of information submitted with
respect to a payment or other transfer of value
described in subsection (c)(1)(E)(i), such information
shall be included in the first report submitted to
States after the date on which such information is made
available to the public under such subsection).
(3) Relation to state laws.--
(A) In general.--In the case of a payment or
other transfer of value provided by an
applicable manufacturer that is received by a
covered recipient (as defined in subsection
(e)) on or after January 1, 2012, subject to
subparagraph (B), the provisions of this
section shall preempt any statute or regulation
of a State or of a political subdivision of a
State that requires an applicable manufacturer
(as so defined) to disclose or report, in any
format, the type of information (as described
in subsection (a)) regarding such payment or
other transfer of value.
(B) No preemption of additional
requirements.--Subparagraph (A) shall not
preempt any statute or regulation of a State or
of a political subdivision of a State that
requires the disclosure or reporting of
information--
(i) not of the type required to be
disclosed or reported under this
section;
(ii) described in subsection
(e)(10)(B), except in the case of
information described in clause (i) of
such subsection;
(iii) by any person or entity other
than an applicable manufacturer (as so
defined) or a covered recipient (as
defined in subsection (e)); or
(iv) to a Federal, State, or local
governmental agency for public health
surveillance, investigation, or other
public health purposes or health
oversight purposes.
(C) Nothing in subparagraph (A) shall be
construed to limit the discovery or
admissibility of information described in such
subparagraph in a criminal, civil, or
administrative proceeding.
(4) Consultation.--The Secretary shall consult with
the Inspector General of the Department of Health and
Human Services on the implementation of this section.
(e) Definitions.--In this section:
(1) Applicable group purchasing organization.--The
term ``applicable group purchasing organization'' means
a group purchasing organization (as defined by the
Secretary) that purchases, arranges for, or negotiates
the purchase of a covered drug, device, biological, or
medical supply which is operating in the United States,
or in a territory, possession, or commonwealth of the
United States.
(2) Applicable manufacturer.--The term ``applicable
manufacturer'' means a manufacturer of a covered drug,
device, biological, or medical supply which is
operating in the United States, or in a territory,
possession, or commonwealth of the United States.
(3) Clinical investigation.--The term ``clinical
investigation'' means any experiment involving 1 or
more human subjects, or materials derived from human
subjects, in which a drug or device is administered,
dispensed, or used.
(4) Covered device.--The term ``covered device''
means any device for which payment is available under
title XVIII or a State plan under title XIX or XXI (or
a waiver of such a plan).
(5) Covered drug, device, biological, or medical
supply.--The term ``covered drug, device, biological,
or medical supply'' means any drug, biological product,
device, or medical supply for which payment is
available under title XVIII or a State plan under title
XIX or XXI (or a waiver of such a plan).
(6) Covered recipient.--
(A) In general.--Except as provided in
subparagraph (B), the term ``covered
recipient'' means the following:
(i) A physician.
(ii) A teaching hospital.
(iii) A physician assistant, nurse
practitioner, or clinical nurse
specialist (as such terms are defined
in section 1861(aa)(5)).
(iv) A certified registered nurse
anesthetist (as defined in section
1861(bb)(2)).
(v) A certified nurse-midwife (as
defined in section 1861(gg)(2)).
(B) Exclusion.--Such term does not include a
physician, physician assistant, nurse
practitioner, clinical nurse specialist,
certified nurse anesthetist, or certified
nurse-midwife who is an employee of the
applicable manufacturer that is required to
submit information under subsection (a).
(7) Employee.--The term ``employee'' has the meaning
given such term in section 1877(h)(2).
(8) Knowingly.--The term ``knowingly'' has the
meaning given such term in section 3729(b) of title 31,
United States Code.
(9) Manufacturer of a covered drug, device,
biological, or medical supply.--The term ``manufacturer
of a covered drug, device, biological, or medical
supply'' means any entity which is engaged in the
production, preparation, propagation, compounding, or
conversion of a covered drug, device, biological, or
medical supply (or any entity under common ownership
with such entity which provides assistance or support
to such entity with respect to the production,
preparation, propagation, compounding, conversion,
marketing, promotion, sale, or distribution of a
covered drug, device, biological, or medical supply).
(10) Payment or other transfer of value.--
(A) In general.--The term ``payment or other
transfer of value'' means a transfer of
anything of value. Such term does not include a
transfer of anything of value that is made
indirectly to a covered recipient through a
third party in connection with an activity or
service in the case where the applicable
manufacturer is unaware of the identity of the
covered recipient.
(B) Exclusions.--An applicable manufacturer
shall not be required to submit information
under subsection (a) with respect to the
following:
(i) A transfer of anything the value
of which is less than $10, unless the
aggregate amount transferred to,
requested by, or designated on behalf
of the covered recipient by the
applicable manufacturer during the
calendar year exceeds $100. For
calendar years after 2012, the dollar
amounts specified in the preceding
sentence shall be increased by the same
percentage as the percentage increase
in the consumer price index for all
urban consumers (all items; U.S. city
average) for the 12-month period ending
with June of the previous year.
(ii) [Product samples] Except for
purposes of paragraph (3) of subsection
(a), product samples that are not
intended to be sold and are intended
for patient use.
