,,ii #aafth ,,congress #ast ,session ,s4 #cgh ,,in ,,the ,,senate ,,of ,,the ,,united ,,states ,february #g1 #bjai,mr4 ,brown 7for himself1 ,mrs4 ,gillibrand1 and ,ms4 ,hassan7 introduced the following bill2 which was read twice and referred to the ,committee on ,finance ,a ,,bill ,to amend the ,internal ,revenue ,code of #aihf to establish an excise tax on certain prescription drugs which have been subject to a price spike1 and for other purposes4 #a4 ,short title ,this ,act may be cited as the ,stop ,price ,gouging ,act4 #b4 ,identification of prescription drug price spikes 7a7 ,definitions ,in this section3 7#a7 ,applicable entity ,the term applicable entity means the holder of an application approved under subsection 7c7 or 7j7 of section #eje of the ,federal ,food1 ,drug1 and ,cosmetic ,act 7#ba ,u4,s4,c4 #cee7 or of a license issued under subsection 7a7 or 7k7 of section #cea of the ,public ,health ,service ,act 7#db ,u4,s4,c4 #bfb7 for a drug described in paragraph 7#e77;,a74 7#b7 ,average manufacturer price ,the term average manufacturer price-- 7,a7 has the same meaning given such term under section #aibg7k77#a7 of the ,social ,security ,act 7#db ,u4,s4,c4 #acifr-#h7k77#a772 or 7,b7 with respect to a drug for which there is no average manufacturer price as so defined1 such term shall mean the wholesale acquisition cost of the drug4 7#c7 ,commerce ,the term commerce has the meaning given such term in section #d of the ,federal ,trade ,commission ,act 7#ae ,u4,s4,c4 #dd74 7#d7 ,inspector ,general ,the term ,inspector ,general means the ,inspector ,general of the ,department of ,health and ,human ,services4 7#e7 ,prescription drug 7,a7 ,in general ,the term prescription drug means any drug 7as defined in section #bja7;g7 of the ,federal ,food1 ,drug1 and ,cosmetic ,act 7#ba ,u4,s4,c4 #cba7;g7771 including a combination product whose primary mode of action is determined under section #ejc7;g7 of such ,act 7#ba ,u4,s4,c4 #cec7;g77 to be that of a drug1 and that-- 7i7 is subject to section #ejc7;b77#a7 of the ,federal ,food1 ,drug1 and ,cosmetic ,act 7#ba ,u4,s4,c4 #cec7;b77#a772 and 7ii7 is covered by a ,federal health care program 7as defined in section #aabh;,b7f7 of the ,social ,security ,act 7#db ,u4,s4,c4 #acbj;a-#g;b7f7774 7,b7 ,treatment of reformulated drugs ,for purposes of this section1 a prescription drug with respect to which the ,secretary of ,health and ,human ,services has approved any minor reformulation that does not produce a meaningful therapeutic benefit1 the drug that was approved prior to any such reformulation and the drug with any such reformulation shall be considered one prescription drug4 7#f7 ,price spike 7,a7 ,in general ,the term price spike means an increase in the average manufacturer price in commerce of a prescription drug for which the price spike percentage is equal to or greater than applicable price increase allowance4 7,b7 ,price spike percentage ,the price spike percentage is the percentage 7if any7 by which-- 7i7 the average manufacturer price of a prescription drug in commerce for the calendar year2 exceeds 7ii7 the average manufacturer price of such prescription drug in commerce for the calendar year preceding such year4 7,c7 ,applicable price increase allowance ,the applicable price increase allowance for any calendar year is the percentage 7rounded to the nearest one-tenth of #a percent7 by which the ,c-,,cpi-,u 7as defined in section #a7;f77#f7 of the ,internal ,revenue ,code of #aihf7 for that year exceeds the ,c-,,cpi-,u for the preceding calendar year4 7#g7 ,price spike revenue 7,a7 ,in general ,the price spike revenue for any calendar year is an amount equal to-- 7i7 the gross price spike revenue1 minus 7ii7 the adjustment amount4 7,b7 ,gross price spike revenue ,the gross price spike revenue for any calendar year is an amount equal to the product of-- 7i7 an amount equal to the difference between clause 7i7 of paragraph 7#f77;,b7 and clause 7ii7 of such paragraph2 and 7ii7 the total number of units of the prescription drug which were sold in commerce in such calendar year4 7,c7 ,adjustment amount ,the adjustment amount is the amount1 if any1 of the gross price spike revenue which the ,inspector ,general has determined is due solely to an increase in the cost of the inputs necessary to manufacture the prescription drug subject to the price spike4 7b7 ,submission by pharmaceutical companies of information to ,inspector ,general 7#a7 ,in general ,for each prescription drug1 the applicable entity shall submit to the ,inspector ,general a quarterly report that includes the following3 7,a7 ,for each prescription drug of the applicable entity-- 7i7 the total number of units of the prescription drug which were sold in commerce in the preceding calendar quarter2 7ii7 the average and median price per unit of such prescription drug in commerce in the preceding calendar quarter1 disaggregated by month2 and 7iii7 the gross revenues from sales of such prescription drug in commerce in the preceding calendar quarter4 7,b7 ,such information related to increased input costs or public health considerations as the applicable entity may wish the ,inspector ,general to consider in making a determination under clause 7ii7 of subsection 7c77#b77;,b7 or an assessment in clause 7iii7 of such subsection for the preceding calendar quarter4 7,c7 ,such information related to any anticipated increased input costs for the subsequent calendar quarter as the applicable entity may wish the ,inspector ,general to consider in making a determination under clause 7ii7 of subsection 7c77#b77;,b7 or an assessment in clause 7iii7 of such subsection for such calendar quarter4 7#b7 ,penalty for failure to submit 7,a7 ,in general ,an applicable entity described in paragraph 7#a7 that fails to submit information to the ,inspector ,general regarding a prescription drug1 as required by such paragraph1 before the date specified in paragraph 7#c7 shall be liable for a civil penalty1 as determined under subparagraph 7,b74 7,b7 ,amount of penalty ,the amount of the civil penalty shall be equal to the product of-- 7i7 an amount1 as determined appropriate by the ,inspector ,general1 which is-- 7,i7 not less than #j4e percent of the gross revenues from sales of the prescription drug described in subparagraph 7,a7 for the preceding calendar year1 and 7,,ii7 not greater than #a percent of the gross revenues from sales of such prescription drug for the preceding calendar year1 and 7ii7 the number of days in the period between-- 7,i7 the applicable date specified in paragraph 7#c71 and 7,,ii7 the date on which the ,inspector ,general receives the information described in paragraph 7#a7 from the applicable entity4 7#c7 ,submission deadline ,an applicable entity shall submit each quarterly report described in paragraph 7#a7 not later than ,january #ag1 ,april #ah1 ,june #ae1 and ,september #ae of each calendar year4 7c7 ,assessment by ,inspector ,general 7#a7 ,in general ,not later than the last day in ,february of each year1 the ,inspector ,general1 in consultation with other relevant ,federal agencies 7including the ,federal ,trade ,commission71 shall-- 7,a7 complete an assessment of the information the ,inspector ,general received pursuant to subsection 7b77#a7 with respect to sales of prescription drugs in the preceding calendar year2 and 7,b7 in the case of any prescription drug which satisfies the conditions described in paragraph 7#a7 or 7#b7 of subsection 7d71 submit a recommendation to the ,secretary of ,health and ,human ,services that such drug be exempted from application of the tax imposed under section #daib of the ,internal ,revenue ,code of #aihf 7as added by section #c of this ,act7 for such year4 7#b7 ,elements ,the assessment required by paragraph 7#a77;,a7 shall include the following3 7,a7 ,identification of each price spike relating to a prescription drug in the preceding calendar year4 7,b7 ,for each price spike identified under subparagraph 7,a7-- 7i7 a determination of the price spike revenue2 7ii7 a determination regarding the accuracy of the information submitted by the applicable entity regarding increased input costs2 and 7iii7 an assessment of the rationale of the applicable entity for the price spike4 7d7 ,exemption of certain drugs 7#a7 ,in general ,the ,secretary of ,health and ,human ,services1 upon recommendation of the ,inspector ,general pursuant to subsection 7c77#a77;,b71 may exempt any prescription drug which has been subject to a price spike during the preceding calendar year from application of the tax imposed under section #daib of the ,internal ,revenue ,code of #aihf for such year1 if the ,secretary determines that-- 7,a7 based on information submitted pursuant to subsection 7b77#a77;,b71 a for-cause price increase exemption should apply2 or 7,b7 7i7 the prescription drug which has been subject to a price