I 

108TH CONGRESS 

2D SESSION H. R. 4899

To amend the Public Health Service Act and the Internal Revenue Code 

of 1986 to require agreements regarding the wholesale price of brandname prescription drugs as a condition of the allowance of certain tax 

deductions and credits. 

IN THE HOUSE OF REPRESENTATIVES 

JULY 22, 2004

Mr. BROWN of Ohio introduced the following bill; which was referred to the 

Committee on Energy and Commerce, and in addition to the Committee 

on Ways and Means, for a period to be subsequently determined by the 

Speaker, in each case for consideration of such provisions as fall within 

the jurisdiction of the committee concerned 

A BILL

To amend the Public Health Service Act and the Internal 

Revenue Code of 1986 to require agreements regarding 

the wholesale price of brand-name prescription drugs as 

a condition of the allowance of certain tax deductions 

and credits.

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 ‘‘Sustainable Drug Pric5 ing Act’’. 
2

•HR 4899 IH 

1 SEC. 2. AGREEMENTS REGARDING PRICES OF BRAND-NAME 

2 PRESCRIPTION DRUGS; RELATION TO CER3 TAIN TAX DEDUCTIONS AND CREDITS. 

4 Part D of title III of the Public Health Service Act 

5 (42 U.S.C. 254b et seq.) is amended by adding at the end 

6 the following subpart: 

7 ‘‘Subpart XI—Sustainable Drug Pricing 

8 ‘‘SEC. 340H. AGREEMENTS REGARDING PRICES OF BRAND9 NAME PRESCRIPTION DRUGS; RELATION TO 

10 CERTAIN TAX DEDUCTIONS AND CREDITS. 

11 ‘‘(a) IN GENERAL.—

12 ‘‘(1) AGREEMENT.—The Secretary may in ac13 cordance with this section enter into an agreement 

14 with any manufacturer of a brand-name prescription 

15 drug for purposes of—

16 ‘‘(A) section 280I of the Internal Revenue 

17 Code of 1986 (relating to the allowance of a de18 duction for expenditures relating to the adver19 tising, promoting, or marketing of such drug); 

20 and 

21 ‘‘(B) section 901(l) of such Code (relating 

22 to the allowance of a foreign tax credit for in23 come, war profits, or excess profits taxes paid 

24 or accrued with respect to such drug). 

25 ‘‘(2) COORDINATION WITH TAX PROVISIONS.—

26 For purposes of the provisions of the Internal Rev-
3

•HR 4899 IH 

1 enue Code of 1986 referred to in paragraph (1), an 

2 agreement under this section shall be considered to 

3 be in effect with respect to a brand-name prescrip4 tion drug unless the Secretary transmits to the Sec5 retary of the Treasury a notice in writing that such 

6 an agreement is not in effect. 

7 ‘‘(3) NEGOTIATIONS.—The Secretary shall ne8 gotiate with any manufacturer of a brand-name pre9 scription drug that in good faith seeks an agreement 

10 under paragraph (1), and shall make reasonable ef11 forts to enter into such an agreement with the man12 ufacturer. 

13 ‘‘(b) PUBLIC HEALTH OBJECTIVES OF AGREE14 MENT.—The purpose of an agreement under subsection 

15 (a) regarding a drug is to establish the maximum price 

16 at which the drug may be sold at wholesale under the 

17 agreement, reasonably taking into account—

18 ‘‘(1) the affordability of the drug in relation to 

19 the public-health need for the drug; and 

20 ‘‘(2) the need for the manufacturer to invest in 

21 research and development activities toward the de22 velopment of new drugs that will benefit the public 

23 health. 

24 ‘‘(c) DURATION OF AGREEMENT; RENEGOTIATION.—
4

•HR 4899 IH 

1 ‘‘(1) IN GENERAL.—With respect to taxable 

2 years of a manufacturer, the Secretary may enter 

3 into an agreement under subsection (a) regarding a 

4 drug only if the agreement contains provisions in ac5 cordance with the following: 

6 ‘‘(A) In the case of the agreement as first 

7 in effect, the agreement will be in effect for not 

8 fewer than four successive taxable years. 

9 ‘‘(B) In the case of taxable years following 

10 such four taxable years, the agreement may be 

11 periodically renegotiated at the initiative of the 

12 manufacturer or the Secretary, except that any 

13 agreement that takes effect pursuant to such a 

14 renegotiation will remain in effect for not fewer 

15 than four taxable years. 

16 ‘‘(C) Each agreement will apply to the en17 tirety of the taxable years with which the agree18 ment is concerned, except that in the case of 

19 the taxable year during which the drug first en20 ters the commercial market, the applicability of 

21 the agreement will begin on the date during the 

22 taxable year on which commercial marketing of 

23 the drug begins. 