(iii) Educational materials that
directly benefit patients or are
intended for patient use.
(iv) The loan of a covered device for
a short-term trial period, not to
exceed 90 days, to permit evaluation of
the covered device by the covered
recipient.
(v) Items or services provided under
a contractual warranty, including the
replacement of a covered device, where
the terms of the warranty are set forth
in the purchase or lease agreement for
the covered device.
(vi) A transfer of anything of value
to a covered recipient when the covered
recipient is a patient and not acting
in the professional capacity of a
covered recipient.
(vii) Discounts (including rebates).
(viii) In-kind items used for the
provision of charity care.
(ix) A dividend or other profit
distribution from, or ownership or
investment interest in, a publicly
traded security and mutual fund (as
described in section 1877(c)).
(x) In the case of an applicable
manufacturer who offers a self-insured
plan, payments for the provision of
health care to employees under the
plan.
(xi) In the case of a covered
recipient who is a licensed non-medical
professional, a transfer of anything of
value to the covered recipient if the
transfer is payment solely for the non-
medical professional services of such
licensed non-medical professional.
(xii) In the case of a covered
recipient who is a physician, a
transfer of anything of value to the
covered recipient if the transfer is
payment solely for the services of the
covered recipient with respect to a
civil or criminal action or an
administrative proceeding.
(11) Physician.--The term ``physician'' has the
meaning given that term in section 1861(r).
* * * * * * *
SEC. 1128L. DRUG MANUFACTURER PRICE TRANSPARENCY.
(a) In General.--With respect to each year, beginning with
2021, the Secretary shall, at least once during such year,
determine if there is a triggered SPIKE increase (in accordance
with subsection (b)) with respect to an applicable drug (as
defined in subsection (f)(1)). If the Secretary determines,
with respect to a year, there is such an increase with respect
to an applicable drug, the manufacturer of the applicable drug
shall submit to the Secretary the justification described in
subsection (c), subject to subsection (b)(4), for each such
triggered SPIKE increase in accordance with the timing
described in subsection (d)).
(b) Triggered SPIKE Increase.--
(1) In general.--A triggered SPIKE increase occurs,
with respect an applicable drug and year (beginning
with 2021 and referred to in this paragraph as the
``applicable year''), in any of the following cases:
(A) If there is at least a 10 percent (or
$10,000) cumulative increase with respect to
the wholesale acquisition cost (or alternative
cost measure specified by the Secretary under
paragraph (3)) of such drug during a calendar-
year period beginning and ending within the
lookback period that is the 5-year period
preceding such applicable year.
(B) If there is at least a 25 percent (or
$25,000) cumulative increase with respect to
the wholesale acquisition cost (or such
alternative cost measure) of such drug during
any three-calendar-year period beginning and
ending within such lookback period.
(C) In the case of such a drug that is first
covered under title XVIII with respect to such
applicable year, if the estimated cost or
spending under such title per individual or per
user of such drug (as estimated by the
Secretary) for such applicable year (or per
course of treatment in such applicable year, as
defined by the Secretary) is at least $26,000.
(2) Indexing dollar amounts.--The dollar amounts
applied under paragraph (1) for 2022 and each
subsequent year shall be the dollar amounts specified
in such paragraph for the previous year increased by
the annual percentage increase in the consumer price
index (all items; U.S. city average) as of September of
such previous year. If any amount established under
paragraph (1), after application of this paragraph, for
a year is not a multiple of $10, it shall be rounded to
the nearest multiple of $10.
(3) Alternative to wac.--The Secretary may, for
purposes of making determinations under paragraph (1),
in addition to using the wholesale acquisition cost for
an applicable drug, use alternative cost measures of
such drug, or use such alternative cost measure if the
wholesale acquisition cost is not available.
(4) Exception.--A justification under subsection (c)
shall not be required for a triggered SPIKE increase
described in paragraph (1) of an applicable drug of a
manufacturer if--
(A) there is any portion of the lookback
period described in the respective subparagraph
of such paragraph for such increase that is
included within the lookback period for another
triggered SPIKE increase (or combination of
such increases) for which a justification is
made under this section for such drug by such
manufacturer; or
(B) such increase is less than the wholesale
acquisition cost (or alternative cost measure
specified by the Secretary under paragraph (3))
of such drug during the calendar-year period
described in paragraph (1)(A) or the three-
calendar-year period described in paragraph
(1)(B), as applicable, for such increase,
increased by the percentage increase in the
consumer price index for all urban consumers
(all items; United States city average) for the
12-month period ending six months prior to the
calendar-year period so described and for the
36-month period ending six months prior to the
three-calendar-year period so described,
respectively.
(5) Unit determination.--For purposes of determining
the wholesale acquisition cost in carrying out this
section, the Secretary shall determine a unit (such as
a unit size) to apply.
(6) Public posting.--Beginning with respect to 2021,
the Secretary shall publicly post on the Internet
website of the Department of Health and Human
Services--
(A) alternative percentages, dollar amounts,
and lookback periods that, if applied under
paragraph (1), would be projected to increase
the number of applicable drugs for which a
triggered SPIKE increase would occur for such
year; and
(B) the number of applicable drugs for which
a triggered SPIKE increase would occur for such
year if such an alternative percentage, dollar
amount, or period were applied for such year.
