I 

108TH CONGRESS 

1ST SESSION H. R. 3662

To provide for substantial reductions in the price of prescription drugs purchased by States for its employees, retirees, and pharmaceutical assistance beneficiaries. 

IN THE HOUSE OF REPRESENTATIVES 

DECEMBER 8, 2003

Mr. ALLEN (for himself, Mr. WAXMAN, Mr. STARK, Mr. BROWN of Ohio, Mr. 

PALLONE, Mr. MARKEY, Mr. MEEHAN, Mr. BERRY, Mr. MICHAUD, Ms. 

SCHAKOWSKY, Mr. FRANK of Massachusetts, Mr. OLVER, Mr. CASE, Mrs. 

EMERSON, Mr. STUPAK, Mr. OBERSTAR, and Mr. MCGOVERN) introduced 

the following bill; which was referred to the Committee on Energy and 

Commerce 

A BILL

To provide for substantial reductions in the price of prescription drugs purchased by States for its employees, retirees, and pharmaceutical assistance beneficiaries.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘State and Local Access 

5 to Fair Prescription Drug Prices Act’’. 

6 SEC. 2. FINDINGS AND PURPOSE. 

7 (a) FINDINGS.—
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1 (1) The majority of States are facing their 

2 worst fiscal crisis since World War II. Soaring 

3 healthcare costs are deepening the crisis. Healthcare 

4 costs grew an average of 11 percent in 2002 and are 

5 expected to grow to 13 percent in fiscal year 2004. 

6 Healthcare spending currently accounts for approxi7 mately 30 percent of total State budgets. 

8 (2) As the economy continues to struggle, State 

9 revenues continue to fall dramatically while spending 

10 pressure has grown. Thirty-seven States reduced fis11 cal 2003 enacted budgets by nearly 

12 $14,500,000,000, the largest spending cut since 

13 1979. 

14 (3) State drug expenditures for public employ15 ees, dependents and retirees, medicaid beneficiaries, 

16 and the uninsured are rising each year. As more 

17 Americans lose jobs and health care coverage for 

18 themselves and their dependents, States’ share of 

19 medicaid costs grew by 13 percent in fiscal year 

20 2002. This growth is expected to rise by an esti21 mated 8 percent in fiscal year 2003 and 4.9 percent 

22 in fiscal year 2004 based on governors’ fiscal 2004 

23 budget proposals. 

24 (4) In February 2002, the National Governor’s 

25 Association passed a resolution urging Congress to 
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1 review Federal laws which may be contributing to 

2 the ‘‘high cost of prescription drugs’’. 

3 (5) Several States and localities are currently 

4 seeking to reimport drugs from Canada and other 

5 foreign countries in an attempt to lower prescription 

6 drug costs. 

7 (6) Foreign nations and Federally funded 

8 health care programs use purchasing power to ob9 tain prescription drugs at low prices. States and lo10 calities are not legally allowed to reimport prescrip11 tion drugs. This Act will provide an appropriate al12 ternative by allowing states and localities to pur13 chase prescription drugs domestically at prices 

14 roughly equivalent to those available in foreign na15 tions and Federally funded health care programs. 

16 (7) Implementation of the policy set forth in 

17 this Act may reduce prices for brand name prescrip18 tion drugs for many States and localities by up to 

19 40 percent. 

20 (b) PURPOSE.—The purpose of this Act is to make 

21 prescription drugs available to States and local govern22 ments and residents thereof at prices that are substan23 tially lower than current United States prices. 

24 SEC. 3. PARTICIPATING MANUFACTURERS. 

25 (a) AVAILABILITY OF DRUGS FOR PURCHASE.—
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1 (1) IN GENERAL.—Each participating manufac2 turer of a covered outpatient drug shall make avail3 able for purchase in whole or in part by each State 

4 for the benefit of residents within the State whose 

5 cost of covered outpatient drugs are paid for by the 

6 State through a group health program, a retiree 

7 health program, a State or local pharmaceutical as8 sistance program, or other similar program (includ9 ing, to the extent provided under subsection (f)(2), 

10 a State medicaid program), such covered outpatient 

11 drug in the amount described in subsection (b) at 

12 the price described in subsection (c). 

