Sec. 202. Prescription drug price spikes

2,229 words·~10 min read·/bill/115/hr/1776/ih/section-202

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In this subsection: The term applicable entity means the holder of an application approved under subsection

(c)or

(j)of section 505 of the Federal Food, Drug, and Cosmetic Act ( 21 U.S.C. 355 ) or of a license issued under subsection

(a)or

(k)of section 351 of the Public Health Service Act ( 42 U.S.C. 262 ) for a prescription drug. The term average price means— the average manufacturer price, as defined in section 1927(k)(1) of the Social Security Act ( 42 U.S.C. 1396r–8(k)(1) ); or in the case of a drug for which the average manufacturer price is not available, the manufacturer’s average sales price (as defined in section 1847A(c)(1) of the Social Security Act (42 U.S.C. 1395w-3a(c)(1)). The term commerce has the meaning given such term in section 4 of the Federal Trade Commission Act ( 15 U.S.C. 44 ). The term prescription drug means any drug subject to section 503(b)(1) of the Federal Food, Drug, and Cosmetic Act ( 21 U.S.C. 353(b)(1) ) which is covered by a Federal health care program (as defined in section 1128B(f) of the Social Security Act (42 U.S.C. 1320a–7b(f))). The term price spike means an increase in the average price in commerce of a prescription drug for which the price spike percentage is equal to or greater than the applicable price increase allowance. The price spike percentage is the percentage (if any) by which— the average price of a prescription drug in commerce for the most recently completed calendar year; exceeds the average price of such drug in commerce for the calendar year preceding such year. The applicable price increase allowance for any calendar year is the percentage (rounded to the nearest one-tenth of 1 percent) by which the medical care component of the consumer price index for all urban consumers (as published by the Bureau of Labor Statistics) for that year exceeds such component for the preceding calendar year. The price spike revenue for any calendar year is an amount equal to— the gross price spike revenue; minus the adjustment amount. The gross price spike revenue for any calendar year is an amount equal to the product of— an amount equal to the difference between subclause

(I)of subparagraph (E)(ii) and subclause

(II)of such subparagraph; and the total number of units of the prescription drug which were sold in commerce in such calendar year. The adjustment amount is the amount, if any, of the gross price spike revenue which the Inspector General has determined is due solely to an increase in the cost of the goods sold (excluding any increase in costs which are related to internal transfers within the applicable entity) which are necessary to manufacture the prescription drug subject to the price spike. The term Inspector General means the Inspector General of the Department of Health and Human Services. For each prescription drug, the applicable entity shall submit to the Inspector General a quarterly report that includes the following: For each prescription drug of the applicable entity— the total number of units of the prescription drug which were sold in commerce in the most recently completed calendar quarter; and the gross revenues from sales of such prescription drug in commerce in the most recently completed calendar quarter. Such information related to increased input costs as the applicable entity may wish the Inspector General to consider in making a determination under subclause

(II)of paragraph (3)(B)(ii) or an assessment in subclause

(III)of such paragraph for the most recently completed calendar quarter. 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 subclause

(II)of paragraph (3)(B)(ii) or an assessment in subclause

(III)of such paragraph for such calendar quarter. An applicable entity described in subparagraph

(A)that fails to submit information to the Inspector General regarding a prescription drug, as required by such paragraph, before the date specified in subparagraph

(C)shall be liable for a civil penalty, as determined under clause (ii). The amount of the civil penalty shall be equal to the product of— an amount, as determined appropriate by the Inspector General; which is— not less than 0.5 percent of the gross revenues from sales of the prescription drug described in clause

(i)for the most recently completed calendar year; and not greater than 1 percent of the gross revenues from sales of such drug for the most recently completed calendar year; and the number of days in the period between— the applicable date specified in subparagraph (C); and the date on which the Inspector General receives the information described in subparagraph

(A)from the applicable entity. An applicable entity shall submit each quarterly report described in subparagraph

(A)not later than January 17, April 18, June 15, and September 15 of each calendar year. Not later than the last day in February of each year, the Inspector General, in consultation with the Federal Trade Commission, shall complete an assessment of the information the Inspector General received pursuant to paragraph (2)(A) with respect to sales of prescription drugs in the most recently completed calendar year. The assessment required by subparagraph

(A)shall include the following: Identification of each price spike relating to a prescription drug in the most recently completed calendar year. For each price spike identified under clause (i)— a determination of the price spike percentage and price spike revenue; a determination regarding the accuracy of the information submitted by the applicable entity regarding increased input costs; and an assessment of the rationale of the applicable entity for the price spike. Not later than the last day in February of each year, the Inspector General shall transmit to the Internal Revenue Service a report on the findings of the Inspector General with respect to the information the Inspector General received under paragraph (2)(A) with respect to the most recently completed calendar year and the assessment carried out by the Inspector General under paragraph (3)(A) with respect to such information. The report transmitted under subparagraph

(A)shall include the following: The information received under paragraph (2)(A) with respect to the most recently completed calendar year. The price spikes identified under clause

