Stop Price Gouging Act

I 116TH CONGRESS 1ST SESSION H. R. 1093 To amend the Internal Revenue Code of 1986 to establish an excise tax on certain prescription drugs which have been subject to a price spike, and for other purposes. IN THE HOUSE OF REPRESENTATIVES FEBRUARY 7, 2019 Mr. POCAN (for himself and Ms. KAPTUR) introduced the following bill; which was referred to the Committee on Energy and Commerce, and in addition to the Committee on Ways and Means, for a period to be subsequently determined by the Speaker, in each case for consideration of such provi- sions as fall within the jurisdiction of the committee concerned A BILL To amend the Internal Revenue Code of 1986 to establish an excise tax on certain prescription drugs which have been subject to a price spike, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Stop Price Gouging 4 Act’’. 5 SEC. 2. IDENTIFICATION OF PRESCRIPTION DRUG PRICE 6 SPIKES. 7 (a) DEFINITIONS.—In this section: 8 VerDate Sep 11 2014 22:13 Feb 22, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H1093.IH H1093 pamtmann on DSKBFK8HB2PROD with BILLS 2 •HR 1093 IH (1) APPLICABLE ENTITY.—The term ‘‘applica- 1 ble entity’’ means the holder of an application ap- 2 proved under subsection (c) or (j) of section 505 of 3 the Federal Food, Drug, and Cosmetic Act (21 4 U.S.C. 355) or of a license issued under subsection 5 (a) or (k) of section 351 of the Public Health Serv- 6 ice Act (42 U.S.C. 262) for a drug described in 7 paragraph (5)(A). 8 (2) AVERAGE MANUFACTURER PRICE.—The 9 term ‘‘average manufacturer price’’— 10 (A) has the same meaning given such term 11 under section 1927(k)(1) of the Social Security 12 Act (42 U.S.C. 1396r–8(k)(1)); or 13 (B) with respect to a drug for which there 14 is no average manufacturer price as so defined, 15 such term shall mean the wholesale acquisition 16 cost of the drug. 17 (3) COMMERCE.—The term ‘‘commerce’’ has 18 the meaning given such term in section 4 of the 19 Federal Trade Commission Act (15 U.S.C. 44). 20 (4) INSPECTOR GENERAL.—The term ‘‘Inspec- 21 tor General’’ means the Inspector General of the De- 22 partment of Health and Human Services. 23 (5) PRESCRIPTION DRUG.— 24 VerDate Sep 11 2014 22:13 Feb 22, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H1093.IH H1093 pamtmann on DSKBFK8HB2PROD with BILLS 3 •HR 1093 IH (A) IN GENERAL.—The term ‘‘prescription 1 drug’’ means any drug (as defined in section 2 201(g) of the Federal Food, Drug, and Cos- 3 metic Act (21 U.S.C. 321(g))), including a com- 4 bination product whose primary mode of action 5 is determined under section 503(g) of such Act 6 (21 U.S.C. 353(g)) to be that of a drug, and 7 that— 8 (i) is subject to section 503(b)(1) of 9 the Federal Food, Drug, and Cosmetic Act 10 (21 U.S.C. 353(b)(1)); and 11 (ii) is covered by a Federal health 12 care program (as defined in section 13 1128B(f) of the Social Security Act (42 14 U.S.C. 1320a–7b(f))). 15 (B) TREATMENT OF REFORMULATED 16 DRUGS.—For purposes of this section, a pre- 17 scription drug with respect to which the Sec- 18 retary of Health and Human Services has ap- 19 proved any minor reformulation that does not 20 produce a meaningful therapeutic benefit, the 21 drug that was approved prior to any such refor- 22 mulation and the drug with any such reformu- 23 lation shall be considered one prescription drug. 24 (6) PRICE SPIKE.— 25 VerDate Sep 11 2014 22:13 Feb 22, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H1093.IH H1093 pamtmann on DSKBFK8HB2PROD with BILLS 4 •HR 1093 IH (A) IN GENERAL.—The term ‘‘price spike’’ 1 means an increase in the average manufacturer 2 price in commerce of a prescription drug for 3 which the price spike percentage is equal to or 4 greater than applicable price increase allowance. 5 (B) PRICE SPIKE PERCENTAGE.—The 6 price spike percentage is the percentage (if any) 7 by which— 8 (i) the average manufacturer price of 9 a prescription drug in commerce for the 10 calendar year; exceeds 11 (ii) the average manufacturer price of 12 such prescription drug in commerce for the 13 calendar year preceding such year. 14 (C) APPLICABLE PRICE INCREASE ALLOW- 15 ANCE.—The applicable price increase allowance 16 for any calendar year is the percentage (round- 17 ed to the nearest one-tenth of 1 percent) by 18 which the C–CPI–U (as defined in section 19 1(f)(6) of the Internal Revenue Code of 1986) 20 for that year exceeds the C–CPI–U for the pre- 21 ceding calendar year. 22 (7) PRICE SPIKE REVENUE.— 23 (A) IN GENERAL.—The price spike revenue 24 for any calendar year is an amount equal to— 25 VerDate Sep 11 2014 22:13 Feb 22, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H1093.IH H1093 pamtmann on DSKBFK8HB2PROD with BILLS 5 •HR 1093 IH (i) the gross price spike revenue, 1 minus 2 (ii) the adjustment amount. 3 (B) GROSS PRICE SPIKE REVENUE.