I
105TH CONGRESS
2D SESSION
H. R. 3925
To establish the Prescription Drug Price Monitoring Commission.
IN THE HOUSE OF REPRESENTATIVES
MAY 21, 1998
Mr. BERRY (for himself, Mr. DINGELL, Mr. STARK, Mr. CLEMENT, Mr.
DEFAZIO, Mr. LEWIS of Georgia, Ms. FURSE, Mr. BOUCHER, and Mr.
ALLEN) introduced the following bill; which was referred to the Commit-
tee on Ways and Means, and in addition to the Committee on Commerce,
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 establish the Prescription Drug Price Monitoring
Commission.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; FINDINGS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Prescription Drug Price Monitoring Commission Act of
1998’’.
(b) FINDINGS.—The Congress finds the following:
(1) Although prescription drugs represent one
of the most frequently used medical care interven-
tions in treating common acute and chronic diseases,
many Americans, especially elderly and other vulner-
able populations, are unable to afford necessary
medications because of excessive and persistent pre-
scription drug price inflation.
(2) Between 1981 and 1998, the rate of infla-
tion for prescription drugs has increased at over 2.5
times the general rate of inflation.
(3) Because of the limited availability of private
or public prescription drug coverage for the elderly,
prescription drugs represent the highest out-of-pock-
et medical care cost for 75 percent of elderly pa-
tients, surpassed only by costs of long-term care
services.
(4) The Federal Government and the American
taxpayer provide substantial subsidies to the phar-
maceutical industry in the form of tax incentives,
tax write-offs, and grants for nonresearch activities.
(5) According to the most current edition of the
Internal Revenue Service Corporation Source Book
of Statistics of Income, the 1994–95 edition, the
pharmaceutical industry claimed $6,061,807,000 in
deductions for advertising and marketing of their
products.
(6) The statistic described in paragraph (5) is
not indicative of the current amounts deducted by
prescription drug manufacturers, since the Food and
Drug Administration Reform Act of 1996, effective
taxable year 1996, substantially expanded the adver-
tising activities the costs of which are deductible by
the pharmaceutical industry.
(7) According to the Internal Revenue Service
Corporation Source Book of Statistics of Income,
the pharmaceutical industry claimed $2,115,690,000
in tax credits to locate their production facilities in
United States possessions.
(8) There is a need to determine whether Fed-
eral subsidies are used in the most efficient manner
by the pharmaceutical industry to develop drugs
which represent true therapeutic advances over those
products already on the market.
SEC. 2. ESTABLISHMENT.
There is established a commission to be known as the
‘‘Prescription Drug Price Monitoring Commission’’ (in
this Act referred to as the ‘‘Commission’’).
SEC. 3. DUTIES OF COMMISSION.
(a) STUDIES.—The Commission shall conduct the fol-
lowing studies:
(1) A study of the impact of a pharmaceutical
price review board on containing inflation on the
cost of prescription pharmaceutical products in the
United States.
(2) A study on how Federal tax credits and
subsidies, as well as market exclusivity given to the
pharmaceutical industry, can be used to modify an
individual manufacturer’s pricing behavior and re-
search priorities.
(3) A study on drug prices in other industri-
alized nations.
(4)(A) A study on the feasibility of establishing
in the United States a pharmaceutical products price
review board.
(B) In conducting the study under subpara-
graph (A), the Commission shall—
(i) assess the impact of such a board in
other industrialized nations, such as Canada, on
containing the costs of prescription drugs and
the introductory prices of new drugs;
(ii) recommend how such a board might
operate in the United States, including the
membership of the Board;
(iii) recommend guidelines that might be
used by the board in determining whether
prices or price increases for prescription drugs
are excessive and whether the introductory
prices of new drugs are excessive; and
(iv) recommend incentives for drug manu-
facturers to price their products fairly in the
United States, including a system of compul-
sory licensing of pharmaceutical products or a
reduction in the period of market exclusivity as
a penalty for excessive inflation.