13 (2) DIRECT PURCHASES BY AGENTS.—The re14 quirements of paragraph (1) shall apply in the case 

15 of purchases by an organization or agent of the 

16 State that directly purchases covered outpatient pre17 scription drugs on behalf of the State, or on behalf 

18 of a county or municipality of such State, for resi19 dents described in such paragraph. 

20 (b) DESCRIPTION OF AMOUNT OF DRUGS.—The 

21 amount of a covered outpatient drug that a participating 

22 manufacturer shall make available for purchase by a State 

23 or local government (or agent thereof) is an amount equal 

24 to the aggregate amount of the covered outpatient drug 
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1 sold or distributed to residents described in subsection (a) 

2 in that State. 

3 (c) DESCRIPTION OF PRICE.—

4 (1) IN GENERAL.—The price at which a partici5 pating manufacturer shall make a covered outpatient 

6 drug available for purchase by a pharmacy is a price 

7 no greater than the manufacturer’s average foreign 

8 price. 

9 (2) HANDLING FEE.—Nothing in this sub10 section shall be construed to prevent a pharmacy 

11 from assessing a reasonable (as determined by the 

12 Secretary in consultation with pharmacy stake13 holders) handling fee in connection with the provi14 sion of covered outpatient prescription drugs to resi15 dents described in subsection (a)(1). 

16 (d) ENFORCEMENT.—

17 (1) IN GENERAL.—The Secretary, any whole18 saler or retailer in the United States, or any resident 

19 described in subsection (a)(1) that is aggrieved by a 

20 violation of this Act may bring a civil action in a 

21 United States district court against a manufacturer 

22 or other person that violates this Act for an order 

23 enjoining the violation and awarding damages in the 

24 amount that is equal to 3 times the amount of the 

25 value of the difference between—
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1 (A) the price that the manufacturer or 

2 other person sold a covered outpatient prescrip3 tion drug to the wholesaler, retailer, or indi4 vidual; and 

5 (B) the manufacturer’s average foreign 

6 price for the prescription drug. 

7 (2) REPEAT VIOLATIONS.—The United States 

8 shall debar a manufacturer of drugs or biologicals 

9 that commits repeated violations of the provisions of 

10 this Act. 

11 (e) APPLICATION TO LOCAL GOVERNMENTS.—The 

12 provisions of this section shall apply with respect to the 

13 purchase of covered outpatient drugs by local governments 

14 if such purchase was made for the benefit of individuals 

15 within the jurisdiction of the local government whose cost 

16 of covered outpatient drugs are paid for by the local gov17 ernment (or agent thereof) through a group health pro18 gram, a retiree health program, a local pharmaceutical as19 sistance program, or other similar program, in the same 

20 manner as such provisions apply to States. 

21 (f) RELATION TO MEDICAID REBATE AGREEMENT.—

22 A State, with respect to its provision of medical assistance 

23 for covered outpatient drugs under title XIX of the Social 

24 Security Act, may elect for a year (or other period speci25 fied by the Secretary) either of the following to apply (and 
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1 such election shall apply to all such covered outpatient 

2 drugs under such title):

3 (1) CONTINUATION OF REBATE AGREEMENT.—

4 (A) IN GENERAL.—The provisions of sec5 tion 1927 of such Act (42 U.S.C. 1396r–8) 

6 shall continue to apply. 

7 (B) DISREGARD OF MANUFACTURER’S AV8 ERAGE FOREIGN PRICE IN DETERMINING BEST

9 PRICE UNDER REBATE AGREEMENT.—The price 

10 under subsection (c) at which a participating 

11 manufacturer makes a covered outpatient drug 

12 available under this Act shall be disregarded for 

13 purposes of determining the best price under a 

14 rebate agreement under such section 1927 of 

15 the Social Security Act. 

16 (2) USE OF MANUFACTURER’S FOREIGN

17 PRICE.—The provisions of such section do not apply 

18 and such drugs shall be made available for purposes 

19 of such title in the quantities under subsection (b) 

20 and at the prices specified under subsection (c). 