24 ‘‘(2) VARIATION IN MAXIMUM PRICE UNDER

25 AGREEMENT.—With respect to the maximum price 
5

•HR 4899 IH 

1 established for a drug under an agreement under 

2 subsection (a), this section may not be construed as 

3 requiring that the agreement provide that a single 

4 maximum price be in effect throughout the taxable 

5 years with which the agreement is concerned. The 

6 maximum price may vary under the agreement ac7 cording to the terms of the agreement. 

8 ‘‘(d) VIOLATION OF AGREEMENT; LIQUIDATED PEN9 ALTY.—

10 ‘‘(1) IN GENERAL.—The Secretary may enter 

11 into an agreement under subsection (a) regarding a 

12 drug only if—

13 ‘‘(A) the agreement specifies the amount 

14 that, as a liquidated penalty, the Secretary may 

15 require the manufacturer involved to pay to the 

16 United States for failing to maintain substan17 tial compliance with the agreement; and 

18 ‘‘(B) such amount is sufficient to deter 

19 violations of the agreement. 

20 ‘‘(2) HEARING; LOSS OF EFFECTIVE STATUS OF

21 AGREEMENT.—

22 ‘‘(A) HEARING.—If, after providing notice 

23 and an opportunity for a hearing, the Secretary 

24 determines that a manufacturer has failed to 

25 maintain substantial compliance with the agree-
6

•HR 4899 IH 

1 ment under subsection (a), the Secretary shall 

2 order the manufacturer—

3 ‘‘(i) to pay to the United States an 

4 amount as a penalty for such failure, 

5 which amount does not exceed the amount 

6 specified under paragraph (1)(A) as a liq7 uidated penalty; and 

8 ‘‘(ii) to take appropriate action to 

9 bring the manufacturer into compliance 

10 with the agreement. 

11 ‘‘(B) LOSS OF EFFECTIVE STATUS.—If a 

12 manufacturer fails to comply with an order 

13 under subparagraph (A), the Secretary may 

14 transmit to the Secretary of the Treasury a no15 tice in writing that an agreement under this 

16 section is not in effect with respect to the 

17 brand-name prescription drug involved. 

18 ‘‘(e) GENERAL PROVISIONS.—

19 ‘‘(1) INDIVIDUAL DRUG AGREEMENTS.—The 

20 Secretary shall ensure that each agreement under 

21 subsection (a) concerns only one brand-name pre22 scription drug. 

23 ‘‘(2) MONITORING OF COMPLIANCE.—With re24 spect to brand-name prescription drugs for which 

25 agreements under subsection (a) are in effect, the 
7

•HR 4899 IH 

1 Secretary shall monitor the prices at which such 

2 drugs are being sold and determine whether the 

3 manufacturers involved are in compliance with the 

4 agreements. The Secretary may require, as a condi5 tion of a entering into an agreement under sub6 section (a) with a manufacturer, that the agreement 

7 include provisions regarding the cooperation of the 

8 manufacturer with such monitoring of prices. 

9 ‘‘(3) ACCESS TO RECORDS.—The Secretary may 

10 require, as a condition of a entering into an agree11 ment under subsection (a) with a manufacturer, that 

12 the manufacturer provide the Secretary, during ne13 gotiations and after the agreement is made, with ac14 cess to financial records of the manufacturer that 

15 relate to the brand-name prescription drug involved. 

16 ‘‘(4) CONSIDERATION OF COMPLIANCE

17 RECORD.—In determining to what extent to estab18 lish requirements under paragraphs (2) and (3) with 

19 respect to an agreement under subsection (a) with a 

20 manufacturer, the Secretary shall take into account 

21 whether the manufacturer has maintained substan22 tial compliance with any other agreements under 

23 such subsection that have been made by the manu24 facturer. 
8

•HR 4899 IH 

1 ‘‘(f) ADVISORY PANEL ON DRUG-PRICE NEGOTIA2 TIONS.—

3 ‘‘(1) IN GENERAL.—The Secretary shall estab4 lish an advisory panel to be known as the Advisory 

5 Panel on Drug-Price Negotiations (in this subsection 

6 referred to as the ‘Advisory Panel’). 

7 ‘‘(2) DUTIES.—The Advisory Panel shall pro8 vide advice to the Secretary on establishing prices 

9 for the sale of brand-name prescription drugs at 

10 wholesale under agreements under subsection (a). 