(c) Justification Described.--
(1) In general.--The justification described in this
subsection, with respect to a triggered SPIKE increase
described in subsection (b)(1) of an applicable drug of
a manufacturer, is--
(A) all of the information described in
paragraph (2);
(B) all of the information and supporting
documentation described in paragraph (3), as
applicable to the increase and drug; and
(C) a certification described in paragraph
(4).
(2) Required information.--For purposes of paragraph
(1), the information described in this paragraph is the
following:
(A) The individual factors that have
contributed to the increase in the wholesale
acquisition cost.
(B) An explanation of the role of each factor
in contributing to such increase.
(3) Information as applicable.--For purposes of
paragraph (1), the information and supporting
documentation described in this paragraph is the
following, as applicable to the increase of the drug:
(A) Total expenditures of the manufacturer
on--
(i) materials and manufacturing for
such drug;
(ii) acquiring patents and licensing
for each drug of the manufacturer; and
(iii) costs to purchase or acquire
the drug from another company, if
applicable.
(B) The percentage of total expenditures of
the manufacturer on research and development
for such drug that was derived from Federal
funds.
(C) The total expenditures of the
manufacturer on research and development for
such drug.
(D) The total revenue and net profit
generated from the applicable drug for each
calendar year since drug approval.
(E) The total costs associated with marketing
and advertising for the applicable drug.
(F) Additional information specific to the
manufacturer of the applicable drug, such as--
(i) the total revenue and net profit
of the manufacturer for the period of
such increase, as determined by the
Secretary;
(ii) metrics used to determine
executive compensation;
(iii) total expenditures on--
(I) drug research and
development; or
(II) clinical trials on drugs
that failed to receive approval
by the Food and Drug
Administration; and
(iv) any additional information
related to drug pricing decisions of
the manufacturer.
(G) Any other relevant information and
supporting documentation necessary to justify
the triggering SPIKE increase.
(H) Any other relevant information and
supporting documentation, as specified by the
Secretary.
(4) Certification.--For purposes of paragraph (1),
the certification described in this paragraph is a
certification, that all such information and
documentation is accurate and complete, by one of the
following:
(A) The chief executive officer of the
manufacturer.
(B) The chief financial officer of the
manufacturer.
(C) An individual who has delegated authority
to sign for, and who reports directly to, such
chief executive officer or chief financial
officer.
(d) Timing.--
(1) Notification.--Not later than 60 days after the
date on which the Secretary makes the determination
that there is a triggering SPIKE increase with respect
to an applicable drug, the Secretary shall notify the
manufacturer of the applicable drug of such
determination.
(2) Submission of justification.--Not later than 90
days after the date on which a manufacturer receives a
notification under paragraph (1), subject to subsection
(b)(4), the manufacturer shall submit to the Secretary
the justification required under subsection (a),
including a summary of such justification, in a form
and manner specified by the Secretary. In specifying
such form, with respect to the summary required under
the previous sentence, the Secretary shall provide that
such summary shall be in an easily understandable
format, as specified by the Secretary, and shall permit
the manufacturer to exclude proprietary information
from such summary.
(3) Posting on internet website.--Not later than 30
days after receiving the complete justification under
paragraph (2), the Secretary shall post on the Internet
website of the Centers for Medicare & Medicaid Services
the summary included for such justification.
(e) Penalties.--
(1) Failure to submit timely justification.--If the
Secretary determines that a manufacturer has failed to
submit a justification as required under this section,
including in accordance with the timing and form
required, with respect to an applicable drug, the
Secretary shall apply a civil monetary penalty in an
amount of $10,000 for each day the manufacturer has
failed to submit such justification as so required.
(2) False information.--Any manufacturer that submits
a justification under this section that knowingly
provides false information in such justification is
subject to a civil monetary penalty in an amount not to
exceed $100,000 for each item of false information.
(3) Application of procedures.--The provisions of
section 1128A (other than subsections (a) and (b))
shall apply to a civil monetary penalty under this
subsection in the same manner as such provisions apply
to a penalty or proceeding under section 1128A(a).
Civil monetary penalties imposed under this subsection
are in addition to other penalties as may be prescribed
by law.
(f) Definitions.--In this section:
(1) Applicable drug.--
(A) In general.--Subject to subparagraph (B),
the term ``applicable drug'' means, with
respect to a lookback period described in
subsection (b)(1), a covered outpatient drug
(as defined in paragraph (2) of section
1927(k), without application of paragraph (3)
of such section) that is covered under title
XVIII and is not a low cost drug.
(B) Exclusion of low cost drugs.--For
purposes of subparagraph (A), not later than
January 1, 2021, the Secretary shall specify a
threshold (such as a cost or spending
threshold) for identifying (and shall identify)
low cost drugs to be excluded from the
definition of the term ``applicable drug'',
such as a drug that has a wholesale acquisition
cost of less than $10 per unit or less than
$100 in average estimated expenditures under
title XVIII per individual per year or per user
of such drug per year. For purposes of this
section, a drug shall not be considered
specified as a low cost drug for a lookback
period described in subsection (b)(1) with
respect to a year unless such drug is
identified as being below the specified
threshold for the entirety of the lookback
period.
(2) Manufacturer.--The term ``manufacturer'' has the
meaning given that term in section 1847A(c)(6)(A).
