I
103D CONGRESS
1ST SESSION
H. R. 1158
To provide for the affordability of prescription drug prices by reducing certain
nonresearch related tax credits to pharmaceutical manufacturers and
to generate previously uncollected tax revenues for the Federal Govern-
ment.
IN THE HOUSE OF REPRESENTATIVES
MARCH 1, 1993
Mr. MACHTLEY (for himself and Mr. MURTHA) introduced the following bill;
which was referred jointly to the Committees on Ways and Means and
Energy and Commerce
A BILL
To provide for the affordability of prescription drug prices
by reducing certain nonresearch related tax credits to
pharmaceutical manufacturers and to generate previously
uncollected tax revenues for the Federal Government.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Prescription Drug Af-
fordability Act of 1993’’.
SEC. 2. FINDINGS AND PURPOSES.
(a) FINDINGS.—The Congress finds that—
(1) although prescription drugs represent one of
the most frequently used medical care interventions
in treating common acute and chronic diseases,
many Americans, especially elderly and other vulner-
able populations, are unable to afford their medica-
tions because of excessive and persistent prescription
drug price inflation;
(2) between 1980 and 1990, prescription drug
price inflation was 3 times the rate of general infla-
tion;
(3) between 1985 and 1991, the prices of the
20 top selling prescription drugs, which account for
almost a third of prescription sales, rose 79 per-
cent—nearly 4 times the general rate of inflation;
(4) prescription drug manufacturers continue to
make enormous profits on the backs of the elderly,
poor, and other vulnerable populations that are un-
able to afford their medications;
(5) 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 3 of 4 elderly patients, sur-
passed only by costs of long-term care services;
(6) individuals over 65 fill an average of 15
prescriptions a year to treat chronic health condi-
tions compared to 5 prescriptions for those under
65;
(7) the Federal Government and American tax-
payer provide substantial subsidies to the pharma-
ceutical industry in the form of tax incentives, tax
write-offs, and grants for non-research activities;
(8) for example, in 1987 alone, the pharma-
ceutical industry received a section 936 tax credit of
more than $1,400,000,000, and such credit is esti-
mated to have yielded over $2,000,000,000 in tax
breaks in 1990 to such industry;
(9) when Congress enacted section 936 in 1976,
it sought to help Puerto Rico obtain employment-
producing investments, however, in 1987 the phar-
maceutical industry received over half of the tax
benefits provided by section 936 but employed less
than 20 percent of the workers;
(10) the Department of the Treasury will lose
$15,000,000,000 in tax revenues during the 1993
through 1997 period due to section 936; and
(11) 17 of the 21 most prescribed drugs in the
United States in 1990 are authorized for Puerto
Rican manufacture.
(b) PURPOSES.—The purposes of this Act are to in-
sure that the elderly, the chronically ill, and all Americans
have access to reasonably-priced pharmaceutical products.
SEC. 3. REDUCTION IN POSSESSIONS TAX CREDIT FOR EX-
CESSIVE PHARMACEUTICAL INFLATION.
(a) IN GENERAL.—Section 936 of the Internal Reve-
nue Code of 1986 (relating to Puerto Rico and possession
tax credit) is amended by adding at the end the following
new subsection:
‘‘(i) REDUCTION FOR EXCESSIVE PHARMACEUTICAL
INFLATION.—
‘‘(1) IN GENERAL.—In the case of any manu-
facturer of single source drugs or innovator multiple
source drugs, the amount by which the credit under
this section for the taxable year (determined without
regard to this subsection) exceeds the manufactur-
er’s wage base for such taxable year shall be reduced
by the product of—
‘‘(A) the amount of such excess, multiplied
by
‘‘(B) the sum of the reduction percentages
for each single source drug or innovator mul-
tiple source drug of the manufacturer for such
taxable year.