—The 4 gross price spike revenue for any calendar year 5 is an amount equal to the product of— 6 (i) an amount equal to the difference 7 between clause (i) of paragraph (6)(B) and 8 clause (ii) of such paragraph; and 9 (ii) the total number of units of the 10 prescription drug which were sold in com- 11 merce in such calendar year. 12 (C) ADJUSTMENT AMOUNT.—The adjust- 13 ment amount is the amount, if any, of the gross 14 price spike revenue which the Inspector General 15 has determined is due solely to an increase in 16 the cost of the inputs necessary to manufacture 17 the prescription drug subject to the price spike. 18 (b) SUBMISSION BY PHARMACEUTICAL COMPANIES 19 OF INFORMATION TO INSPECTOR GENERAL.— 20 (1) IN GENERAL.—For each prescription drug, 21 the applicable entity shall submit to the Inspector 22 General a quarterly report that includes the fol- 23 lowing: 24 VerDate Sep 11 2014 22:13 Feb 22, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H1093.IH H1093 pamtmann on DSKBFK8HB2PROD with BILLS 6 •HR 1093 IH (A) For each prescription drug of the ap- 1 plicable entity— 2 (i) the total number of units of the 3 prescription drug which were sold in com- 4 merce in the preceding calendar quarter; 5 (ii) the average and median price per 6 unit of such prescription drug in commerce 7 in the preceding calendar quarter, 8 disaggregated by month; and 9 (iii) the gross revenues from sales of 10 such prescription drug in commerce in the 11 preceding calendar quarter. 12 (B) Such information related to increased 13 input costs or public health considerations as 14 the applicable entity may wish the Inspector 15 General to consider in making a determination 16 under clause (ii) of subsection (c)(2)(B) or an 17 assessment in clause (iii) of such subsection for 18 the preceding calendar quarter. 19 (C) Such information related to any antici- 20 pated increased input costs for the subsequent 21 calendar quarter as the applicable entity may 22 wish the Inspector General to consider in mak- 23 ing a determination under clause (ii) of sub- 24 section (c)(2)(B) or an assessment in clause 25 VerDate Sep 11 2014 22:13 Feb 22, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H1093.IH H1093 pamtmann on DSKBFK8HB2PROD with BILLS 7 •HR 1093 IH (iii) of such subsection for such calendar quar- 1 ter. 2 (2) PENALTY FOR FAILURE TO SUBMIT.— 3 (A) IN GENERAL.—An applicable entity de- 4 scribed in paragraph (1) that fails to submit in- 5 formation to the Inspector General regarding a 6 prescription drug, as required by such para- 7 graph, before the date specified in paragraph 8 (3) shall be liable for a civil penalty, as deter- 9 mined under subparagraph (B). 10 (B) AMOUNT OF PENALTY.—The amount 11 of the civil penalty shall be equal to the product 12 of— 13 (i) an amount, as determined appro- 14 priate by the Inspector General, which is— 15 (I) not less than 0.5 percent of 16 the gross revenues from sales of the 17 prescription drug described in sub- 18 paragraph (A) for the preceding cal- 19 endar year, and 20 (II) not greater than 1 percent of 21 the gross revenues from sales of such 22 prescription drug for the preceding 23 calendar year, and 24 VerDate Sep 11 2014 22:13 Feb 22, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H1093.IH H1093 pamtmann on DSKBFK8HB2PROD with BILLS 8 •HR 1093 IH (ii) the number of days in the period 1 between— 2 (I) the applicable date specified 3 in paragraph (3), and 4 (II) the date on which the In- 5 spector General receives the informa- 6 tion described in paragraph (1) from 7 the applicable entity. 8 (3) SUBMISSION DEADLINE.—An applicable en- 9 tity shall submit each quarterly report described in 10 paragraph (1) not later than January 17, April 18, 11 June 15, and September 15 of each calendar year. 12 (c) ASSESSMENT BY INSPECTOR GENERAL.— 13 (1) IN GENERAL.—Not later than the last day 14 in February of each year, the Inspector General, in 15 consultation with other relevant Federal agencies 16 (including the Federal Trade Commission), shall— 17 (A) complete an assessment of the infor- 18 mation the Inspector General received pursuant 19 to subsection (b)(1) with respect to sales of pre- 20 scription drugs in the preceding calendar year; 21 and 22 (B) in the case of any prescription drug 23 which satisfies the conditions described in para- 24 graph (1) or (2) of subsection (d), submit a rec- 25 VerDate Sep 11 2014 22:13 Feb 22, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H1093.IH H1093 pamtmann on DSKBFK8HB2PROD with BILLS 9 •HR 1093 IH ommendation to the Secretary of Health and 1 Human Services that such drug be exempted 2 from application of the tax imposed under sec- 3 tion 4192 of the Internal Revenue Code of 1986 4 (as added by section 3 of this Act) for such 5 year. 6 (2) ELEMENTS.