I

103D CONGRESS

2D SESSION H. R. 916

To establish in the Food and Drug Administration the Patented Medicine

Prices Review Board to regulate the prices of certain prescription drugs,

to amend the Internal Revenue Code to recapture certain tax benefits,

and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

FEBRUARY 16, 1993

Mr. STARK introduced the following bill; which was referred jointly to the

Committees on Energy and Commerce, the Judiciary, and Ways and Means

FEBRUARY 28, 1994

Additional sponsors: Mrs. COLLINS of Illinois, Mr. SANDERS, Mr. DE LUGO,

Mr. FRANK of Massachusetts, Mr. BARRETT of Wisconsin, Mr. LAFALCE,

Mr. MARTINEZ, Ms. PELOSI, Mr. STRICKLAND, Mr. OWENS, Mr. SABO,

Mr. BLACKWELL, Mr. HASTINGS, Ms. FURSE, Miss COLLINS of Michigan, Ms. KAPTUR, Mr. EVANS, Mr. BARLOW, Mr. FOGLIETTA, Mr. HALL

of Ohio, Mr. FLAKE, Mr. BAESLER, Mr. TORRICELLI, Mr. DEFAZIO, Ms.

SLAUGHTER, Mr. MILLER of California, Mrs. CLAYTON, Mr. KLECZKA,

Mr. PASTOR, Mr. GIBBONS, Mr. DELLUMS, Mr. WASHINGTON, and Mr.

ROMERO-BARCELO ́

Deleted sponsors: Mr. CLYBURN (added March 24, 1993; deleted April 22,

1993)

A BILL

To establish in the Food and Drug Administration the Patented Medicine Prices Review Board to regulate the

prices of certain prescription drugs, to amend the Internal Revenue Code to recapture certain tax benefits, and

for other purposes.
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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 ‘‘Prescription Drug

5 Prices Review Board Act of 1993’’.

6 SEC. 2. ESTABLISHMENT.

7 There is established in the Food and Drug Adminis8 tration a board to be known as the Patented Medicine

9 Prices Review Board (in this Act referred to as the

10 ‘‘Board’’).

11 SEC. 3. MEMBERSHIP.

12 (a) NUMBER AND APPOINTMENT.—The Board shall

13 be composed of 5 members appointed by the President,

14 by and with the advice and consent of the Senate, from

15 among individuals—

16 (1) who are recognized experts in the fields of

17 consumer advocacy, medicine, pharmacology, phar18 macy, and prescription drug reimbursement; and

19 (2) who have not worked in the pharmaceutical

20 industry during the 1-year period ending on the date

21 of appointment.

22 (b) INITIAL APPOINTMENTS.—Initial appointments

23 under subsection (a) shall be made not later than 90 days

24 after the date of the enactment of this Act.

25 (c) TERMS.—
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1 (1) IN GENERAL.—Except as provided in para2 graphs (2) and (3), each member shall be appointed

3 for a term of 5 years.

4 (2) TERMS OF INITIAL APPOINTEES.—As des5 ignated by the President at the time of appointment,

6 of the members first appointed—

7 (A) 1 member shall be appointed for a

8 term of 1 year;

9 (B) 1 member shall be appointed for a

10 term of 2 years;

11 (C) 1 member shall be appointed for a

12 term of 3 years;

13 (D) 1 member shall be appointed for a

14 term of 4 years; and

15 (E) 1 member shall be appointed for a

16 term of 5 years.

17 (3) VACANCIES.—A vacancy in the Board shall

18 be filled in the manner in which the original appoint19 ment was made. Any member appointed to fill a va20 cancy occurring before the expiration of the term for

21 which the member’s predecessor was appointed shall

22 be appointed only for the remainder of that term. A

23 member may serve after the expiration of the mem24 ber’s term until a successor has taken office.
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1 (d) INITIAL MEETING.—The initial meeting of the

2 Board shall be held not later than 90 days after the date

3 on which the first appointments of the members have been

4 completed.

5 (e) CHAIRPERSON.—The President shall designate 1

6 member of the Board to serve as the chairperson.