(3) Wholesale acquisition cost.--The term ``wholesale
acquisition cost'' has the meaning given that term in
section 1847A(c)(6)(B).
* * * * * * *
SEC. 1150A. PHARMACY BENEFIT MANAGERS TRANSPARENCY REQUIREMENTS.
(a) Provision of Information.--A health benefits plan or any
entity that provides pharmacy benefits management services on
behalf of a health benefits plan (in this section referred to
as a ``PBM'') that manages prescription drug coverage under a
contract with--
(1) a PDP sponsor of a prescription drug plan or an
MA organization offering an MA-PD plan under part D of
title XVIII; or
(2) a qualified health benefits plan offered through
an exchange established by a State under section 1311
of the Patient Protection and Affordable Care Act,
shall provide the information described in subsection (b) to
the Secretary and, in the case of a PBM, to the plan with which
the PBM is under contract with, at such times, and in such form
and manner, as the Secretary shall specify.
(b) Information Described.--The information described in this
subsection is the following with respect to services provided
by a health benefits plan or PBM for a contract year:
(1) The percentage of all prescriptions that were
provided through retail pharmacies compared to mail
order pharmacies, and the percentage of prescriptions
for which a generic drug was available and dispensed
(generic dispensing rate), by pharmacy type (which
includes an independent pharmacy, chain pharmacy,
supermarket pharmacy, or mass merchandiser pharmacy
that is licensed as a pharmacy by the State and that
dispenses medication to the general public), that is
paid by the health benefits plan or PBM under the
contract.
(2) The aggregate amount, and the type of rebates,
discounts, or price concessions (excluding bona fide
service fees, which include but are not limited to
distribution service fees, inventory management fees,
product stocking allowances, and fees associated with
administrative services agreements and patient care
programs (such as medication compliance programs and
patient education programs)) that the PBM negotiates
that are attributable to patient utilization under the
plan, and the aggregate amount of the rebates,
discounts, or price concessions that are passed through
to the plan sponsor, and the total number of
prescriptions that were dispensed.
(3) The aggregate amount of the difference between
the amount the health benefits plan pays the PBM and
the amount that the PBM pays retail pharmacies, and
mail order pharmacies, and the total number of
prescriptions that were dispensed.
(c) Confidentiality.--Information disclosed by a health
benefits plan or PBM under this section is confidential and
shall not be disclosed by the Secretary (other than as
permitted under subsection (e)) or by a plan receiving the
information, except that the Secretary may disclose the
information in a form which does not disclose the identity of a
specific PBM, plan, or prices charged for drugs, for the
following purposes:
(1) As the Secretary determines to be necessary to
carry out this section or part D of title XVIII.
(2) To permit the Comptroller General to review the
information provided.
(3) To permit the Director of the Congressional
Budget Office to review the information provided.
(4) To States to carry out section 1311 of the
Patient Protection and Affordable Care Act.
(d) Penalties.--The provisions of subsection (b)(3)(C) of
section 1927 shall apply to a health benefits plan or PBM that
fails to provide information required under subsection (a) on a
timely basis or that knowingly provides false information in
the same manner as such provisions apply to a manufacturer with
an agreement under that section.
(e) Public Availability of Certain Information.--
(1) In general.--In order to allow the comparison of
PBMs' ability to negotiate rebates, discounts, and
price concessions and the amount of such rebates,
discounts, and price concessions that are passed
through to plan sponsors, beginning January 1, 2020,
the Secretary shall make available on the Internet
website of the Department of Health and Human Services
the information with respect to the second preceding
calendar year provided to the Secretary on generic
dispensing rates (as described in paragraph (1) of
subsection (b) and information provided to the
Secretary under paragraphs (2) and (3) of such
subsection that, as determined by the Secretary, is
with respect to each PBM.
(2) Availability of data.--In carrying out paragraph
(1), the Secretary shall ensure the following:
(A) Confidentiality.--The information
described in such paragraph is displayed in a
manner that prevents the disclosure of
information on rebates, discounts, and price
concessions, with respect to an individual drug
or an individual plan.
(B) Class of drug.--The information described
in such paragraph is made available by class of
drug, using an existing classification system,
but only if the class contains such number of
drugs, as specified by the Secretary, to ensure
confidentiality of proprietary information or
other information that is prevented to be
disclosed under subparagraph (A).
* * * * * * *
TITLE XVIII--HEALTH INSURANCE FOR THE AGED AND DISABLED
* * * * * * *
Part B--Supplementary Medical Insurance Benefits for the Aged and
Disabled
* * * * * * *
use of average sales price payment methodology
Sec. 1847A. (a) Application.--
(1) In general.--Except as provided in paragraph (2),
this section shall apply to payment for drugs and
biologicals that are described in section 1842(o)(1)(C)
and that are furnished on or after January 1, 2005.
(2) Election.--This section shall not apply in the
case of a physician who elects under subsection
(a)(1)(A)(ii) of section 1847B for that section to
apply instead of this section for the payment for drugs
and biologicals.