(i)of paragraph (3)(B). The price spike revenue determinations made under clause (ii)(I) of such paragraph. The average price of the prescription drug for each month during the most recently completed calendar year. The determinations and assessments made under subclauses

(II)and

(III)of clause

(ii)of such paragraph. Not later than the last day in February of each year, the Inspector General shall make the report transmitted under subparagraph

(A)available to the public, including on the Internet website of the Inspector General. The Secretary of the Treasury, in conjunction with the Inspector General, shall notify, at such time and in such manner as the Secretary of the Treasury shall provide, each applicable entity in regard to any prescription drug which has been determined to have been subject to a price spike during the most recently completed calendar year and the amount of the tax imposed on such applicable entity pursuant to section 4192 of the Internal Revenue Code of 1986 (as added by subsection

(b)of this section). Subchapter E of chapter 32 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section: For each taxable prescription drug sold by an applicable entity during the calendar year, there is hereby imposed on such entity a tax equal to the greater of— the annual price spike tax for such drug, or subject to paragraph (2), the cumulative price spike tax for such drug. In the case of a taxable prescription drug for which the applicable period (as determined under subsection (c)(2)(E)(i)) is less than 2 completed calendar years, the cumulative price spike tax shall not apply. The amount of the annual price spike tax shall be equal to the applicable percentage of the price spike revenue received by the applicable entity on the sale of the taxable prescription drug during the calendar year. For purposes of paragraph (1), the applicable percentage shall be equal to— in the case of a taxable prescription drug which has been subject to a price spike percentage equal to or greater than the applicable price increase allowance (as defined in section 202(a)(1)(E)(iii) of the Improving Access To Affordable Prescription Drugs Act ) but less than 15 percent, 50 percent, in the case of a taxable prescription drug which has been subject to a price spike percentage equal to or greater than 15 percent but less than 20 percent, 75 percent, and in the case of a taxable prescription drug which has been subject to a price spike percentage equal to or greater than 20 percent, 100 percent. The amount of the cumulative price spike tax shall be equal to the applicable percentage of the cumulative price spike revenue received by the applicable entity on the sale of the taxable prescription drug during the calendar year. For purposes of paragraph (1), the applicable percentage shall be equal to— in the case of a taxable prescription drug which has been subject to a cumulative price spike percentage equal to or greater than the cumulative price increase allowance but less than the first compounded percentage, 50 percent, 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 compounded percentage but less than the second compounded percentage, 75 percent, and 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 compounded percentage, 100 percent. The cumulative price spike percentage is the percentage (if any) by which— the average price of the taxable prescription drug in commerce for the most recently completed calendar year, exceeds the average price of such drug in commerce for the base year. For purposes of clause

(i)of subparagraph (A), the cumulative price increase allowance for any calendar year is the percentage (rounded to the nearest one-tenth of 1 percent) by which the medical care component of the consumer price index for all urban consumers (as published by the Bureau of Labor Statistics) for that year exceeds such component for the base year. For purposes of subparagraph (A), the first compounded percentage and second compounded percentage shall be determined in accordance with the following table: Number of years in applicable period First compounded percentage Second compounded percentage 2 years 32.35 44.00 3 years 52.09 72.80 4 years 74.90 107.36 5 years 101.14 148.83. The applicable period shall be the lesser of— the 5 most recently completed calendar years, any completed calendar years beginning after March 29, 2017, or any completed calendar years in which the taxable prescription drug was sold in commerce. The base year shall be the calendar year immediately preceding the applicable period. For purposes of paragraph (1), the cumulative price spike revenue for any taxable prescription drug shall be an amount equal to— an amount equal to the product of— an amount (not less than zero) equal to— the average price of such drug in commerce for the most recently completed calendar year, minus the average price of such drug in commerce for the base year, and the total number of units of such drug which were sold in commerce in the most recently completed calendar year, minus the adjustment amount, if any, determined under section 202(a)(1)(F)(iii) of the Improving Access To Affordable Prescription Drugs Act for such calendar year. For purposes of this section— The term taxable prescription drug means a prescription drug (as defined in section 202(a)(1)(D) of the Improving Access To Affordable Prescription Drugs Act ) which has been identified by the Inspector General of the Department of Health and Human Services, under section 202(a)(3)(B)(i) of such Act, as being subject to a price spike. The terms applicable entity , average price , price spike , price spike percentage , and price spike revenue have the same meaning given such terms under section 202(a)(1) of the Improving Access To Affordable Prescription Drugs Act . . The heading of subchapter E of chapter 32 of the Internal Revenue Code of 1986 is amended by striking and inserting Medical devices . Certain medical devices and prescription drugs The table of subchapters for chapter 32 of such Code is amended by striking the item relating to subchapter E and inserting the following new item: Subchapter E. Certain medical devices and prescription drugs . The table of sections for subchapter E of chapter 32 of such Code is amended by adding at the end the following new item: Sec. 4192. Prescription drugs subject to price spikes. . The amendments made by this section shall apply to sales after the date of the enactment of this Act. 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 section or the amendments made by this section for the purposes of— funding or conducting research on the economic and policy implications of price patterns of prescription drugs; or increasing amounts available to the National Institutes of Health for research and development of drugs.

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