7 (f) BASIC PAY.—

8 (1) IN GENERAL.—Members shall be paid at a

9 rate not to exceed the daily equivalent of the maxi10 mum annual rate of basic pay payable for grade

11 GS–18 of the General Schedule under section 5332

12 of title 5, United States Code, for each day during

13 which the members are engaged in the actual per14 formance of the duties of the Board.

15 (2) TRAVEL EXPENSES.—Members shall receive

16 travel expenses, including per diem in lieu of subsist17 ence, in accordance with sections 5702 and 5703 of

18 title 5, United States Code.

19 SEC. 4. DIRECTOR AND STAFF.

20 (a) DIRECTOR.—The Board shall have a director who

21 shall be appointed by the chairperson, subject to rules pre22 scribed by the Board.

23 (b) STAFF.—The chairperson may appoint and fix

24 the pay of such additional personnel as the chairperson
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1 considers appropriate, subject to rules prescribed by the

2 Board.

3 (c) APPLICABILITY OF CERTAIN CIVIL SERVICE

4 LAWS.—The director and staff of the Board shall be ap5 pointed subject to the provisions of title 5, United States

6 Code, governing appointments in the competitive service,

7 and shall be paid in accordance with the requirements of

8 chapter 51 and subchapter III of chapter 53 of such title

9 relating to classification and General Schedule pay rates;

10 except that an individual so appointed may not receive pay

11 in excess of the maximum annual rate of basic pay payable

12 for grade GS–15 of the General Schedule.

13 SEC. 5. REGULATION OF PRESCRIPTION DRUG PRICING.

14 (a) ANNUAL INFORMATION REQUIREMENT.—The

15 Board shall require each patentee of a prescription drug

16 to provide the Board with information on an annual

17 basis—

18 (1) identifying the type of prescription drug

19 sold by the patentee; and

20 (2) identifying the price at which the prescrip21 tion drug is being sold in the United States.

22 The Board shall also require each such patentee to provide

23 the Board with information describing the costs of produc24 ing and marketing the prescription drug for sale in the

25 United States. Such information shall be provided at a
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1 level of specificity necessary for the Board to make its de2 termination under subsection (b).

3 (b) DECREASE IN LENGTH OF PATENT TERM.—

4 (1) IN GENERAL.—The Board shall decrease

5 the length of a term of a patent issued under section

6 151 of title 35, United States Code, for a prescrip7 tion drug, after notice and an opportunity for a

8 hearing, if the patentee of such drug charges an ex9 cessive price for such drug. If the patentee charged

10 an excessive price for a drug which has gone off pat11 ent, the Board may select another drug of the pat12 entee to have its length of patent term reduced.

13 (2) EXCESSIVE PRICE.—

14 (A) IN GENERAL.—For purposes of para15 graph (1), the term ‘‘excessive price’’ means the

16 average price charged by the patentee for a pre17 scription drug during the calendar year preced18 ing the date on which the Board gives notice to

19 the patentee under paragraph (1), if such price

20 for such calendar year, adjusted for cost-of-liv21 ing, as determined by the Board, exceeds the

22 average price for such drug charged by the pat23 entee for the calendar year preceding such year

24 in an amount determined by the Board to be

25 excessive under subparagraph (B).
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1 (B) EXCESSIVE AMOUNT.—In determining

2 if an amount of increase in a drug price is ex3 cessive, the Board shall consider—

4 (i) the average price at which the pat5 entee sold the drug during the 5-year pe6 riod ending on the date on which the

7 Board gives notice to the patentee under

8 paragraph (1);

9 (ii) the average prices of other pre10 scription drugs in the same therapeutic

11 class sold in the United States during such

12 period;

13 (iii) the average price at which the

14 prescription drug and other prescription

15 drugs in the same therapeutic class have

16 been sold in countries other than the

17 United States during such period;

18 (iv) the costs associated with produc19 ing and marketing the prescription drug

20 during such period and the value of any

21 support provided by Federal agencies, the

22 value of any tax benefit provided to the

23 patentee in the development of the drug,

24 the amount of compensation provided to

25 officers of the patentee, and other factors
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1 determinative as to the true cost of pro2 duction; and

3 (v) if the price of the drug exceeds the

4 CPI increase percentage (as defined in sec5 tion 215(i) of the Social Security Act) by

6 more than 2 percent.