(b) Payment Amount.--
(1) In general.--Subject to paragraph (7) and
subsections (d)(3)(C) and (e), the amount of payment
determined under this section for the billing and
payment code for a drug or biological (based on a
minimum dosage unit) is, subject to applicable
deductible and coinsurance--
(A) in the case of a multiple source drug (as
defined in subsection (c)(6)(C)), 106 percent
of the amount determined under paragraph (3)
for a multiple source drug furnished before
April 1, 2008, or 106 percent of the amount
determined under paragraph (6) for a multiple
source drug furnished on or after April 1,
2008;
(B) in the case of a single source drug or
biological (as defined in subsection
(c)(6)(D)), 106 percent of the amount
determined under paragraph (4); or
(C) in the case of a biosimilar biological
product (as defined in subsection (c)(6)(H)),
the amount determined under paragraph (8).
(2) Specification of unit.--
(A) Specification by manufacturer.--The
manufacturer of a drug or biological shall
specify the unit associated with each National
Drug Code (including package size) as part of
the submission of data under section
1927(b)(3)(A)(iii) or subsection (f)(2), as
applicable.
(B) Unit defined.--In this section, the term
``unit'' means, with respect to each National
Drug Code (including package size) associated
with a drug or biological, the lowest
identifiable quantity (such as a capsule or
tablet, milligram of molecules, or grams) of
the drug or biological that is dispensed,
exclusive of any diluent without reference to
volume measures pertaining to liquids. For
years after 2004, the Secretary may establish
the unit for a manufacturer to report and
methods for counting units as the Secretary
determines appropriate to implement this
section.
(3) Multiple source drug.--For all drug products
included within the same multiple source drug billing
and payment code, the amount specified in this
paragraph is the volume-weighted average of the average
sales prices reported under section 1927(b)(3)(A)(iii)
or subsection (f)(2), as applicable, determined by--
(A) computing the sum of the products (for
each National Drug Code assigned to such drug
products) of--
(i) the manufacturer's average sales
price (as defined in subsection (c));
and
(ii) the total number of units
specified under paragraph (2) sold; and
(B) dividing the sum determined under
subparagraph (A) by the sum of the total number
of units under subparagraph (A)(ii) for all
National Drug Codes assigned to such drug
products.
(4) Single source drug or biological.--The amount
specified in this paragraph for a single source drug or
biological is the lesser of the following:
(A) Average sales price.--The average sales
price as determined using the methodology
applied under paragraph (3) for single source
drugs and biologicals furnished before April 1,
2008, and using the methodology applied under
paragraph (6) for single source drugs and
biologicals furnished on or after April 1,
2008, for all National Drug Codes assigned to
such drug or biological product.
(B) Wholesale acquisition cost (wac).--The
wholesale acquisition cost (as defined in
subsection (c)(6)(B)) using the methodology
applied under paragraph (3) for single source
drugs and biologicals furnished before April 1,
2008, and using the methodology applied under
paragraph (6) for single source drugs and
biologicals furnished on or after April 1,
2008, for all National Drug Codes assigned to
such drug or biological product.
(5) Basis for payment amount.--The payment amount
shall be determined under this subsection based on
information reported under subsection (f) and without
regard to any special packaging, labeling, or
identifiers on the dosage form or product or package.
(6) Use of volume-weighted average sales prices in
calculation of average sales price.--
(A) In general.--For all drug products
included within the same multiple source drug
billing and payment code, the amount specified
in this paragraph is the volume-weighted
average of the average sales prices reported
under section 1927(b)(3)(A)(iii) or subsection
(f)(2), as applicable, determined by--
(i) computing the sum of the products
(for each National Drug Code assigned
to such drug products) of--
(I) the manufacturer's
average sales price (as defined
in subsection (c)), determined
by the Secretary without
dividing such price by the
total number of billing units
for the National Drug Code for
the billing and payment code;
and
(II) the total number of
units specified under paragraph
(2) sold; and
(ii) dividing the sum determined
under clause (i) by the sum of the
products (for each National Drug Code
assigned to such drug products) of--
(I) the total number of units
specified under paragraph (2)
sold; and
(II) the total number of
billing units for the National
Drug Code for the billing and
payment code.
(B) Billing unit defined.--For purposes of
this subsection, the term ``billing unit''
means the identifiable quantity associated with
a billing and payment code, as established by
the Secretary.
(7) Special rule.--Beginning with April 1, 2008, the
payment amount for--
(A) each single source drug or biological
described in section 1842(o)(1)(G) that is
treated as a multiple source drug because of
the application of subsection (c)(6)(C)(ii) is
the lower of--
(i) the payment amount that would be
determined for such drug or biological
applying such subsection; or
(ii) the payment amount that would
have been determined for such drug or
biological if such subsection were not
applied; and
(B) a multiple source drug described in
section 1842(o)(1)(G) (excluding a drug or
biological that is treated as a multiple source
drug because of the application of such
subsection) is the lower of--
(i) the payment amount that would be
determined for such drug or biological
taking into account the application of
such subsection; or
(ii) the payment amount that would
have been determined for such drug or
biological if such subsection were not
applied.
(8) Biosimilar biological product.--The amount
specified in this paragraph for a biosimilar biological
product described in paragraph (1)(C) is the sum of--
(A) the average sales price as determined
using the methodology described under paragraph
(6) applied to a biosimilar biological product
for all National Drug Codes assigned to such
product in the same manner as such paragraph is
applied to drugs described in such paragraph;
and
(B) 6 percent of the amount determined under
paragraph (4) for the reference biological
product (as defined in subsection (c)(6)(I)).
