Sec. 202. Prescription drug price spikes

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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 drug described in paragraph (5)(A). The term average manufacturer price — has the same meaning given such term under section 1927(k)(1) of the Social Security Act ( 42 U.S.C. 1396r–8(k)(1) ); or with respect to a drug for which there is no average manufacturer price as so defined, such term shall mean the wholesale acquisition cost of the drug. 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 Inspector General means the Inspector General of the Department of Health and Human Services. The term prescription drug means any drug (as defined in section 201(g) of the Federal Food, Drug, and Cosmetic Act ( 21 U.S.C. 321(g) )), including a combination product whose primary mode of action is determined under section 503(g) of such Act ( 21 U.S.C. 353(g) ) to be that of a drug, and that— is subject to section 503(b)(1) of the Federal Food, Drug, and Cosmetic Act ( 21 U.S.C. 353(b)(1) ); and 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))). For purposes of this subsection, a prescription drug with respect to which the Secretary of Health and Human Services has approved any minor reformulation that does not produce a meaningful therapeutic benefit, the drug that was approved prior to any such reformulation and the drug with any such reformulation shall be considered one prescription drug. The term price spike means an increase in the average manufacturer price in commerce of a prescription drug for which the price spike percentage is equal to or greater than applicable price increase allowance. The price spike percentage is the percentage (if any) by which— the average manufacturer price of a prescription drug in commerce for the calendar year; exceeds the average manufacturer price of such prescription 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 C–CPI–U (as defined in section 1(f)(6) of the Internal Revenue Code of 1986) for that year exceeds the C–CPI–U for the preceding calendar year. 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 (F)(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 inputs necessary to manufacture the prescription drug subject to the price spike. 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 preceding calendar quarter; the average and median price per unit of such prescription drug in commerce in the preceding calendar quarter, disaggregated by month; and the gross revenues from sales of such prescription drug in commerce in the preceding calendar quarter. 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 subclause

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

(III)of such paragraph for the preceding 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 subparagraph, 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 preceding calendar year, and not greater than 1 percent of the gross revenues from sales of such prescription drug for the preceding 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 other relevant Federal agencies (including 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 preceding calendar year; and in the case of any prescription drug which satisfies the conditions described in subparagraph

(A)or

(B)of paragraph (4), submit a recommendation to the Secretary of Health and Human Services that such drug be exempted from application of the tax imposed under section 4192 of the Internal Revenue Code of 1986 (as added by subsection

(b)of this section) for such year. The assessment required by subparagraph

(A)shall include the following: Identification of each price spike relating to a prescription drug in the preceding calendar year. For each price spike identified under clause (i)— a determination of the 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. The Secretary of Health and Human Services, upon recommendation of the Inspector General pursuant to paragraph (3)(A)(ii), may exempt any prescription drug which has been subject to a price spike during the preceding calendar year from application of the tax imposed under section 4192 of the Internal Revenue Code of 1986 for such year, if the Secretary determines that— based on information submitted pursuant to paragraph (2)(A)(ii), a for-cause price increase exemption should apply; or the prescription drug which has been subject to a price spike has an average manufacturer price of not greater than $10 for a 30-day supply; and such drug is marketed by not less than three other holders of applications approved under subsection

(c)or

(j)of section 505 of the Federal Food, Drug, and Cosmetic Act ( 21 U.S.C. 355 ), where such applications approved under such subsection

(j)use as a reference drug the drug so approved under such subsection (c). In considering, under subparagraph (A)(i), information submitted pursuant to paragraph (2)(A)(ii), the Secretary— has the discretion to determine that such information does not warrant a for-cause price increase exemption; and shall exclude from such consideration any information submitted by the applicable entity threatening to curtail or limit production of the prescription drug if the Secretary does not grant an exemption from the application of the tax under section 4192 of the Internal Revenue Code of 1986. Subject to subparagraph (C), 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 preceding 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 preceding 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 determinations and assessments made under subclauses