7 (3) LENGTH OF TERM DECREASE.—The Board

8 shall determine the length of the decrease of a term

9 of a patent for a prescription drug described in

10 paragraph (1).

11 (c) AUTHORITY TO RECAPTURE CERTAIN TAX BEN12 EFITS.—

13 (1) IN GENERAL.—If the Board determines,

14 after notice and an opportunity for a hearing, that

15 the patentee of any prescription drug charges an ex16 cessive price for such drug, the Board may require

17 the recapture of tax benefits provided to the pat18 entee with respect to such drug.

19 (2) RECAPTURE.—

20 (A) IN GENERAL.—If the Board requires

21 the recapture of tax benefits with respect to any

22 prescription drug, the patentee’s tax under

23 chapter 1 of the Internal Revenue Code of 1986

24 for each taxable year specified by the Board

25 shall be increased by the aggregate of the re-
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1 capture amounts with respect to sales of such

2 drug during such taxable year.

3 (B) RECAPTURE AMOUNT.—For purposes

4 of subparagraph (A), the recapture amount

5 with respect to the sale of any prescription drug

6 is the lesser of—

7 (i) the portion of the price of such

8 drug which the Board determines is exces9 sive, or

10 (ii) the amount which the Board de11 termines is such sales pro rata share of the

12 tax benefits received by the patentee in

13 connection with the research for, and de14 velopment of, such drug.

15 (3) NO CREDITS AGAINST TAX, ETC.—Any in16 crease in tax by reason of this subsection shall not

17 be treated as a tax imposed by chapter 1 of such

18 Code for purposes of determining—

19 (A) the amount of any credit under sub20 part A, B, D, or G of part IV of subchapter A

21 of such chapter, or

22 (B) the minimum tax under section 55 of

23 such Code.

24 (d) MANUFACTURE AND SALE OF DRUGS.—If the

25 Board determines, after notice and an opportunity for a
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1 hearing, that the patentee of any prescription drug

2 charges an excessive price for such drug, the Board may,

3 either directly or by contract, manufacture and sell such

4 drug.

5 (e) INCREASE IN LENGTH OF PATENT TERM.—

6 (1) IN GENERAL.—Upon application of the pat7 entee, the Board may increase the length of a term

8 of a patent issued under section 151 of title 35,

9 United States Code, for a prescription drug, if—

10 (A) the Board determines that the pat11 entee of such drug has not charged an excessive

12 price for such drug during the 5-year period

13 ending on the date the patentee applies to the

14 Board, as determined by the Board using rules

15 similar to the rules applicable under subsection

16 (b); and

17 (B) the patentee provides assurances satis18 factory to the Board that it will not charge an

19 excessive price for such drug for any period

20 during the extension of the term.

21 (2) LENGTH OF TERM INCREASE.—

22 (A) IN GENERAL.—Subject to subpara23 graph (B), the Board shall determine the length

24 of the increase of a term of a patent for a pre25 scription drug described in paragraph (1).
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1 (B) LIMITATION.—The Board may not in2 crease the length of a term of such patent in

3 excess of 10 percent of the length of the origi4 nal term of such patent.

5 (f) REGULATIONS.—

6 (1) IN GENERAL.—Not later than 1 year after

7 the date of the initial meeting held under section

8 3(e), the Board shall develop regulations to carry

9 out subsections (a), (b), (c), (d), and (e).

10 (2) NOTICE AND COMMENT REQUIREMENT.—

11 The regulations developed under paragraph (1) shall

12 be issued in accordance with the notice and com13 ment procedures established under section 553 of

14 title 5, United States Code.

15 (g) DEFINITIONS.—For purposes of this section, the

16 following definitions apply:

17 (1) PATENTEE.—The term ‘‘patentee’’ has the

18 meaning given such term in section 100(d) of title

19 35, United States Code.

