Fair Accountability and Innovative Research Drug Pricing Act of 2016

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Fair Accountability and Innovative 
Research Drug Pricing Act of 2016''.

SEC. 2. REPORTING ON JUSTIFICATION FOR DRUG PRICE INCREASES.

    Title III of the Public Health Service Act (42 U.S.C. 241 et seq.) 
is amended by adding at the end the following:

            ``PART W--DRUG PRICE REPORTING; DRUG VALUE FUND

``SEC. 399OO. REPORTING ON JUSTIFICATION FOR DRUG PRICE INCREASES.

    ``(a) Definitions.--In this section:
            ``(1) Average manufacturer price.--The term `average 
        manufacturer price' has the meaning given the term in section 
        1927(k)(1) of the Social Security Act (42 U.S.C. 1396r-
        8(k)(1)).
            ``(2) Manufacturer.--The term `manufacturer' means the 
        person--
                    ``(A) that holds the application for a drug 
                approved under section 505 of the Federal Food, Drug, 
                and Cosmetic Act or the license issued under section 
                351 of the Public Health Service Act; or
                    ``(B) who is responsible for setting the price for 
                the drug.
            ``(3) Qualifying drug.--The term `qualifying drug' means 
        any drug that is approved under subsection (c) or (j) of 
        section 505 of the Federal Food, Drug, and Cosmetic Act or 
        licensed under subsection (a) or (k) of section 351 of this 
        Act--
                    ``(A) that is--
                            ``(i)(I) subject to section 503(b)(1) of 
                        the Federal Food, Drug, and Cosmetic Act; or
                            ``(II) commonly administered by hospitals 
                        (as determined by the Secretary);
                            ``(ii) not designated as a drug for a rare 
                        disease or condition under section 526 of the 
                        Federal Food, Drug, and Cosmetic Act; and
                            ``(iii) not designated by the Secretary as 
                        a vaccine; and
                    ``(B) for which, during the previous calendar year, 
                at least 1 dollar of the total amount of sales were for 
                individuals enrolled under the Medicare program under 
                title XVIII of the Social Security Act (42 U.S.C. 1395 
                et seq.) or under a State Medicaid plan under title XIX 
                of such Act (42 U.S.C. 1396 et seq.) or under a waiver 
                of such plan.
    ``(b) Report.--
            ``(1) Report required.--The manufacturer of a qualifying 
        drug shall submit a report to the Secretary for each price 
        increase of a qualifying drug that will result in an increase 
        in the average manufacturer price of that drug that is equal to 
        10 percent or more over a 12-month period.
            ``(2) Report deadline.--Each report described in paragraph 
        (1) shall be submitted to the Secretary not later than 30 days 
        prior to the planned effective date of such price increase.
    ``(c) Contents.--A report under subsection (b) shall, at a minimum, 
include--
            ``(1) with respect to the qualifying drug--
                    ``(A) the percentage by which the manufacturer will 
                raise the average manufacturer price of the drug on the 
                planned effective date of such price increase;
                    ``(B) a justification for, and description of, each 
                manufacturer's price increase that occurred during the 
                12-month period described in subsection (b)(1);
                    ``(C) the identity of the initial developer of the 
                drug;
                    ``(D) a description of the history of the 
                manufacturer's price increases for the drug since the 
                approval of the application for the drug under section 
                505 of the Federal Food, Drug, and Cosmetic Act or the 
                issuance of the license for the drug under section 351, 
                or since the manufacturer acquired such approved 
                application or license;
                    ``(E) the current list price of the drug;
                    ``(F) the total expenditures of the manufacturer 
                on--
                            ``(i) materials and manufacturing for such 
                        drug; and
                            ``(ii) acquiring patents and licensing for 
                        such drug;
                    ``(G) the percentage of total expenditures of the 
                manufacturer on research and development for such drug 
                that was derived from Federal funds;
                    ``(H) the total expenditures of the manufacturer on 
                research and development for such drug that is used 
                for--
                            ``(i) basic and preclinical research;
                            ``(ii) clinical research;
                            ``(iii) new drug development;
                            ``(iv) pursuing new or expanded indications 
                        for such drug through supplemental applications 
                        under section 505 of the Federal Food, Drug, 
                        and Cosmetic Act; and
                            ``(v) carrying out postmarket requirements 
                        related to such drug, including those under 
                        section 505(o)(3) of such Act;
                    ``(I) the total revenue and the net profit 
                generated from the qualifying drug for each calendar 
                year since the approval of the application for the drug 
                under section 505 of the Federal Food, Drug, and 
                Cosmetic Act or the issuance of the license for the 
                drug under section 351, or since the manufacturer 
                acquired such approved application or license; and
                    ``(J) the total costs associated with marketing and 
                advertising for the qualifying drug;
            ``(2) with respect to the manufacturer--
                    ``(A) the total revenue and the net profit of the 
                manufacturer for the 12-month period described in 
                subsection (b)(1);
                    ``(B) the amount the manufacturer has spent on 
                dividends and stock repurchases and the specific 
                metrics used by the manufacturer to determine executive 
                compensation, including any stock-based performance 
                metrics, for the 12-month period described in 
                subsection (b)(1); and
                    ``(C) any additional information the manufacturer 
                chooses to provide related to drug pricing decisions, 
                such as total expenditures on--
                            ``(i) drug research and development; or
                            ``(ii) clinical trials on drugs that failed 
                        to receive approval by the Food and Drug 
                        Administration; and
            ``(3) such other related information as the Secretary 
        considers appropriate.
    ``(d) Civil Penalty.--Any manufacturer of a qualifying drug that 
fails to submit a report for the drug as required by this section shall 
be subject to a civil penalty of $100,000 for each day on which the 
violation continues.
    ``(e) Compliance Determinations.--In determining whether a 
manufacturer may have been required to submit a report under this 
section, and otherwise making determinations about manufacturer 
compliance with the requirements of this section, the Inspector General 
of the Department of Health and Human Services shall annually review 
and consider the average manufacturer price information submitted under 
section 447.510 of title 42, Code of Federal Regulations, or any 
successor regulations.
    ``(f) Public Posting.--
            ``(1) In general.--Subject to paragraph (3), not later than 
        30 days after the submission of a report under subsection (b), 
        the Secretary shall post the report on the public Web site of 
        the Department of Health and Human Services.
            ``(2) Format.--In developing the format of such report for 
        public posting, the Secretary shall consult stakeholders, 
        including beneficiary groups, and shall seek feedback on the 
        content and format from consumer advocates and readability 
        experts to ensure such public reports are user-friendly to the 
        public and are written in plain language that consumers can 
        readily understand.
            ``(3) Trade secrets and confidential information.--In 
        carrying out this section the Secretary shall ensure the 
        protection of confidential commercial information and trade 
        secrets.''.