—The assessment required by 7 paragraph (1)(A) shall include the following: 8 (A) Identification of each price spike relat- 9 ing to a prescription drug in the preceding cal- 10 endar year. 11 (B) For each price spike identified under 12 subparagraph (A)— 13 (i) a determination of the price spike 14 revenue; 15 (ii) a determination regarding the ac- 16 curacy of the information submitted by the 17 applicable entity regarding increased input 18 costs; and 19 (iii) an assessment of the rationale of 20 the applicable entity for the price spike. 21 (d) EXEMPTION OF CERTAIN DRUGS.— 22 (1) IN GENERAL.—The Secretary of Health and 23 Human Services, upon recommendation of the In- 24 spector General pursuant to subsection (c)(1)(B), 25 VerDate Sep 11 2014 22:13 Feb 22, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H1093.IH H1093 pamtmann on DSKBFK8HB2PROD with BILLS 10 •HR 1093 IH may exempt any prescription drug which has been 1 subject to a price spike during the preceding cal- 2 endar year from application of the tax imposed 3 under section 4192 of the Internal Revenue Code of 4 1986 for such year, if the Secretary determines 5 that— 6 (A) based on information submitted pursu- 7 ant to subsection (b)(1)(B), a for-cause price 8 increase exemption should apply; or 9 (B)(i) the prescription drug which has 10 been subject to a price spike has an average 11 manufacturer price of not greater than $10 for 12 a 30 day supply; and 13 (ii) such drug is marketed by not less than 14 3 other holders of applications approved under 15 subsection (c) or (j) of section 505 of the Fed- 16 eral Food, Drug, and Cosmetic Act (21 U.S.C. 17 355), where such applications approved under 18 such subsection (j) use as a reference drug the 19 drug so approved under such subsection (c). 20 (2) CLARIFICATION.—In considering, under 21 paragraph (1)(A), information submitted pursuant 22 to subsection (b)(1)(B), the Secretary— 23 VerDate Sep 11 2014 22:13 Feb 22, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H1093.IH H1093 pamtmann on DSKBFK8HB2PROD with BILLS 11 •HR 1093 IH (A) has the discretion to determine that 1 such information does not warrant a for-cause 2 price increase exemption; and 3 (B) shall exclude from such consideration 4 any information submitted by the applicable en- 5 tity threatening to curtail or limit production of 6 the prescription drug if the Secretary does not 7 grant an exemption from the application of the 8 tax under section 4192 of the Internal Revenue 9 Code of 1986. 10 (e) INSPECTOR GENERAL REPORT TO INTERNAL 11 REVENUE SERVICE.— 12 (1) IN GENERAL.—Subject to paragraph (3), 13 not later than the last day in February of each year, 14 the Inspector General shall transmit to the Internal 15 Revenue Service a report on the findings of the In- 16 spector General with respect to the information the 17 Inspector General received under subsection (b)(1) 18 with respect to the preceding calendar year and the 19 assessment carried out by the Inspector General 20 under subsection (c)(1)(A) with respect to such in- 21 formation. 22 (2) CONTENTS.—The report transmitted under 23 paragraph (1) shall include the following: 24 VerDate Sep 11 2014 22:13 Feb 22, 2019 Jkt 089200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H1093.IH H1093 pamtmann on DSKBFK8HB2PROD with BILLS 12 •HR 1093 IH (A) The information received under sub- 1 section (b)(1) with respect to the preceding cal- 2 endar year. 3 (B) The price spikes identified under sub- 4 paragraph (A) of subsection (c)(2). 5 (C) The price spike revenue determinations 6 made under subparagraph (B)(i) of such sub- 7 section. 8 (D) The determinations and assessments 9 made under clauses (ii) and (iii) of subpara- 10 graph (B) of such subsection. 11 (3) NOTICE AND OPPORTUNITY FOR HEAR- 12 ING.— 13 (A) IN GENERAL.—No report shall be 14 transmitted to the Internal Revenue Service 15 under paragraph (1) in regards to a prescrip- 16 tion drug unless the Inspector General has pro- 17 vided the applicable entity with— 18 (i) the assessment of such drug under 19 subsection (c)(1)(A); and 20 (ii) notice of their right to a hearing 21 in regards to such assessment. 22 (B) NOTICE.—The notice required under 23 subparagraph (A) shall be provided to the ap- 24 plicable entity not later than 30 days after com- 25 VerDate Sep 11 2014 22:13 Feb 22, 2019 Jkt 089200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\H1093.IH H1093 pamtmann on DSKBFK8HB2PROD with BILLS 13 •HR 1093 IH pletion of the assessment under subsection 1 (c)(1)(A). 2 (C) REQUEST FOR HEARING.—Subject to 3 subparagraph (E), an applicable entity may re- 4 quest a hearing before the Secretary of Health 5 and Human Services not later than 30 days 6 after the date on which the notice under sub- 7 paragraph (B) is received. 8 (D) COMPLETION OF HEARING.—In the 9 case of an appl [Text truncated for display. 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