I

104TH CONGRESS

2D SESSION H. R. 3691

To provide for the establishment of a Prescription Drug Price Review Board

to identify excessive drug prices, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

JUNE 20, 1996

Mr. JOHNSON of South Dakota introduced the following bill; which was

referred to the Committee on Commerce

A BILL

To provide for the establishment of a Prescription Drug

Price Review Board to identify excessive drug prices,

and for other purposes.

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 Consumer Protection Act of 1996’’.

6 SEC. 2. ESTABLISHMENT OF BOARD.

7 (a) ESTABLISHMENT.—There is established in the ex8 ecutive branch the Prescription Drug Price Review Board

9 (hereinafter in this Act referred to as the ‘‘Board’’).

10 (b) MEMBERSHIP.—
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1 (1) NUMBER AND APPOINTMENT.—The Board

2 shall be composed of 5 members appointed by the

3 President, by and with the advice and consent of the

4 Senate, from among individuals—

5 (A) who are recognized experts in the

6 fields of consumer advocacy, medicine, phar7 macology, pharmacy, and prescription drug re8 imbursement; and

9 (B) who have not worked in the pharma10 ceutical manufacturing industry during the 3-

11 year period ending on the date of appointment.

12 (2) INITIAL APPOINTMENTS.—Initial appoint13 ments under paragraph (1) shall be made not later

14 than 90 days after the date of the enactment of this

15 Act.

16 (3) TERMS.—

17 (A) IN GENERAL.—Except as provided in

18 subparagraphs (B) and (C), each member shall

19 be appointed for a term of 5 years.

20 (B) TERMS OF INITIAL APPOINTEES.—As

21 designated by the President at the time of ap22 pointment, of the members first appointed—

23 (i) 1 member shall be appointed for a

24 term of 1 year;
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1 (ii) 1 member shall be appointed for a

2 term of 2 years;

3 (iii) 1 member shall be appointed for

4 a term of 3 years;

5 (iv) 1 member shall be appointed for

6 a term of 4 years; and

7 (v) 1 member shall be appointed for a

8 term of 5 years.

9 (C) VACANCIES.—A vacancy in the Board

10 shall be filled in the manner in which the origi11 nal appointment was made. Any member ap12 pointed to fill a vacancy occurring before the

13 expiration of the term for which the member’s

14 predecessor was appointed shall be appointed

15 only for the remainder of that term. A member

16 may serve after the expiration of the member’s

17 term until a successor has taken office.

18 (4) INITIAL MEETING.—The initial meeting of

19 the Board shall be held not later than 90 days after

20 the date on which the first appointments of the

21 members have been completed.

22 (5) CHAIRPERSON.—The President shall des23 ignate 1 member of the Board to serve as the chair24 person.

25 (6) BASIC PAY.—
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1 (A) IN GENERAL.—Members shall be paid

2 at a rate not to exceed the daily equivalent of

3 the maximum annual rate of basic pay payable

4 under section 5376 of title 5, United States

5 Code, for each day during which the members

6 are engaged in the actual performance of the

7 duties of the Board.

8 (B) TRAVEL EXPENSES.—Members shall

9 receive travel expenses, including per diem in

10 lieu of subsistence, in accordance with sections

11 5702 and 5703 of title 5, United States Code.

12 (c) DIRECTOR AND STAFF.—

13 (1) DIRECTOR.—The Board shall have a direc14 tor who shall be appointed by the chairperson, sub15 ject to rules prescribed by the Board.

16 (2) STAFF.—The chairperson may appoint and

17 fix the pay of such additional personnel as the chair18 person considers appropriate, subject to rules pre19 scribed by the Board.

20 (3) APPLICABILITY OF CERTAIN CIVIL SERVICE

21 LAWS.—The director and staff of the Board shall be

22 appointed subject to the provisions of title 5, United

23 States Code, governing appointments in the competi24 tive service, and shall be paid in accordance with the

25 requirements of chapter 51 and subchapter III of
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1 chapter 53 of such title relating to classification and

2 General Schedule pay rates; except that an individ3 ual so appointed may not receive pay in excess of

4 the maximum annual rate of basic pay payable for

5 grade GS–15 of the General Schedule.

6 SEC. 3. POWERS OF BOARD.

7 (a) OBTAINING OFFICIAL DATA.—The chairperson of

8 the Board may secure directly from any Federal agency

9 information necessary to enable the Board to carry out

10 its duties. Upon request of the chairperson, the head of

11 the agency shall furnish such information to the Board

12 to the extent such information is not prohibited from dis13 closure by law.

14 (b) MAILS.—The Board may use the United States

15 mails in the same manner and under the same conditions

16 as other Federal agencies.

