II

106TH CONGRESS

2D SESSION S. 2465

To amend the Internal Revenue Code of 1986 to deny tax benefits for

research conducted by pharmaceutical companies where United States

consumers pay higher prices for the products of that research than

consumers in certain other countries.

IN THE SENATE OF THE UNITED STATES

APRIL 26, 2000

Mr. WELLSTONE introduced the following bill; which was read twice and

referred to the Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 to deny tax

benefits for research conducted by pharmaceutical companies where United States consumers pay higher prices

for the products of that research than consumers in

certain other countries.

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 Price Eq5 uity Act of 2000’’.
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1 SEC. 2. DENIAL OF TAX BENEFITS FOR RESEARCH CON2 DUCTED BY PHARMACEUTICAL COMPANIES

3 WHERE THE PRODUCTS OF THAT RESEARCH

4 ARE SOLD AT HIGHER PRICES IN THE

5 UNITED STATES THAN IN CERTAIN OTHER

6 COUNTRIES.

7 (a) IN GENERAL.—Part IX of subchapter B of chap8 ter 1 of the Internal Revenue Code of 1986 (relating to

9 items not deductible) is amended by adding at the end

10 the following new section:

11 ‘‘SEC. 280I. BENEFITS FOR RESEARCH CONDUCTED BY

12 PHARMACEUTICAL COMPANIES WHERE THE

13 PRODUCTS OF THAT RESEARCH ARE SOLD AT

14 HIGHER PRICES IN THE UNITED STATES

15 THAN IN CERTAIN OTHER COUNTRIES.

16 ‘‘(a) IN GENERAL.—If a worldwide affiliated group

17 has any disqualified gross receipts from any developed for18 eign country for any calendar year, then the applicable

19 percentage of the research-related tax benefits shall not

20 be allowed to any taxpayer which is a member of such

21 group for such taxpayer’s taxable year ending within such

22 calendar year.

23 ‘‘(b) DEFINITIONS.—For purpose of this section—

24 ‘‘(1) DISQUALIFIED GROSS RECEIPTS.—The

25 term ‘disqualified gross receipts’ means, with respect

26 to any developed foreign country, gross receipts of
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1 the worldwide affiliated group from prescription

2 drugs manufactured or produced by any member of

3 such group and sold for use or consumption in such

4 country if such gross receipts are at least 5 percent

5 less than the amount which would be such gross re6 ceipts were such drugs sold at their respective aver7 age manufacturing prices charged by members of

8 such group in the United States.

9 ‘‘(2) DEVELOPED FOREIGN COUNTRY.—The

10 term ‘developed foreign country’ means any foreign

11 country which is a member of the Organization for

12 Economic Co-operation and Development.

13 ‘‘(3) APPLICABLE PERCENTAGE.—The term

14 ‘applicable percentage’ means the percentage

15 which—

16 ‘‘(A) the aggregate disqualified gross re17 ceipts of the worldwide affiliated group, bears

18 to

19 ‘‘(B) the aggregate gross receipts of such

20 group from all prescription drugs which are

21 manufactured or produced by members of such

22 group.

23 ‘‘(4) RESEARCH-RELATED TAX BENEFITS.—The

24 term ‘research-related tax benefits’ means the bene25 fits provided by—
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1 ‘‘(A) section 41 (relating to credit for in2 creasing research activities),

3 ‘‘(B) section 45C (relating to clinical test4 ing expenses for certain drugs for rare diseases

5 or conditions), and

6 ‘‘(C) section 174 (relating to research and

7 experimental expenditures).

8 ‘‘(5) WORLDWIDE AFFILIATED GROUP.—The

9 term ‘worldwide affiliated group’ means any affili10 ated group as defined in section 1504 (determined

11 without regard to paragraphs (3) and (4) of

12 1504(b)).

13 ‘‘(c) CAPITALIZATION OF EXPENDITURES FOR

14 WHICH TAX BENEFIT DENIED.—Expenditures to which

15 section 174 does not apply by reason of this section shall

16 be treated for purposes of section 197 (relating to amorti17 zation of goodwill and certain other intangibles) as a sec18 tion 197 intangible acquired on the last day of the taxable

19 year in which such expenditures are paid or incurred.’’

20 (b) CLERICAL AMENDMENT.—The table of sections

21 for such part IX is amended by adding at the end the

22 following new item:

‘‘Sec. 280I. Benefits for research conducted by pharmaceutical

companies where the products of that research are

sold at higher prices in the United States than in

certain other countries.’’
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to taxable years beginning after

3 the date of the enactment of this Act.

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