spike has an average manufacturer price of not greater than #aj for a #cj day supply2 and 7ii7 such drug is marketed by not less than #c other holders of applications approved under subsection 7c7 or 7j7 of section #eje of the ,federal ,food1 ,drug1 and ,cosmetic ,act 7#ba ,u4,s4,c4 #cee71 where such applications approved under such subsection 7j7 use as a reference drug the drug so approved under such subsection 7c74 7#b7 ,clarification ,in considering1 under paragraph 7#a77;,a71 information submitted pursuant to subsection 7b77#a77;,b71 the ,secretary-- 7,a7 has the discretion to determine that such information does not warrant a for-cause price increase exemption2 and 7,b7 shall exclude from such consideration any information submitted by the applicable entity threatening to curtail or limit production of the prescription drug if the ,secretary does not grant an exemption from the application of the tax under section #daib of the ,internal ,revenue ,code of #aihf4 7e7 ,inspector ,general report to ,internal ,revenue ,service 7#a7 ,in general ,subject to paragraph 7#c71 not later than the last day in ,february of each year1 the ,inspector ,general shall transmit to the ,internal ,revenue ,service a report on the findings of the ,inspector ,general with respect to the information the ,inspector ,general received under subsection 7b77#a7 with respect to the preceding calendar year and the assessment carried out by the ,inspector ,general under subsection 7c77#a77;,a7 with respect to such information4 7#b7 ,contents ,the report transmitted under paragraph 7#a7 shall include the following3 7,a7 ,the information received under subsection 7b77#a7 with respect to the preceding calendar year4 7,b7 ,the price spikes identified under subparagraph 7,a7 of subsection 7c77#b74 7,c7 ,the price spike revenue determinations made under subparagraph 7,b77i7 of such subsection4 7,d7 ,the determinations and assessments made under clauses 7ii7 and 7iii7 of subparagraph 7,b7 of such subsection4 7#c7 ,notice and opportunity for hearing 7,a7 ,in general ,no report shall be transmitted to the ,internal ,revenue ,service under paragraph 7#a7 in regards to a prescription drug unless the ,inspector ,general has provided the applicable entity with-- 7i7 the assessment of such drug under subsection 7c77#a77;,a72 and 7ii7 notice of their right to a hearing in regards to such assessment4 7,b7 ,notice ,the notice required under subparagraph 7,a7 shall be provided to the applicable entity not later than #cj days after completion of the assessment under subsection 7c77#a77;,a74 7,c7 ,request for hearing ,subject to subparagraph 7,e71 an applicable entity may request a hearing before the ,secretary of ,health and ,human ,services not later than #cj days after the date on which the notice under subparagraph 7,b7 is received4 7,d7 ,completion of hearing ,in the case of an applicable entity which requests a hearing pursuant to subparagraph 7,c71 the ,secretary of ,health and ,human ,services shall1 not later than #ab months after the date on which the assessment under subsection 7c77#a77;,a7 was completed by the ,inspector ,general-- 7i7 make a final determination in regards the accuracy of such assessment2 and 7ii7 provide the report described in paragraph 7#b7 to the ,internal ,revenue ,service4 7,e7 ,limitation ,an applicable entity may request a hearing under subparagraph 7,c7 with respect to a particular prescription drug only once within a #e-year period4 7#d7 ,publication 7,a7 ,in general ,not later than the last day in ,february of each year1 subject to subparagraph 7,b71 the ,inspector ,general shall make the report transmitted under paragraph 7#a7 available to the public1 including on the ,internet website of the ,inspector ,general1 subject to subparagraph 7,b74 7,b7 ,proprietary information ,the ,inspector ,general shall ensure that any information made public in accordance with subparagraph 7,a7 excludes trade secrets and confidential commercial information4 7f7 ,notification ,the ,secretary of the ,treasury1 in conjunction with the ,inspector ,general1 shall notify1 at such time and in such manner as the ,secretary of the ,treasury shall provide1 each applicable entity in regard to any prescription drug which has been determined to have been subject to a price spike during the preceding calendar year and the amount of the tax imposed on such applicable entity pursuant to section #daib of the ,internal ,revenue ,code of #aihf4 #c4 ,excise tax on prescription drugs subject to price spikes 7a7 ,in general ,subchapter ,e of chapter #cb of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new section3 #daib4 ,prescription drugs subject to price spikes 7a7 ,imposition of tax 7#a7 ,in general ,subject to paragraph 7#c71 for each taxable prescription drug sold by an applicable entity during the calendar year1 there is hereby imposed on such entity a tax equal to the greater of-- 7,a7 the annual price spike tax for such prescription drug1 or 7,b7 subject to paragraph 7#b71 the cumulative price spike tax for such prescription drug4 7#b7 ,limitation ,in the case of a taxable prescription drug for which the applicable period 7as determined under subsection 7c77#b77;,e77i77 is less than #b calendar years1 the cumulative price spike tax shall not apply4 7#c7 ,exemption ,for any calendar year in which the ,secretary of ,health and ,human ,services has provided an exemption for a taxable prescription drug pursuant to section #b7;d7 of the ,stop ,price ,gouging ,act1 the amount of the tax determined under paragraph 7#a7 for such drug or device for such calendar year shall be reduced to zero4 7b7 ,annual price spike tax 7#a7 ,in general ,the amount of the annual price spike tax shall be equal to the applicable percentage of the price spike revenue received by the applicable entity on the sale of the taxable prescription drug during the calendar year4 7#b7 ,applicable percentage ,for purposes of paragraph 7#a71 the applicable percentage shall be equal to-- 7,a7 in the case of a taxable prescription drug which has been subject to a price spike percentage greater than the applicable price increase allowance 7as defined in section #b7;a77#f77;,c7 of the ,stop ,price ,gouging ,act7 but less than #ae percent1 #ej percent1 7,b7 in the case of a taxable prescription drug which has been subject to a price spike percentage equal to or greater than #ae percent but less than #bj percent1 #ge percent1 and 7,c7 in the case of a taxable prescription drug which has been subject to a price spike percentage equal to or greater than #bj percent1 #ajj percent4 7c7 ,cumulative price spike tax 7#a7 ,in general ,the amount of the cumulative price spike tax shall be equal to the applicable percentage of the cumulative price spike revenue received by the applicable entity on the sale of the taxable prescription drug during the calendar year4 7#b7 ,applicable percentage 7,a7 ,in general ,for purposes of paragraph 7#a71 the applicable percentage shall be equal to-- 7i7 in the case of a taxable prescription drug which has been subject to a cumulative price spike percentage greater than the cumulative price increase allowance but less than the first multi-year percentage1 #ej percent1 7ii7 in the case of a taxable prescription drug which has been subject to a cumulative price spike percentage equal to or greater than the first multi-year percentage but less than the second multi-year percentage1 #ge percent1 and 7iii7 in the case of a taxable prescription drug which has been subject to a cumulative price spike percentage equal to or greater than the second multi-year percentage1 #ajj percent4 7,b7 ,cumulative price spike percentage ,the cumulative price spike percentage is the percentage 7if any7 by which-- 7i7 the average manufacturer price of the taxable prescription drug in commerce for the preceding calendar year1 exceeds 7ii7 the average manufacturer price of such prescription drug in commerce for the base year4 7,c7 ,cumulative price increase allowance ,for purposes of clause 7i7 of subparagraph 7,a71 the cumulative price increase allowance for any calendar year is the percentage 7rounded to the nearest one-tenth of #a percent7 by which the ,c-,,cpi-,u 7as defined in section #a7;f77#f77 for that year exceeds the ,c-,,cpi-,u for the base year4 7,d7 ,multi-year percentages ,for purposes of subparagraph 7,a71 the first multi-year percentage and second multi-year percentage shall be determined in accordance with the following table3 ,number of years in applicable period,first multi-year percentage,second multi-year percentage#b years#ag4ebb4ec years#bj4jbe4jd years#bb4ebg4ee years#be4jcj4j4 7,e7 ,applicable period and base year 7i7 ,applicable period ,the applicable period shall be the lesser of-- 7,i7 the #e preceding calendar years1 7,,ii7 all calendar years beginning after the date of enactment of this