17 (c) ADMINISTRATIVE SUPPORT SERVICES.—Upon the

18 request of the chairperson, the Administrator of General

19 Services shall provide to the Board on a reimbursable

20 basis the administrative support services necessary for the

21 Board to carry out its duties.

22 (d) CONTRACT AUTHORITY.—The chairperson may

23 contract with and compensate government and private

24 agencies or persons for the purpose of conducting re-
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1 search, surveys, and other services necessary to enable the

2 Board to carry out its duties.

3 (e) INVESTIGATIONS.—The Board may make such in4 vestigations as it considers necessary to determine whether

5 there is or may be a violation of any regulation promul6 gated under this Act and may require or permit any per7 son to file with it a statement in writing, under oath or

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

9 and circumstances concerning the matter to be inves10 tigated.

11 (f) SUBPOENA POWER.—

12 (1) IN GENERAL.—The Board may issue sub13 poenas requiring the attendance and testimony of

14 witnesses and the production of any evidence relat15 ing to any matter under investigation by the Board.

16 The attendance of witnesses and the production of

17 evidence may be required from any place within the

18 United States at any designated place of hearing

19 within the United States.

20 (2) FAILURE TO OBEY A SUBPOENA.—If a per21 son refuses to obey a subpoena issued under para22 graph (1), the Board may apply to a United States

23 district court for an order requiring that person to

24 appear before the Board to give testimony, produce

25 evidence, or both, relating to the matter under inves-
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1 tigation. The application may be made within the ju2 dicial district where the hearing is conducted or

3 where that person is found, resides, or transacts

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

5 may be punished by the court as civil contempt.

6 (3) SERVICE OF SUBPOENAS.—The subpoenas

7 of the Board shall be served in the manner provided

8 for subpoenas issued by a United States district

9 court under the Federal Rules of Civil Procedure for

10 the United States district courts.

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

12 court to which application is made under paragraph

13 (2) may be served in the judicial district in which

14 the person required to be served resides or may be

15 found.

16 SEC. 4. FUNCTIONS OF THE BOARD.

17 (a) GUIDELINES.—The Board shall—

18 (1) develop and publish within 9 months of the

19 date of the establishment of the Board the initial

20 guidelines that the Board will use in determining

21 whether an existing price or an increase in the price

22 of any prescription drug is excessive,

23 (2) develop and publish within 12 months of the

24 date of the establishment of the Board the initial

25 guidelines that the Board will use in determining
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1 whether the initial price at which a prescription drug

2 is first sold is excessive, and

3 (3) periodically review the guidelines developed

4 under paragraphs (1) and (2) and make appropriate

5 revisions.

6 (b) DETERMINATIONS AND REVIEWS.—The Board

7 shall—

8 (1) within 24 months of the date of the estab9 lishment of the Board, make an initial determination

10 of whether the price of each prescription drug ap11 proved for sale on the date of the enactment of this

12 Act is excessive,

13 (2) promptly make an initial determination of

14 whether the price of each prescription drug first ap15 proved for sale after the date of the enactment of

16 this Act is excessive,

17 (3) review, on an ongoing basis, each increase

18 in the price of a drug reviewed under paragraphs (1)

19 and (2) to determine if the price increase is exces20 sive, and

21 (4) consider whether determinations and re22 views similar to the ones carried out under para23 graphs (1), (2), and (3) should be made for non-pre24 scription drugs and make such determinations and

25 reviews if appropriate.
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1 (c) FACTORS.—In making determinations under sub2 section (b) as to whether the price of a prescription drug

3 is excessive, the Board shall take into consideration—

4 (1) changes in the producer price index (pub5 lished by the Bureau of Labor Statistics of the De6 partment of Labor),

7 (2) changes in the prescription drug component

8 of such producer price index,

9 (3) the price at which such drug was sold to

10 wholesalers in the United States during the preced11 ing 10 years,

12 (4) the price at which such drug was sold to

13 wholesalers in other countries during the preceding

14 10 years,

15 (5) the price at which other drugs in the same

16 therapeutic class were sold to wholesalers in the

17 United States during the preceding 10 years,

18 (6) the therapeutic potential rating of such

19 drug by the Food and Drug Administration,

20 (7) the percentage of such drug’s research and

21 development costs paid by the United States,

22 (8) the cost of manufacturing and marketing

23 such drug, and

24 (9) such other factors as the Board considers

25 relevant.
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1 (d) REPORTING.—The Board shall—

2 (1) promptly provide to consumers and health

3 care providers the results of the Board’s determina4 tions under subsection (b) and the method used in

5 each such determination,

6 (2) provide information to consumers and

7 health care providers regarding prescription drug

8 pricing and price increases by therapeutic class and

9 manufacturer,

10 (3) provide to consumers and health care pro11 viders information regarding the Food and Drug Ad12 ministration therapeutic potential rating of each pre13 scription drug and the percentage of the research

14 and development of each such drug paid by the

15 United States,

16 (4) provide to consumers such other informa17 tion as the Board determines will assist consumers

18 in reducing their expenses for prescription drugs,

19 (5) publish an easy to understand consumer’s

20 guide to prescription drug prices, including the in21 formation described in paragraphs (1), (2), (3), and

22 (4), within 24 months of the date of the establish23 ment of the Board and update and publish such

24 guide annually thereafter, and
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1 (6) provide to the President and the Congress

2 a report of its determinations under subsection (b)

3 within 24 months of the date of the establishment

4 of the Board and update and report such determina5 tions annually thereafter.