(c) Manufacturer's Average Sales Price.--
(1) In general.--For purposes of this section,
subject to paragraphs (2) and (3), the manufacturer's
``average sales price'' means, of a drug or biological
for a National Drug Code for a calendar quarter for a
manufacturer for a unit--
(A) the manufacturer's sales to all
purchasers (excluding sales exempted in
paragraph (2)) in the United States for such
drug or biological in the calendar quarter;
divided by
(B) the total number of such units of such
drug or biological sold by the manufacturer in
such quarter.
(2) Certain sales exempted from computation.--In
calculating the manufacturer's average sales price
under this subsection, the following sales shall be
excluded:
(A) Sales exempt from best price.--Sales
exempt from the inclusion in the determination
of ``best price' under section
1927(c)(1)(C)(i).
(B) Sales at nominal charge.--Such other
sales as the Secretary identifies as sales to
an entity that are merely nominal in amount (as
applied for purposes of section
1927(c)(1)(C)(ii)(III), except as the Secretary
may otherwise provide).
(3) Sale price net of discounts.--In calculating the
manufacturer's average sales price under this
subsection, such price shall include volume discounts,
prompt pay discounts, cash discounts, free goods that
are contingent on any purchase requirement,
chargebacks, and rebates (other than rebates under
section 1927). For years after 2004, the Secretary may
include in such price other price concessions, which
may be based on recommendations of the Inspector
General, that would result in a reduction of the cost
to the purchaser.
(4) Payment methodology in cases where average sales
price during first quarter of sales is unavailable.--In
the case of a drug or biological during an initial
period (not to exceed a full calendar quarter) in which
data on the prices for sales for the drug or biological
is not sufficiently available from the manufacturer to
compute an average sales price for the drug or
biological, the Secretary may determine the amount
payable under this section for the drug or biological
based on--
(A) the wholesale acquisition cost; or
(B) the methodologies in effect under this
part on November 1, 2003, to determine payment
amounts for drugs or biologicals.
(5) Frequency of determinations.--
(A) In general on a quarterly basis.--The
manufacturer's average sales price, for a drug
or biological of a manufacturer, shall be
calculated by such manufacturer under this
subsection on a quarterly basis. In making such
calculation insofar as there is a lag in the
reporting of the information on rebates and
chargebacks under paragraph (3) so that
adequate data are not available on a timely
basis, the manufacturer shall apply a
methodology based on a 12-month rolling average
for the manufacturer to estimate costs
attributable to rebates and chargebacks. For
years after 2004, the Secretary may establish a
uniform methodology under this subparagraph to
estimate and apply such costs.
(B) Updates in payment amounts.--The payment
amounts under subsection (b) shall be updated
by the Secretary on a quarterly basis and shall
be applied based upon the manufacturer's
average sales price calculated for the most
recent calendar quarter for which data is
available.
(C) Use of contractors; implementation.--The
Secretary may contract with appropriate
entities to calculate the payment amount under
subsection (b). Notwithstanding any other
provision of law, the Secretary may implement,
by program instruction or otherwise, any of the
provisions of this section.
(6) Definitions and other rules.--In this section:
(A) Manufacturer.--The term ``manufacturer''
means, with respect to a drug or biological,
the manufacturer (as defined in section
1927(k)(5))[.], except that, for purposes of
subsection (f)(2), the Secretary may, if the
Secretary determines appropriate, exclude
repackagers of a drug or biological from such
term.
(B) Wholesale acquisition cost.--The term
``wholesale acquisition cost'' means, with
respect to a drug or biological, the
manufacturer's list price for the drug or
biological to wholesalers or direct purchasers
in the United States, not including prompt pay
or other discounts, rebates or reductions in
price, for the most recent month for which the
information is available, as reported in
wholesale price guides or other publications of
drug or biological pricing data.
(C) Multiple source drug.--
(i) In general.--The term ``multiple
source drug'' means, for a calendar
quarter, a drug for which there are 2
or more drug products which--
(I) are rated as
therapeutically equivalent
(under the Food and Drug
Administration's most recent
publication of ``Approved Drug
Products with Therapeutic
Equivalence Evaluations''),
(II) except as provided in
subparagraph (E), are
pharmaceutically equivalent and
bioequivalent, as determined
under subparagraph (F) and as
determined by the Food and Drug
Administration, and
(III) are sold or marketed in
the United States during the
quarter.
(ii) Exception.--With respect to
single source drugs or biologicals that
are within the same billing and payment
code as of October 1, 2003, the
Secretary shall treat such single
source drugs or biologicals as if the
single source drugs or biologicals were
multiple source drugs.
(D) Single source drug or biological.--The
term ``single source drug or biological''
means--
(i) a biological; or
(ii) a drug which is not a multiple
source drug and which is produced or
distributed under a new drug
application approved by the Food and
Drug Administration, including a drug
product marketed by any cross-licensed
producers or distributors operating
under the new drug application.