``SEC. 399OO-1. USE OF CIVIL PENALTY AMOUNTS.

    ``The Secretary shall collect the civil penalties under section 
399OO, in addition to any other amounts available, and without further 
appropriation, and shall use such funds to carry out activities 
described in this part and to improve consumer and provider information 
about drug value and drug price transparency.

``SEC. 399OO-2. ANNUAL REPORT TO CONGRESS.

    ``(a) In General.--Subject to subsection (b), the Secretary shall 
submit to Congress, and post on the public Web site of the Department 
of Health and Human Services in a way that is easy to use and 
understand, an annual report--
            ``(1) summarizing the information reported pursuant to 
        section 399OO; and
            ``(2) including copies of the reports and supporting 
        detailed economic analyses submitted pursuant to such section.
    ``(b) Trade Secrets and Confidential Information.--In carrying out 
this section the Secretary shall ensure the protection of confidential 
commercial information and trade secrets.''.

Summary: Fair Accountability and Innovative Research Drug Pricing Act of 2016 This bill amends the Public Health Service Act to require manufacturers of certain drugs and biological products to report to the Department of Health and Human Services (HHS) price increases that result in a 10 or more increase in the price of a drug over a 12-month period. Reports are required for prescription drugs and drugs commonly administered in hospitals, except vaccines, drugs for rare conditions, and drugs with annual sales for Medicare and Medicaid enrollees of less than $1. Manufacturers that do not submit a required report are subject to a civil penalty. The Inspector General of HHS must review drug price information to determine compliance. Collected penalty funds must be used to carry out activities related to this reporting requirement and to improve consumer and provider information about drug value and drug price transparency. HHS must publish manufacturer reports, a summary of those reports, and supporting analyses.