Essential Medicines Strategic Stockpile Act of 2020

I 116TH CONGRESS 2D SESSION H. R. 8479 To amend the Public Health Service Act to provide for stockpiles to ensure that all Americans have access to generic drugs at risk of shortage, and for other purposes. IN THE HOUSE OF REPRESENTATIVES OCTOBER 1, 2020 Mr. CARTER of Georgia (for himself and Ms. BLUNT ROCHESTER) introduced the following bill; which was referred to the Committee on Energy and Commerce A BILL To amend the Public Health Service Act to provide for stockpiles to ensure that all Americans have access to generic drugs at risk of shortage, 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 ‘‘Essential Medicines 4 Strategic Stockpile Act of 2020’’. 5 VerDate Sep 11 2014 00:44 Oct 29, 2020 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H8479.IH H8479 pbinns on DSKJLVW7X2PROD with BILLS 2 •HR 8479 IH SEC. 2. PILOT PROGRAM ON ENSURING MEDICATION SUP- 1 PLY STABILITY. 2 Part D of the Public Health Service Act (42 U.S.C. 3 254b et seq.) is amended by adding at the end the fol- 4 lowing new subpart: 5 ‘‘Subpart XIII—Ensuring Medication Supply Stability 6 ‘‘SEC. 340J. ENSURING MEDICATION SUPPLY STABILITY. 7 ‘‘(a) AWARD OF CONTRACTS.—Beginning not later 8 than January 1, 2021, the Secretary shall award contracts 9 to eligible entities to each implement and test the effective- 10 ness of acquiring, maintaining, managing, and distrib- 11 uting a stockpile that— 12 ‘‘(1) consists of generic drugs at risk of short- 13 age; and 14 ‘‘(2) is of sufficient quantity to ensure that cus- 15 tomers in the United States of the respective eligible 16 entity have access to such drugs for at least 6 17 months (as specified by the Secretary based on the 18 historic demand for those drugs). 19 ‘‘(b) SELECTION OF DRUGS.— 20 ‘‘(1) IN GENERAL.—The Secretary shall— 21 ‘‘(A) select not more than 50 types of 22 drugs that may be included by eligible entities 23 in a stockpile pursuant to a contract under this 24 section; and 25 VerDate Sep 11 2014 00:44 Oct 29, 2020 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H8479.IH H8479 pbinns on DSKJLVW7X2PROD with BILLS 3 •HR 8479 IH ‘‘(B) maintain an up-to-date list of such 1 drugs; and 2 ‘‘(C) make such list publicly available. 3 ‘‘(2) CHOICE OF ELIGIBLE ENTITIES.—A con- 4 tract awarded to an eligible entity under this section 5 need not require the stockpile of the eligible entity 6 to include all 50 types of drugs listed pursuant to 7 paragraph (1). 8 ‘‘(c) SUFFICIENT QUANTITY.—For each generic drug 9 in a stockpile maintained pursuant to subsection (a), the 10 Secretary shall specify the quantity of such drug that is 11 sufficient for purposes of such subsection to ensure that 12 consumers in the United States of the respective eligible 13 entity have access to such drug for at least 6 months. 14 ‘‘(d) DURATION; LIQUIDATION OF INVENTORY.— 15 ‘‘(1) DURATION.—A contract awarded under 16 this section shall be for a term of no more than 3 17 years. 18 ‘‘(2) LIQUIDATION OF INVENTORY.—A drug 19 held in a stockpile pursuant to a contract under this 20 section may be liquidated by the eligible entity at the 21 end of the period of the contract. 22 ‘‘(e) STOCKPILE REQUIREMENTS.— 23 ‘‘(1) ENSURING AVAILABILITY OF UNEXPIRED 24 PRODUCTS.—Each eligible entity with a contract 25 VerDate Sep 11 2014 00:44 Oct 29, 2020 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H8479.IH H8479 pbinns on DSKJLVW7X2PROD with BILLS 4 •HR 8479 IH under this section for a stockpile of generic drugs at 1 risk of shortage shall— 2 ‘‘(A) ensure that each drug maintained in 3 the stockpile has an expiration date at least 1 4 year beyond the current date; and 5 ‘‘(B) to comply with subparagraph (A)— 6 ‘‘(i) sell drugs in the stockpile through 7 normal commercial channels and replace 8 those drugs; or 9 ‘‘(ii) if there is no commercial market 10 for a drug in the stockpile, dispose of the 11 drug, report such disposal to the Secretary, 12 and replace the drug. 13 ‘‘(2) MANAGEMENT OF STOCKPILE.