section1 or 7,,iii7 all calendar years in which the taxable prescription drug was sold in commerce4 7ii7 ,base year ,the base year shall be the calendar year immediately preceding the applicable period4 7#c7 ,cumulative price spike revenue ,for purposes of paragraph 7#a71 the cumulative price spike revenue for any taxable prescription drug shall be an amount equal to-- 7,a7 an amount equal to the product of-- 7i7 an amount 7not less than zero7 equal to-- 7,i7 the average manufacturer price of such prescription drug in commerce for the preceding calendar year1 minus 7,,ii7 the average manufacturer price of such prescription drug in commerce for the base year1 and 7ii7 the total number of units of such prescription drug which were sold in commerce in the preceding calendar year1 minus 7,b7 an amount equal to the sum of the adjustment amounts1 if any1 determined under section #b7;a77#g77;,c7 of the ,stop ,price ,gouging ,act for each calendar year during the applicable period4 7d7 ,definitions ,for purposes of this section-- 7#a7 ,taxable prescription drug ,the term taxable prescription drug means a prescription drug 7as defined in section #b7;a77#e7 of the ,stop ,price ,gouging ,act7 which has been identified by the ,inspector ,general of the ,department of ,health and ,human ,services1 under section #b7;c77#b77;,a7 of such ,act1 as being subject to a price spike4 7#b7 ,other terms ,the terms applicable entity1 average manufacturer price1 price spike1 price spike percentage1 and price spike revenue have the same meaning given such terms under section #b7;a7 of the ,stop ,price ,gouging ,act4 4 7b7 ,clerical amendments 7#a7 ,the heading of subchapter ,e of chapter #cb of the ,internal ,revenue ,code of #aihf is amended by striking ,medical devices and inserting ,certain medical devices and prescription drugs4 7#b7 ,the table of subchapters for chapter #cb of such ,code is amended by striking the item relating to subchapter ,e and inserting the following new item3 ,subchapter ,e4 ,certain medical devices and prescription drugs 4 7#c7 ,the table of sections for subchapter ,e of chapter #cb of such ,code is amended by adding at the end the following new item3 ,sec4 #daib4 ,prescription drugs subject to price spikes4 4 7c7 ,effective date ,the amendments made by this section shall apply to sales after the date of the enactment of this ,act4 #d4 ,study on monopoly medical products 7a7 ,in general ,the ,comptroller ,general of the ,united ,states shall conduct a study that examines-- 7#a7 how drug manufacturers and health plans 7including private insurers1 the ,medicare program1 and ,state ,medicaid programs7 establish initial launch prices for newly approved drugs2 and 7#b7 alternative methods that have been proposed for setting the price of new drugs4 7b7 ,study of specific drugs ,as part of the study described in subsection 7a71 the ,comptroller ,general shall examine drug pricing with respect to several drugs approved within the #e-year period immediately preceding the date of enactment of this ,act and explore potential alternative approaches to establish new drug prices that could help make new drugs more affordable1 better reflect the clinical value of such drugs in treating patients1 and maintain incentives for innovation4 7c7 ,factors ,in conducting the study described in subsection 7a71 the ,comptroller ,general shall consider-- 7#a7 what factors drug manufacturers and health plans consider in establishing initial launch prices2 7#b7 how initial pricing decisions by drug manufacturers and health plans affect costs and use of services for patients and public programs such as the ,medicare and ,medicaid programs2 7#c7 efforts by health plans to limit costs1 including through benefit design or coverage limitations2 7#d7 how prices change in the first few years following a new drug's launch2 and 7#e7 recommendations manufacturers1 health plans1 and other experts have for alternative approaches to establishing new drug prices and the benefits and challenges associated with such alternative approaches4 #e4 ,revenues collected ,there are authorized to be appropriated to the ,secretary of ,health and ,human ,services such sums as are equal to any increase in revenue to the ,treasury by reason of the provisions of this ,act or the amendments made by this ,act for the purposes of increasing amounts available to the ,national ,institutes of ,health for research and development of drugs4