20 (2) PRESCRIPTION DRUG.—The term ‘‘prescrip21 tion drug’’ means a drug (as defined in section

22 201(g)(1) of the Federal Food, Drug, and Cosmetic

23 Act (21 U.S.C. 321 (g)(1))) which is subject to reg24 ulation under section 503(b) of such Act.
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1 SEC. 6. PROVISION OF REPORT TO FEDERAL AGENCIES RE2 LATING TO PRESCRIPTION DRUGS SOLD AT

3 EXCESSIVE PRICES.

4 (a) IN GENERAL.—The Board shall provide on an an5 nual basis to each Federal agency which dispenses or

6 makes payments for the dispensing of prescription drugs

7 a report containing—

8 (1) a list of each prescription drug which is sold

9 at an excessive price, as determined by the Board

10 under section 5(b)(2);

11 (2) recommendations to the Federal agency

12 against dispensing or making payments for the dis13 pensing of the prescription drug; and

14 (3) recommendations to the Federal agency to

15 substitute the drug with a similar prescription drug

16 which is not sold at an excessive price.

17 (b) PRESCRIPTION DRUG DEFINED.—For purposes

18 of this section, the term ‘‘prescription drug’’ has the

19 meaning given such term in section 5(e)(2).

20 SEC. 7. POWERS.

21 (a) OBTAINING OFFICIAL DATA.—The chairperson

22 may secure directly from any Federal agency information

23 necessary to enable the Board to carry out its duties.

24 Upon request of the chairperson, the head of the agency

25 shall furnish such information to the Board to the extent

26 such information is not prohibited from disclosure by law.
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1 (b) MAILS.—The Board may use the United States

2 mails in the same manner and under the same conditions

3 as other Federal agencies.

4 (c) ADMINISTRATIVE SUPPORT SERVICES.—Upon the

5 request of the chairperson, the Administrator of General

6 Services shall provide to the Board on a reimbursable

7 basis, the administrative support services necessary for the

8 Board to carry out its duties.

9 (d) CONTRACT AUTHORITY.—The chairperson may

10 contract with and compensate government and private

11 agencies or persons for the purpose of conducting re12 search, surveys, and other services necessary to enable the

13 Board to carry out its duties.

14 (e) INVESTIGATIONS.—The Board may make such in15 vestigations as it considers necessary to determine whether

16 there is or may be a violation of any regulation promul17 gated under this Act and may require or permit any per18 son to file with it a statement in writing, under oath or

19 otherwise as the Board shall determine, as to all the facts

20 and circumstances concerning the matter to be inves21 tigated.

22 (f) SUBPOENA POWER.—

23 (1) IN GENERAL.—The Board may issue sub24 poenas requiring the attendance and testimony of

25 witnesses and the production of any evidence relat-
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1 ing to any matter under investigation by the Board.

2 The attendance of witnesses and the production of

3 evidence may be required from any place within the

4 United States at any designated place of hearing

5 within the United States.

6 (2) FAILURE TO OBEY A SUBPOENA.—If a per7 son refuses to obey a subpoena issued under para8 graph (1), the Board may apply to a United States

9 district court for an order requiring that person to

10 appear before the Board to give testimony, produce

11 evidence, or both, relating to the matter under inves12 tigation. The application may be made within the ju13 dicial district where the hearing is conducted or

14 where that person is found, resides, or transacts

15 business. Any failure to obey the order of the court

16 may be punished by the court as civil contempt.

17 (3) SERVICE OF SUBPOENAS.—The subpoenas

18 of the Board shall be served in the manner provided

19 for subpoenas issued by a United States district

20 court under the Federal Rules of Civil Procedure for

21 the United States district courts.

22 (4) SERVICE OF PROCESS.—All process of any

23 court to which application is made under paragraph

24 (2) may be served in the judicial district in which
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1 the person required to be served resides or may be

2 found.

3 SEC. 8. ASSISTANCE FOR THE BOARD.

4 The Director of the National Institutes of Health, the

5 Commissioner of the Food and Drug Administration, and

6 the Director of the Center for Disease Control shall report

7 to the Board the amount of any subsidy paid through such

8 agency to a patentee.

9 SEC. 9. REPORT.

10 Not later than 1 year after the initial meeting of the

11 Board under section 3(e), and annually thereafter, the

12 Board shall submit to the Congress a report describing

13 the activities of the Board for the preceding year.

Æ