11 Not later than one year after the date on which the 

12 initial appointments to the Advisory Panel under 

13 paragraph (3) are completed, the Panel shall—

14 ‘‘(A) select, from brand-name prescription 

15 drugs in commercial distribution as of the date 

16 of the enactment of the Sustainable Drug Pric17 ing Act—

18 ‘‘(i) a list of 25 drugs that the Panel 

19 considers important to the public health; 

20 and 

21 ‘‘(ii) a list of the 25 most commonly 

22 prescribed drugs in the United States, ex23 clusive of drugs included on the list under 

24 clause (i); and 
9

•HR 4899 IH 

1 ‘‘(B) submit to the Secretary the rec2 ommendations of the Panel with respect to such 

3 prices for drugs on the lists. 

4 ‘‘(3) COMPOSITION.—The Advisory Panel shall 

5 be composed of five members appointed by the Sec6 retary from among individuals who are not officers 

7 or employees of the Federal Government. Of such 

8 members—

9 ‘‘(A) one shall be a representative of the 

10 pharmaceutical industry; 

11 ‘‘(B) one shall be a representative of retail 

12 consumers generally; 

13 ‘‘(C) one shall be a representative of retail 

14 consumers who are members of racial or ethnic 

15 minority groups; 

16 ‘‘(D) one shall be an academic with exper17 tise in health care economics; and 

18 ‘‘(E) one shall be an academic with exper19 tise in public health. 

20 The Secretary shall appoint the initial members of 

21 the Advisory Panel not later than 180 days after the 

22 date of the enactment of the Sustainable Drug Pric23 ing Act. 
10

•HR 4899 IH 

1 ‘‘(4) CHAIR.—The Advisory Panel shall select, 

2 by recorded vote, a member of the Panel to serve as 

3 the chair of the Panel. 

4 ‘‘(5) TERMS.—

5 ‘‘(A) IN GENERAL.—Each member of the 

6 Advisory Panel shall be appointed for a term of 

7 four years, except that the term of each of the 

8 initial members expires December 31, 2007. 

9 ‘‘(B) SERVICE AFTER EXPIRATION OF

10 TERM.—A member of the Advisory Panel may 

11 continue to serve after the expiration of the 

12 term of the member until a successor is ap13 pointed. 

14 ‘‘(6) VACANCIES.—

15 ‘‘(A) AUTHORITY OF ADVISORY PANEL.—A 

16 vacancy in the membership of the Advisory 

17 Panel does not affect the power of the remain18 ing members to carry out the duties of the 

19 Panel. 

20 ‘‘(B) APPOINTMENT OF SUCCESSORS.—A 

21 vacancy in the membership of the Advisory 

22 Panel shall be filled in the manner in which the 

23 original appointment was made. 

24 ‘‘(C) INCOMPLETE TERM.—If a member of 

25 the Advisory Panel does not serve the full term 
11

•HR 4899 IH 

1 under paragraph (5)(A), the Secretary, not 

2 later than 30 days after the date on which the 

3 vacancy occurs, shall appoint an individual to 

4 serve as a member of the Advisory Panel for 

5 the remainder of such term. 

6 ‘‘(g) DEFINITIONS.—For purposes of this section: 

7 ‘‘(1) The term ‘brand-name prescription drug’ 

8 means a drug meeting each of the following criteria: 

9 ‘‘(A) An approved application under sec10 tion 505(b)(1) of the Federal Food, Drug, and 

11 Cosmetic Act is in effect for the drug, or in the 

12 case of a drug that is a biological product, a 

13 biologics license is in effect for the drug under 

14 section 351 of this Act. 

15 ‘‘(B) The drug is subject to section 

16 503(b)(1) of the Federal Food, Drug, and Cos17 metic Act. 

18 ‘‘(C) A period of market exclusivity is in 

19 effect with respect to the drug pursuant to a 

20 patent or pursuant to section 505(j) or 505A of 

21 such Act. 

22 ‘‘(2) The term ‘drug’ has the meaning given 

23 such term in section 201(g)(1) of such Act.’’. 
12

•HR 4899 IH 

1 SEC. 3. DENIAL OF CERTAIN TAX BENEFITS UNLESS UN2 LESS PRICING AGREEMENT FOR BRAND3 NAME PRESCRIPTION DRUGS IS IN EFFECT. 

4 (a) DEDUCTIONS FOR ADVERTISING.—

5 (1) IN GENERAL.—Part IX of subchapter B of 

6 chapter 1 of subtitle A of the Internal Revenue Code 

7 of 1986 (relating to items not deductible) is amend8 ed by adding at the end the following: 

9 ‘‘SEC. 280I. DENIAL OF DEDUCTIONS FOR ADVERTISING 

10 FOR BRAND-NAME PRESCRIPTION DRUGS UN11 LESS PRICING AGREEMENT IS IN EFFECT. 

12 ‘‘(a) IN GENERAL.—No deduction shall be allowed 

13 under this chapter for any taxable year for any expendi14 ture relating to the advertising, promoting, or marketing 

15 (in any medium) of any brand-name prescription drug 

16 manufactured by the taxpayer. 