— 14 ‘‘(A) IN GENERAL.—Each eligible entity 15 with a contract under this section for a stock- 16 pile of generic drugs at risk of shortage shall— 17 ‘‘(i) acquire not later than 6 months 18 following the date the contract is awarded, 19 and maintain thereafter, a 6-month supply 20 of each type of drug the eligible entity has 21 contracted to stockpile, which 6-month 22 supply shall be in addition to the average 23 levels of inventory held by such eligible en- 24 VerDate Sep 11 2014 00:44 Oct 29, 2020 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H8479.IH H8479 pbinns on DSKJLVW7X2PROD with BILLS 5 •HR 8479 IH tity over the previous year for such drug; 1 and 2 ‘‘(ii) if it is not possible to comply 3 with clause (i), notify the Secretary, citing 4 the reason why it is not possible and the 5 expected time of acquisition of the drug. 6 ‘‘(B) INVENTORY MANAGEMENT.—Each el- 7 igible entity with a contract under this section 8 for a stockpile of generic drugs at risk of short- 9 age shall manage inventory to ensure that 10 drugs in the stockpile are efficiently cycled to 11 the commercial market and— 12 ‘‘(i) may stockpile inventory at the eli- 13 gible entity’s distribution center with speci- 14 fied inventory amounts virtually reserved 15 for the Federal Government with constant 16 cycling to reduce product expiration; or 17 ‘‘(ii) may store stockpiled inventory 18 separately in a different location and re- 19 place drugs in the stockpile inventory with 20 the same drug with newer dating. 21 ‘‘(C) INSUFFICIENT FUNDS.—If amounts 22 available to an eligible entity through contracts 23 under this section are not sufficient to acquire 24 or maintain a 6-month supply of any drug in 25 VerDate Sep 11 2014 00:44 Oct 29, 2020 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H8479.IH H8479 pbinns on DSKJLVW7X2PROD with BILLS 6 •HR 8479 IH the stockpile of the eligible entity funded under 1 this section, the eligible entity— 2 ‘‘(i) may acquire and maintain less 3 than a 6-month supply, but in no case less 4 than a 3-month supply; and 5 ‘‘(ii) shall submit a report to the Sec- 6 retary identifying— 7 ‘‘(I) each such drug; and 8 ‘‘(II) the reasons why such 9 amounts are not sufficient to acquire 10 or maintain a 6-month supply. 11 ‘‘(D) ANNUAL AUDITS.—Not more than 12 annually, the Secretary may request a physical 13 audit count of the inventories of all eligible enti- 14 ties with a contract under this section to vali- 15 date that each such entity is maintaining the 16 appropriate amount of stockpiled inventory. 17 ‘‘(3) PERIODIC PRODUCT REVIEW.— 18 ‘‘(A) USE OF PROCEEDS.—An eligible enti- 19 ty with a contract under this section for a 20 stockpile of generic drugs at risk of shortage 21 shall use the proceeds of the sale of any drugs 22 in the stockpile to purchase drugs for the stock- 23 pile in accordance with this section. 24 VerDate Sep 11 2014 00:44 Oct 29, 2020 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H8479.IH H8479 pbinns on DSKJLVW7X2PROD with BILLS 7 •HR 8479 IH ‘‘(B) MARKET INFLATION OR DEFLA- 1 TION.—In the case of market inflation or defla- 2 tion affecting the price of a drug in the stock- 3 pile of an eligible entity maintained pursuant to 4 a contract under this section, the contract shall 5 ensure that the Federal Government does not 6 profit or suffer loss on items of such drug as 7 a result of such inflation or deflation. 