(b) REPORTS.—
(1) ANNUAL REPORTS.—The Commission shall
submit to the Congress an annual report (by not
later than January 1 of each year beginning with
1999) which shall include information and rec-
ommendations regarding national and international
drug policy issues, such as—
(A) trends and changes in prices for pre-
scription and nonprescription drugs in the inpa-
tient and outpatient setting in the United
States;
(B) trends and changes in prices for pre-
scription drugs in other industrialized nations,
such as Canada, Japan, Mexico, and countries
of the European Union;
(C) the scope of coverage, reimbursement,
and financing under titles XVIII and XIX of
the Social Security Act and other programs
that directly provide or receive Federal funds
to provide coverage for or reimbursement of
prescription drugs, such as the Department of
Veterans Affairs, the Department of Defense,
and Public Health Service clinics;
(D) the availability and affordability of
prescription 
drugs 
for 
various 
population
groups in the United States, and the accessibil-
ity and affordability of public and private insur-
ance programs for prescription drugs for such
population groups;
(E) changes in the level and nature of use
of prescription drugs by recipients of benefits
under titles XVIII and XIX of the Social Secu-
rity Act, taking into account the impact of such
changes on aggregate expenditures under these
titles;
(F) recommendations to make prescription
drugs more affordable and cost-effective for
third-party 
insurers, 
including 
State-based
pharmaceutical assistance and general assist-
ance programs;
(G) evaluation of technologies available for
efficient third-party prescription drug program
administration, such as electronic claims man-
agement and payment technologies;
(H) methods of providing reimbursement
under Federal health care programs to provid-
ers for drug products;
(I) evaluation of the use and efficiency of
all Federal tax credits and subsidies given to
the pharmaceutical industry for various pur-
poses, including the tax credit allowed under
section 936 of the Internal Revenue Code of
1986; and
(J) evaluation of the effect of direct mar-
keting on price, the volume of sales, and adver-
tising deductions.
(2) SPECIAL REPORT.—The Commission shall
submit to the Committee on Finance of the United
States Senate, the Committee on Commerce and the
Committee on Ways and Means of the House of
Representatives, and the Special Committee on
Aging of the United States Senate, by not later than
October 1, 1999, a report on the study conducted
under subsection (a)(4).
SEC. 4. MEMBERSHIP.
(a) NUMBER AND APPOINTMENT.—The Commission
shall be composed of 7 members appointed as follows:
(1) The President shall appoint three members.
(2) The Speaker of the House of Representa-
tives shall appoint one member.
(3) The minority leader of the House of Rep-
resentatives shall appoint one member.
(4) The majority leader of the Senate shall ap-
point one member.
(5) The minority leader of the Senate shall ap-
point one member.
(b) QUALIFICATIONS.—
(1) IN
GENERAL.—The membership of the
Commission shall include the following:
(A) Individuals with national recognition
for their expertise in the provision and financ-
ing of inpatient and outpatient drugs and
biologicals.
(B) Individuals with national recognition
for their expertise in the fields of health care
economics and quality assurance, medicine,
pharmacology, pharmacy, and prescription drug
reimbursement.
(C) Other health care professionals.
(D) At least one individual who is an advo-
cate for medicare and medicaid recipients.
(2) LIMITATION.—No more than 2 individuals
who are, or have been, in the full- or part-time em-
ploy of a pharmaceutical company within one year
from the date of appointment under subsection (a)
may be appointed to the Commission at any time.
(c) CHAIRMAN.—The Chairman shall be elected by
the members.
(d) DEADLINE FOR APPOINTMENT.—Members of the
Commission shall be appointed not later than October 1,
1998.
(e) TERMS.—
(1) IN GENERAL.—Each member shall be ap-
pointed for the life of the Commission.
(2) VACANCIES.—A vacancy in the Commission
shall be filled in the manner in which the original
appointment was made.
(f) MEETINGS.—The Commission shall meet at the
call of the Chairperson or a majority of its members.
(g) QUORUM.—Four members of the Commission
shall constitute a quorum but a lesser number may hold
hearings.
(h) WAIVER OF LIMITATION ON EXECUTIVE SCHED-
ULE POSITIONS.—Appointments may be made under this
section without regard to the provisions of title 5, United
States Code, governing appointments in the competitive
service.