6 SEC. 5. SANCTIONS AND REMEDIES.

7 (a) HEARINGS.—After making a determination under

8 section 4(b) that the price of a prescription drug or an

9 increase in the price of such a drug is excessive, the Board

10 shall—

11 (1) notify, in writing, the manufacturer of such

12 drug of such determination,

13 (2) fix a date on which a public hearing before

14 the Board respecting such determination shall be

15 held and hold such hearing,

16 (3) request from such manufacturer such addi17 tional information as the Board deems necessary for

18 such public hearing, and

19 (4) notify such manufacturer of the Board’s

20 recommendation as to the pricing of the drug at a

21 rate which is not excessive.

22 (b) SETTLEMENT.—If, after a public hearing under

23 subsection (a), the Board finds that the price or an in24 crease in the price of a prescription drug is not excessive,

25 the Board shall—
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1 (1) notify the manufacturer of such drug of the

2 Board’s finding, and

3 (2) remove from all publications and reports of

4 the Board after the date of such finding any state5 ment that the price or increase in the price of such

6 drug is excessive.

7 (c) PATENT REVOCATION.—If, after a public hearing

8 under subsection (a), the Board finds that the price or

9 an increase in the price of a prescription drug is excessive,

10 the Board shall—

11 (1) notify the manufacturer of such drug of the

12 Board’s finding,

13 (2) notify the manufacturer of such drug of the

14 Board’s intent to revoke the patent for such drug if

15 the drug is patented or to revoke the patent of an16 other drug of such manufacturer if such drug is not

17 patented, and

18 (3) take such action as may be necessary to re19 voke a drug patent under paragraph (2) if the man20 ufacturer of such drug does not reduce the price of

21 the drug to a level that is not excessive.

22 SEC. 6. MANUFACTURERS.

23 Each manufacturer of a prescription drug subject to

24 review under section 4 shall—
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1 (1) provide to the Board such information as

2 the Board may require to make the determinations

3 under section 4, including—

4 (A) information identifying such drug,

5 (B) the price at which such drug is being

6 sold or has been sold in any market,

7 (C) the cost of manufacturing and market8 ing such drug, and

9 (D) such other information as the Board

10 considers necessary to be provided in such form

11 and manner and at such time as the Board pre12 scribes by regulation, and

13 (2) notify the Board immediately of any in14 crease in the wholesale price of any prescription

15 drug marketed by the manufacturer.

16 SEC. 7. STUDY.

17 The Board shall engage the Institute of Medicine of

18 the National Academy of Sciences to conduct a study of

19 prescription drug research and development and pricing

20 practices, the difficulties many Americans have in afford21 ing prescription drugs, and options for making prescrip22 tion drugs available to all that need them. Such study

23 shall—

24 (1) examine Federal incentives for research and

25 development and determine which incentives are
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1 most effective and what changes would better en2 courage the development of low cost, effective drugs,

3 (2) examine the Federal regulatory process and

4 identify ways it might be streamlined without jeop5 ardizing consumer safety,

6 (3) consider whether the authority of the Food

7 and Drug Administration should be enhanced and

8 whether the funding for such agency should be in9 creased to improve Federal regulation of drugs,

10 (4) consider steps the United States might take

11 (including possible trade sanctions) to protect manu12 facturers of drugs in the United States from product

13 pirating and other unfair trade practices by foreign

14 competitors,

15 (5) consider changes in the patent laws (includ16 ing delaying the start of a product’s 17 years patent

17 protection until after the product has been approved

18 under the Federal Food, Drug, and Cosmetic Act) to

19 allow manufacturers to charge lower prices and still

20 recoup their research and development costs,

21 (6) consider whether a Board review of non-pre22 scription drug prices would have a positive effect on

23 consumer costs of such drugs,

24 (7) consider mechanisms to assist consumers

25 with the high cost of prescription drugs (including
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1 providing reimbursement under title XVIII of the

2 Social Security Act for prescription drugs at lower

3 prices negotiated with manufacturers of drugs),

4 (8) examine Federal policies regarding the li5 censing of drugs discovered and developed by feder6 ally funded researchers and recommend actions that

7 would allow the United States to recoup its costs or

8 to influence the pricing of such drugs, and

9 (9) examine the effects on retail pharmacies of

10 disparities in drug prices wherein the drug manufac11 turers charge hospitals, mail order pharmacies, and

12 health maintenance organizations significantly lower

13 prices than those charged wholesalers for such

14 drugs.

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