21 (g) RULE OF CONSTRUCTION.—Nothing in this sec22 tion shall be construed to prevent a State or local govern23 ment from implementing programs that provide for the 

24 purchase and distribution of outpatient drugs at prices 
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1 that are lower than the price provided for under subsection 

2 (c). 

3 SEC. 4. ADMINISTRATION. 

4 The Secretary shall issue such regulations as may be 

5 necessary to implement this Act within 180 days after the 

6 date of the enactment of this Act. 

7 SEC. 5. REPORTS TO CONGRESS REGARDING EFFECTIVE8 NESS OF ACT. 

9 (a) IN GENERAL.—Not later than 2 years after the 

10 date of the enactment of this Act, and annually thereafter, 

11 the Secretary shall report to the Congress regarding the 

12 effectiveness of this Act in—

13 (1) protecting States and local governments 

14 from drug price inflation, and 

15 (2) making prescription drugs available to State 

16 and local government employees, retirees, and bene17 ficiaries at substantially reduced prices. 

18 (b) CONSULTATION.—In preparing such reports, the 

19 Secretary shall consult with public health experts, affected 

20 industries, organizations representing consumers and 

21 older Americans, and other interested persons. 

22 (c) RECOMMENDATIONS.—The Secretary shall in23 clude in such reports any recommendations the Secretary 

24 considers appropriate for changes in this Act to further 

25 reduce the cost of covered outpatient drugs to States. 
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1 SEC. 6. DEFINITIONS. 

2 In this Act: 

3 (1) AVERAGE FOREIGN PRICE.—

4 (A) IN GENERAL.—The term ‘‘average for5 eign price’’ means, with respect to a covered 

6 outpatient drug, the average price that the 

7 manufacturer of the drug realizes on the sale of 

8 drugs with the same active ingredient or ingre9 dients that are consumed in covered foreign na10 tions, taking into account—

11 (i) any rebate, contract term or condi12 tion, or other arrangement (whether with 

13 the purchaser or other persons) that has 

14 the effect of reducing the amount realized 

15 by the manufacturer on the sale of the 

16 drugs; 

17 (ii) adjustments for any differences in 

18 dosage, formulation, or other relevant 

19 characteristics of the drugs; and 

20 (iii) any other contract or side agree21 ment that has the effect of adjusting the 

22 effective price of the drug, including agree23 ments to purchase non-drug products. 

24 (B) EXEMPT TRANSACTIONS.—The Sec25 retary may, by regulation, exempt from the cal26 culation of the average foreign price of a drug 
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1 those prices realized by a manufacturer in 

2 transactions that are entered into for charitable 

3 purposes, for research purposes, or under other 

4 unusual circumstances, if the Secretary deter5 mines that the exemption is in the public inter6 est and is consistent with the purposes of this 

7 Act. 

8 (2) COVERED FOREIGN NATION.—The term 

9 ‘‘covered foreign nation’’ means Canada, France, 

10 Germany, Italy, Japan, and the United Kingdom. 

11 (3) COVERED OUTPATIENT DRUG.—The term 

12 ‘‘covered outpatient drug’’ has the meaning given 

13 that term in section 1927(k)(2) of the Social Secu14 rity Act (42 U.S.C. 1396r–8(k)(2)). 

15 (4) DEBAR.—The term ‘‘debar’’ means to ex16 clude, pursuant to established administrative proce17 dures, from Government contracting and subcon18 tracting for a specified period of time commensurate 

19 with the seriousness of the failure or offense or the 

20 inadequacy of performance. 

21 (5) PARTICIPATING MANUFACTURER.—The 

22 term ‘‘participating manufacturer’’ means any man23 ufacturer of drugs or biologicals that, on or after the 

24 date of the enactment of this Act, enters into a con25 tract or agreement with the United States for the 
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1 sale or distribution of covered outpatient drugs to 

2 the United States. 

3 (6) SECRETARY.—The term ‘‘Secretary’’ means 

4 the Secretary of Health and Human Services. 

5 SEC. 7. EFFECTIVE DATE. 

6 This Act shall apply on and after January 1, 2005, 

7 without regard to whether or not final regulations to carry 

8 out this Act have been promulgated by such date.

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