(E) Exception from pharmaceutical equivalence
and bioequivalence requirement.--Subparagraph
(C)(ii) shall not apply if the Food and Drug
Administration changes by regulation the
requirement that, for purposes of the
publication described in subparagraph (C)(i),
in order for drug products to be rated as
therapeutically equivalent, they must be
pharmaceutically equivalent and bioequivalent,
as defined in subparagraph (F).
(F) Determination of pharmaceutical
equivalence and bioequivalence.--For purposes
of this paragraph--
(i) drug products are
pharmaceutically equivalent if the
products contain identical amounts of
the same active drug ingredient in the
same dosage form and meet compendial or
other applicable standards of strength,
quality, purity, and identity; and
(ii) drugs are bioequivalent if they
do not present a known or potential
bioequivalence problem, or, if they do
present such a problem, they are shown
to meet an appropriate standard of
bioequivalence.
(G) Inclusion of vaccines.--In applying
provisions of section 1927 under this section,
``other than a vaccine'' is deemed deleted from
section 1927(k)(2)(B).
(H) Biosimilar biological product.--The term
``biosimilar biological product'' means a
biological product approved under an
abbreviated application for a license of a
biological product that relies in part on data
or information in an application for another
biological product licensed under section 351
of the Public Health Service Act.
(I) Reference biological product.--The term
``reference biological product'' means the
biological product licensed under such section
351 that is referred to in the application
described in subparagraph (H) of the biosimilar
biological product.
(d) Monitoring of Market Prices.--
(1) In general.--The Inspector General of the
Department of Health and Human Services shall conduct
studies, which may include surveys, to determine the
widely available market prices of drugs and biologicals
to which this section applies, as the Inspector
General, in consultation with the Secretary, determines
to be appropriate.
(2) Comparison of prices.--Based upon such studies
and other data for drugs and biologicals, the Inspector
General shall compare the average sales price under
this section for drugs and biologicals with--
(A) the widely available market price for
such drugs and biologicals (if any); and
(B) the average manufacturer price (as
determined under section 1927(k)(1)) for such
drugs and biologicals.
(3) Limitation on average sales price.--
(A) In general.--The Secretary may disregard
the average sales price for a drug or
biological that exceeds the widely available
market price or the average manufacturer price
for such drug or biological by the applicable
threshold percentage (as defined in
subparagraph (B)).
(B) Applicable threshold percentage
defined.--In this paragraph, the term
``applicable threshold percentage'' means--
(i) in 2005, in the case of an
average sales price for a drug or
biological that exceeds widely
available market price or the average
manufacturer price, 5 percent; and
(ii) in 2006 and subsequent years,
the percentage applied under this
subparagraph subject to such adjustment
as the Secretary may specify for the
widely available market price or the
average manufacturer price, or both.
(C) Authority to adjust average sales
price.--If the Inspector General finds that the
average sales price for a drug or biological
exceeds such widely available market price or
average manufacturer price for such drug or
biological by the applicable threshold
percentage, the Inspector General shall inform
the Secretary (at such times as the Secretary
may specify to carry out this subparagraph) and
the Secretary shall, effective as of the next
quarter, substitute for the amount of payment
otherwise determined under this section for
such drug or biological the lesser of--
(i) the widely available market price
for the drug or biological (if any); or
(ii) 103 percent of the average
manufacturer price (as determined under
section 1927(k)(1)) for the drug or
biological.
(4) Civil money penalty.--
(A) [In general] Misrepresentation.--If the
Secretary determines that a manufacturer has
made a misrepresentation in the reporting of
the manufacturer's average sales price for a
drug or biological, the Secretary may apply a
civil money penalty in an amount of up to
$10,000 for each such price misrepresentation
and for each day in which such price
misrepresentation was applied.
(B) Failure to provide timely information.--
If the Secretary determines that a manufacturer
described in subsection (f)(2) has failed to
report on information described in section
1927(b)(3)(A)(iii) with respect to a drug or
biological in accordance with such subsection,
the Secretary shall apply a civil money penalty
in an amount of $10,000 for each day the
manufacturer has failed to report such
information and such amount shall be paid to
the Treasury.
(C) False information.--Any manufacturer
required to submit information under subsection
(f)(2) that knowingly provides false
information is subject to a civil money penalty
in an amount not to exceed $100,000 for each
item of false information. Such civil money
penalties are in addition to other penalties as
may be prescribed by law.
[(B)] (D) Procedures.--The provisions of
section 1128A (other than subsections (a) and
(b)) shall apply to civil money penalties under
[subparagraph (B)] subparagraph (A), (B), or
(C) in the same manner as they apply to a
penalty or proceeding under section 1128A(a).
(5) Widely available market price.--
(A) In general.--In this subsection, the term
``widely available market price'' means the
price that a prudent physician or supplier
would pay for the drug or biological. In
determining such price, the Inspector General
shall take into account the discounts, rebates,
and other price concessions routinely made
available to such prudent physicians or
suppliers for such drugs or biologicals.
(B) Considerations.--In determining the price
under subparagraph (A), the Inspector General
shall consider information from one or more of
the following sources:
(i) Manufacturers.
(ii) Wholesalers.
(iii) Distributors.
(iv) Physician supply houses.
(v) Specialty pharmacies.
(vi) Group purchasing arrangements.
(vii) Surveys of physicians.
(viii) Surveys of suppliers.
(ix) Information on such market
prices from insurers.