(II)and

(III)of clause

(ii)of such paragraph. No report shall be transmitted to the Internal Revenue Service under subparagraph

(A)in regards to a prescription drug unless the Inspector General has provided the applicable entity with— the assessment of such drug under paragraph (3)(A); and notice of their right to a hearing in regards to such assessment. The notice required under clause

(i)shall be provided to the applicable entity not later than 30 days after completion of the assessment under paragraph (3)(A). Subject to clause (v), an applicable entity may request a hearing before the Secretary of Health and Human Services not later than 30 days after the date on which the notice under clause

(ii)is received. In the case of an applicable entity which requests a hearing pursuant to clause (iii), the Secretary of Health and Human Services shall, not later than 12 months after the date on which the assessment under paragraph (3)(A) was completed by the Inspector General— make a final determination in regards the accuracy of such assessment; and provide the report described in subparagraph

(B)to the Internal Revenue Service. An applicable entity may request a hearing under clause

(iii)with respect to a particular prescription drug only once within a 5-year period. Not later than the last day in February of each year, subject to clause (ii), 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 Inspector General shall ensure that any information made public in accordance with clause

(i)excludes trade secrets and confidential commercial information. The Secretary of the Treasury, in conjunction with the Inspector General, shall notify, at such time and in such manner as the Secretary of the Treasury shall provide, each applicable entity in regard to any prescription drug which has been determined to have been subject to a price spike during the preceding calendar year and the amount of the tax imposed on such applicable entity pursuant to section 4192 of the Internal Revenue Code of 1986. Subchapter E of chapter 32 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section: Subject to paragraph (3), for each taxable prescription drug sold by an applicable entity during the calendar year, there is hereby imposed on such entity a tax equal to the greater of— the annual price spike tax for such prescription drug, or subject to paragraph (2), the cumulative price spike tax for such prescription 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 calendar years, the cumulative price spike tax shall not apply. 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 202(a)(4) of the Affordable Medications Act , the amount of the tax determined under paragraph

(1)for such drug or device for such calendar year shall be reduced to zero. 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 greater than the applicable price increase allowance (as defined in section 202(a)(1)(F)(iii) of the Affordable Medications 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 greater than the cumulative price increase allowance but less than the first multi-year 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 multi-year percentage but less than the second multi-year 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 multi-year percentage, 100 percent. The cumulative price spike percentage is the percentage (if any) by which— the average manufacturer price of the taxable prescription drug in commerce for the preceding calendar year, exceeds the average manufacturer price of such prescription 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 C–CPI–U (as defined in section 1(f)(6)) for that year exceeds the C–CPI–U for the base year. For purposes of subparagraph (A), the first multi-year percentage and second multi-year percentage shall be determined in accordance with the following table: Number of years in applicable period First multi-year percentage Second multi-year percentage 2 years 17.5 22.5 3 years 20 25 4 years 22.5 27.5 5 years 25 30. The applicable period shall be the lesser of— the 5 preceding calendar years, all calendar years beginning after the date of enactment of this section, or all 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 manufacturer price of such prescription drug in commerce for the preceding calendar year, minus the average manufacturer price of such prescription drug in commerce for the base year, and the total number of units of such prescription drug which were sold in commerce in the preceding calendar year, minus an amount equal to the sum of the adjustment amounts, if any, determined under section 202(a)(1)(G)(iii) of the Affordable Medications Act for each calendar year during the applicable period. For purposes of this section— The term taxable prescription drug means a prescription drug (as defined in section 202(a)(1)(E) of the Affordable Medications 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 manufacturer price , price spike , price spike percentage , and price spike revenue have the same meaning given such terms under section 202(a)(1) of the Affordable Medications 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; increasing amounts available to the National Institutes of Health for research and development of drugs; reducing prescription drug cost-sharing for patients; or reducing health insurance premiums.

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