8 ‘‘(4) REPORTING.—Each eligible entity with a 9 contract under this section shall submit reports at 10 such time and in such manner as the Secretary may 11 require regarding— 12 ‘‘(A) current inventory levels of stockpiled 13 drugs at a drug level; 14 ‘‘(B) indicators of current inventory levels 15 of stockpiled drugs relative to acceptable mini- 16 mums; and 17 ‘‘(C) such other matters as the Secretary 18 determines appropriate. 19 ‘‘(f) CONTRACT TERMS.— 20 ‘‘(1) PAYMENT OF MONTHLY FEES FOR MAN- 21 AGEMENT.—Subject to paragraph (2), the Secretary 22 shall pay to each eligible entity with a contract 23 under this section for a stockpile of generic drugs at 24 VerDate Sep 11 2014 00:44 Oct 29, 2020 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H8479.IH H8479 pbinns on DSKJLVW7X2PROD with BILLS 8 •HR 8479 IH risk of shortage appropriate monthly fees for the 1 management of the stockpile. 2 ‘‘(2) PAYMENT CONDITIONED ON STOCKPILE 3 ADEQUACY.— 4 ‘‘(A) IN GENERAL.—Except as provided in 5 subparagraph (B), each contract with an eligi- 6 ble entity under this section shall provide that 7 no payment under the contract may be made 8 until the entity demonstrates to the Secretary 9 that the entity has stockpiled such portion of 10 the total quantity of drugs to be stockpiled 11 under the contract as the Secretary determines 12 to be acceptable for payment. 13 ‘‘(B) EXCEPTIONS FOR ADVANCE PAY- 14 MENTS.— 15 ‘‘(i) IN GENERAL.—A contract under 16 this section may provide that, if the Sec- 17 retary determines (in the Secretary’s dis- 18 cretion) that an advance payment, partial 19 payment for significant milestones, or pay- 20 ment to increase capacity is necessary to 21 ensure success of the terms of the con- 22 tract, the Secretary shall pay, in advance 23 of delivery, an amount not to exceed 10 24 percent of the total contract amount to be 25 VerDate Sep 11 2014 00:44 Oct 29, 2020 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H8479.IH H8479 pbinns on DSKJLVW7X2PROD with BILLS 9 •HR 8479 IH paid to the eligible entity by the Secretary 1 pursuant to the contract over the full pe- 2 riod of the contract. 3 ‘‘(ii) COST OF CAPITAL.—A contract 4 under this section may provide for pay- 5 ments to compensate the contracting eligi- 6 ble entity for additional capital require- 7 ments related to the additional inventory 8 to be maintained. 9 ‘‘(iii) TIMING.—The Secretary shall, 10 to the extent practicable, make any deter- 11 mination under clause (i) to make an ad- 12 vance payment at the same time as the 13 issuance of a solicitation. 14 ‘‘(iv) REPAYMENT.—If the Secretary 15 makes an advance payment pursuant to 16 clause (i), the Secretary shall require the 17 eligible entity receiving such advance pay- 18 ment to repay it if there is a failure to per- 19 form by the eligible entity. 20 ‘‘(3) TERMINATION.— 21 ‘‘(A) IN GENERAL.—Subject to subpara- 22 graph (B), nothing in this section shall be con- 23 strued as affecting the rights of eligible entities 24 under provisions of statute or regulation (in- 25 VerDate Sep 11 2014 00:44 Oct 29, 2020 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H8479.IH H8479 pbinns on DSKJLVW7X2PROD with BILLS 10 •HR 8479 IH cluding the Federal Acquisition Regulation) re- 1 lating to the termination of contracts for the 2 convenience of the Government. 3 ‘‘(B) LIQUIDATION OF STOCKPILE.—If a 4 contract under this section is terminated, the 5 eligible entity with the contract shall liquidate 6 the drugs comprising the stockpile funded 7 through the contract and return to the Govern- 8 ment any amounts owed in relation to such 9 drugs, but shall collect the management fees as- 10 sociated with such liquidation. 