(x) Information on such market prices
from private health plans.
(e) Authority To Use Alternative Payment in Response to
Public Health Emergency.--In the case of a public health
emergency under section 319 of the Public Health Service Act in
which there is a documented inability to access drugs and
biologicals, and a concomitant increase in the price, of a drug
or biological which is not reflected in the manufacturer's
average sales price for one or more quarters, the Secretary may
use the wholesale acquisition cost (or other reasonable measure
of drug or biological price) instead of the manufacturer's
average sales price for such quarters and for subsequent
quarters until the price and availability of the drug or
biological has stabilized and is substantially reflected in the
applicable manufacturer's average sales price.
(f) Quarterly Report on Average Sales Price.--[For
requirements]
(1) In general._For requirements for reporting the
manufacturer's average sales price (and, if required to
make payment, the manufacturer's wholesale acquisition
cost) for the drug or biological under this section,
see section 1927(b)(3).
(2) Manufacturers without a rebate agreement under
title xix.--
(A) In general.--In the case of a
manufacturer of a drug or biological described
in subparagraph (C), (E), or (G) of section
1842(o)(1) or in clause (ii) or (iii) of
section 1881(b)(14)(B) that does not have a
rebate agreement in effect under section 1927,
for calendar quarters beginning on or after
January 1, 2020, such manufacturer shall report
to the Secretary the information described in
subsection (b)(3)(A)(iii) of such section 1927
with respect to such drug or biological in a
time and manner specified by the Secretary.
(B) Audit.--Information reported under
subparagraph (A) is subject to audit by the
Inspector General of the Department of Health
and Human Services.
(C) Verification.--The Secretary may survey
wholesalers and manufacturers that directly
distribute drugs described in subparagraph (A),
when necessary, to verify manufacturer prices
and manufacturer's average sales prices
(including wholesale acquisition cost) if
required to make payment reported under
subparagraph (A). The Secretary may impose a
civil monetary penalty in an amount not to
exceed $100,000 on a wholesaler, manufacturer,
or direct seller, if the wholesaler,
manufacturer, or direct seller of such a drug
refuses a request for information about charges
or prices by the Secretary in connection with a
survey under this subparagraph or knowingly
provides false information. The provisions of
section 1128A (other than subsections (a) (with
respect to amounts of penalties or additional
assessments) and (b)) shall apply to a civil
money penalty under this subparagraph in the
same manner as such provisions apply to a
penalty or proceeding under section 1128A(a).
(D) Confidentiality.--Notwithstanding any
other provision of law, information disclosed
by manufacturers or wholesalers under this
paragraph (other than the wholesale acquisition
cost for purposes of carrying out this section)
is confidential and shall not be disclosed by
the Secretary in a form which discloses the
identity of a specific manufacturer or
wholesaler or prices charged for drugs by such
manufacturer or wholesaler, except--
(i) as the Secretary determines to be
necessary to carry out this section
(including the determination and
implementation of the payment amount),
or to carry out section 1847B;
(ii) to permit the Comptroller
General to review the information
provided; and
(iii) to permit the Director of the
Congressional Budget Office to review
the information provided.
(g) Judicial Review.--There shall be no administrative or
judicial review under section 1869, section 1878, or otherwise,
of--
(1) determinations of payment amounts under this
section, including the assignment of National Drug
Codes to billing and payment codes;
(2) the identification of units (and package size)
under subsection (b)(2);
(3) the method to allocate rebates, chargebacks, and
other price concessions to a quarter if specified by
the Secretary;
(4) the manufacturer's average sales price when it is
used for the determination of a payment amount under
this section; and
(5) the disclosure of the average manufacturer price
by reason of an adjustment under subsection (d)(3)(C)
or (e).
* * * * * * *
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INTERNAL REVENUE CODE OF 1986
* * * * * * *
Subtitle F--Procedure and Administration
* * * * * * *
CHAPTER 61--INFORMATION AND RETURNS
* * * * * * *
Subchapter A--RETURNS AND RECORDS
* * * * * * *
PART III--INFORMATION RETURNS
* * * * * * *
Subpart A--INFORMATION CONCERNING PERSONS SUBJECT TO SPECIAL PROVISIONS
Sec. 6031. Return of partnership income.
* * * * * * *
Sec. 6039K. Drug price SPIKE increase reporting.
Sec. 6039L. Product samples of applicable manufacturers.
* * * * * * *
SEC. 6039K. DRUG PRICE SPIKE INCREASE REPORTING.
Each manufacturer (within the meaning of section 1128L of the
Social Security Act) shall file a return (at such time and in
such form and manner as the Secretary may provide) showing for
such year with respect to which such section applies all
information and supporting documentation and the certification
included within a justification reported by the manufacturer
under subsection (c)(1) of such section.
SEC. 6039L. PRODUCT SAMPLES OF APPLICABLE MANUFACTURERS.
Each applicable manufacturer (within the meaning of section
1128G(a)(3) of the Social Security Act) shall file a return (at
such time and in such form and manner as the Secretary may
provide) showing for such year to which such section applies--
(1) the amount described in section
1128G(a)(3)(A)(ii) of such Act with respect to such
year, and
(2) the portion of such amount for which a deduction
was claimed under section 162.
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