17 ‘‘(b) EXCEPTION FOR QUALIFIED PRICING AGREE18 MENT.—

19 ‘‘(1) IN GENERAL.—Subsection (a) shall not 

20 apply with respect to any brand-name prescription 

21 drug for a taxable year if there is in effect for the 

22 entire taxable year a qualified pricing agreement 

23 with respect to such drug. 

24 ‘‘(2) SPECIAL RULE REGARDING INITIAL COM25 MERCIAL MARKETING.—In the case of the taxable 

26 year during which a brand-name prescription drug 
13

•HR 4899 IH 

1 first enters the commercial market, subsection (a) 

2 shall not apply with respect to such drug for such 

3 taxable year if a qualified pricing agreement with re4 spect to the drug is in effect on the date of such 

5 entry and remains in effect throughout the remain6 der of such year. 

7 ‘‘(c) DEFINITIONS.—For purposes of this section—

8 ‘‘(1) QUALIFIED PRICING AGREEMENT.—The 

9 term ‘qualified pricing agreement’ means an agree10 ment entered into under section 340H of the Public 

11 Health Service Act. 

12 ‘‘(2) BRAND-NAME PRESCRIPTION DRUG.—The 

13 term ‘brand-name prescription drug’ has the mean14 ing given such term in section 340H of the Public 

15 Health Service Act. 

16 ‘‘(d) AGGREGATION RULES.—For purposes of this 

17 section, all members of the same controlled group of cor18 porations (within the meaning of section 52(a)) and all 

19 persons under common control (within the meaning of sec20 tion 52(b)) shall be treated as 1 person.’’. 

21 (2) CLERICAL AMENDMENT.—The table of sec22 tions for such part IX is amended by adding after 

23 the item relating to section 280H the following:

‘‘280I. Denial of deductions for advertising for brand-name prescription drugs 

unless pricing agreement is in effect.’’.
14

•HR 4899 IH 

1 (b) FOREIGN TAX CREDIT.—Section 901 of such 

2 Code (relating to taxes of foreign countries and of posses3 sions of United States) is amended by redesignating sub4 section (l) as subsection (m) and by inserting after sub5 section (k) the following new subsection: 

6 ‘‘(l) DENIAL OF FOREIGN TAX CREDIT, ETC. WITH

7 RESPECT TO BRAND-NAME PRESCRIPTION DRUGS UN8 LESS PRICING AGREEMENT IS IN EFFECT.—

9 ‘‘(1) IN GENERAL.—Notwithstanding any other 

10 provision of this part, no credit shall be allowed 

11 under subsection (a) for any income, war profits, or 

12 excess profits taxes paid or accrued (or deemed paid 

13 under section 902 or 960) with respect to any 

14 brand-name prescription drug manufactured by the 

15 taxpayer. 

16 ‘‘(2) EXCEPTION FOR QUALIFIED PRICING

17 AGREEMENT.——

18 ‘‘(A) IN GENERAL.—Paragraph (1) shall 

19 not apply with respect to any brand-name pre20 scription drug for a taxable year if there is in 

21 effect for the entire taxable year a qualified 

22 pricing agreement with respect to such drug. 

23 ‘‘(B) SPECIAL RULE REGARDING INITIAL

24 COMMERCIAL MARKETING.—In the case of the 

25 taxable year during which a brand-name pre-
15

•HR 4899 IH 

1 scription drug first enters the commercial mar2 ket, paragraph (1) shall not apply with respect 

3 to such drug for such taxable year if a qualified 

4 pricing agreement with respect to the drug is in 

5 effect on the date of such entry and remains in 

6 effect throughout the remainder of such year. 

7 ‘‘(3) DEFINITIONS.—For purposes of this sub8 section, the terms ‘qualified pricing agreement’ and 

9 ‘brand-name prescription drug’ have the meanings 

10 given such terms by section 280I. 

11 ‘‘(4) AGGREGATION RULES.—For purposes of 

12 this subsection, a rule similar to the rule of section 

13 280I(d) shall apply. ’’. 

14 (c) EFFECTIVE DATE.—The amendments made by 

15 this section shall apply to taxable years beginning after 

16 December 31, 2005. 

17 SEC. 4. FEDERAL REGISTER NOTICE. 

18 Not later than 90 days after the date of the enact19 ment of this Act, the Secretary of Health and Human 

20 Services shall publish in the Federal Register a notice that 

21 informs manufacturers of brand-name prescription drugs 

22 of the provisions of the amendments made by this Act, 

23 and that invites the manufacturers to enter into negotia24 tions with the Secretary for purposes of entering into 
16

•HR 4899 IH 

1 agreements under section 340H of the Public Health Serv2 ice Act.

Æ