11 ‘‘(g) CONGRESSIONAL OVERSIGHT.— 12 ‘‘(1) INDEPENDENT EVALUATION AND RE- 13 PORT.—Not later than 1 year after the date of en- 14 actment of this section and annually thereafter, the 15 Comptroller General of the United States shall con- 16 duct an independent evaluation, and submit to the 17 appropriate congressional committees a report, con- 18 cerning the program under this section. 19 ‘‘(2) CONTENTS OF REPORT.—The report under 20 paragraph (1) shall review, assess, and provide rec- 21 ommendations, as appropriate, on the following: 22 ‘‘(A) Details on likely costs and resultant 23 savings as compared to a stockpiling method 24 VerDate Sep 11 2014 00:44 Oct 29, 2020 Jkt 019200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H8479.IH H8479 pbinns on DSKJLVW7X2PROD with BILLS 11 •HR 8479 IH that does not incorporate perpetual inventory 1 cycling. 2 ‘‘(B) Identification of drawdowns from the 3 stockpile, as evidence of market shortage avoid- 4 ance. 5 ‘‘(C) The allocation of drugs included in 6 the stockpiles funded pursuant to this section to 7 the customers of the eligible entities with con- 8 tracts under this section. 9 ‘‘(D) The degree to which eligible entities 10 with contracts under this section fulfilled their 11 obligations under such contracts. 12 ‘‘(h) DEFINITIONS.—In this section: 13 ‘‘(1) The term ‘eligible entity’ means an entity 14 that meets each of the following criteria: 15 ‘‘(A) The entity is licensed or registered in 16 accordance with applicable Federal and State 17 law and in good standing with respect to such 18 licensure or registration. 19 ‘‘(B) The entity agrees— 20 ‘‘(i) to purchase all drugs to be main- 21 tained in its stockpile funded under this 22 section directly from the manufacturers of 23 the drugs or the exclusive distributors of 24 such manufacturers; or 25 VerDate Sep 11 2014 00:44 Oct 29, 2020 Jkt 019200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H8479.IH H8479 pbinns on DSKJLVW7X2PROD with BILLS 12 •HR 8479 IH ‘‘(ii) in the case of an entity that is a 1 co-op or chain pharmacy warehouse— 2 ‘‘(I) to purchase drugs to be 3 maintained in its stockpile funded 4 under this section from an authorized 5 distributor; and 6 ‘‘(II) distribute those drugs only 7 to its member pharmacies. 8 ‘‘(C) The entity holds a verified authorized 9 wholesale distributor certification issued by the 10 National Association of Boards of Pharmacy. 11 ‘‘(D) The entity sells more than 90 percent 12 of its drugs to dispensers. 13 ‘‘(E) The entity agrees to distribute inven- 14 tory from its stockpile funded under this section 15 only to dispensers that are customers of the en- 16 tity. 17 ‘‘(2) The term ‘generic drug at risk of shortage’ 18 means a drug (as defined in section 201 of the Fed- 19 eral Food, Drug, and Cosmetic Act) that— 20 ‘‘(A) is approved pursuant to section 21 505(j) of such Act; 22 ‘‘(B) is included in the World Health Or- 23 ganization’s most recent Model List of Essen- 24 tial Medicines; 25 VerDate Sep 11 2014 00:44 Oct 29, 2020 Jkt 019200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\H8479.IH H8479 pbinns on DSKJLVW7X2PROD with BILLS 13 •HR 8479 IH ‘‘(C) is included, at any point during the 1 preceding 36 months, on the drug shortage list 2 in effect under section 506E of the Federal 3 Food, Drug, and Cosmetic Act; and 4 ‘‘(D) is manufactured by 3 or fewer per- 5 sons that are registered under section 510 of 6 the Federal Food, Drug, and Cosmetic Act for 7 p [Text truncated for display. 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