SEC. 5. ADMINISTRATIVE PROVISIONS.
(a) IN GENERAL.—The following provisions of sec-
tion 1805 of the Social Security Act (42 U.S.C. 1395b–
6) shall apply to the Commission in the same manner as
they apply to the Medicare Payment Advisory Commis-
sion:
(1) Subsection (c)(4) (relating to compensation
of members).
(2) Subsection (d) (relating to staffing and ad-
ministration).
(3) Subsection (e) (relating to powers of the
Commission generally).
(b) TECHNICAL ASSISTANCE.—Upon the request of
the Commission, the head of a Federal agency shall pro-
vide such technical assistance to the Commission as the
Commission determines to be necessary to carry out its
duties.
SEC. 6. TERMINATION.
The Commission shall terminate on October 1, 2003.
SEC. 7. STUDY AND REPORT ON FEDERAL SUBSIDIES AND
INCENTIVES PROVIDED TO THE PHARMA-
CEUTICAL INDUSTRY.
(a) STUDY.—The Secretary of Health and Human
Services, in consultation with Secretary of the Treasury,
shall conduct a study on Federal subsidies and incentives
provided to the pharmaceutical industry. Matters studied
shall include—
(1) a determination of the total cost over the 5
preceding fiscal years to Federal taxpayers of all
Federal subsidies provided to the pharmaceutical in-
dustry (including tax incentives, subsidies, grants,
and any other financial support);
(2)(A) the purposes for which such Federal
subsidies are used by the pharmaceutical industry;
(B) the Federal role in researching and develop-
ing patented pharmaceutical products and the extent
to which the Federal Government should co-license
certain drugs and biologicals;
(C) the extent to which pharmaceutical industry
marketing research costs are incorporated into al-
lowable Federal tax credits;
(D) comparable financial incentives, subsidies,
and tax credits provided to the pharmaceutical in-
dustry by other industrialized nations and the use of
such incentives, subsidies, and credits by such indus-
try;
(E) the relationship between the total Federal
financial support provided to the pharmaceutical in-
dustry by the United States and other industrialized
nations and the prices paid by the citizens of such
respective nations for prescription drugs; and
(F) the extent to which tax credits provided by
the Federal Government subsidize total worldwide
pharmaceutical industry research and development;
and
(3) the relation of Federal tax credits to phar-
maceutical manufacturers and marketing exclusivity
for drug products to—
(A) an individual manufacturer’s pricing
behavior in the marketplace; and
(B) the relative therapeutic value of new
pharmaceutical products researched, developed,
and marketed in the United States.
(b) REPORT.—Not later than July 1, 1999, the Sec-
retary of Health and Human Services, after consultation
with the Secretary of the Treasury, shall submit a report
to the Committee on Finance of the United States Senate,
the Committee on Commerce and the Committee on Ways
and Means of the United States House of Representatives,
and the Special Committee on Aging of the United States
Senate, on the study conducted under subsection (a), and
shall include such recommendations as the Secretary of
Health and Human Services deems appropriate.
SEC. 8. MANUFACTURER INTERNATIONAL DRUG PRICE RE-
PORTING REQUIREMENTS.
(a) IN GENERAL.—Subparagraph (A) of section
1927(b)(3) of the Social Security Act (42 U.S.C. 1396r–
8(b)(3)) is amended—
(1) by striking ‘‘and’’ at the end of clause (i),
(2) by striking the period at the end of clause
(ii) and inserting ‘‘, and’’, and
(3) by adding at the end thereof the following
new clause:
‘‘(iii) not later than 30 days after the
end of each calendar year, the average
price at which the manufacturer sold each
covered outpatient drug in such calendar
year in the following countries: Canada,
Australia, Mexico, and the countries of the
European Union.’’.
(b) TECHNICAL AMENDMENT.—Clause (ii) of section
1927(b)(3)(A) of such Act (42 U.S.C. 1396r–8(b)(3)(A))
is amended by inserting a comma after ‘‘1990’’.
Æ