ommendation to the Secretary of Health and 
Human Services that such drug be exempted 
from application of the tax imposed under sec-
tion 4192 of the Internal Revenue Code of 1986 
(as added by section 3 of this Act) for such 
year. 
(2) ELEMENTS.—The assessment required by 
paragraph (1)(A) shall include the following: 
(A) Identification of each price spike relat-
ing to a prescription drug in the preceding cal-
endar year. 
(B) For each price spike identified under 
subparagraph (A)— 
(i) a determination of the price spike 
revenue; 
(ii) a determination regarding the ac-
curacy of the information submitted by the 
applicable entity regarding increased input 
costs; and 
(iii) an assessment of the rationale of 
the applicable entity for the price spike. 
(d) EXEMPTION OF CERTAIN DRUGS.— 
(1) IN GENERAL.—The Secretary of Health and 
Human Services, upon recommendation of the In-
spector General pursuant to subsection (c)(1)(B), 
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may exempt any prescription drug which has been 
subject to a price spike during the preceding cal-
endar year from application of the tax imposed 
under section 4192 of the Internal Revenue Code of 
1986 for such year, if the Secretary determines 
that— 
(A) based on information submitted pursu-
ant to subsection (b)(1)(B), a for-cause price 
increase exemption should apply; or 
(B)(i) the prescription drug which has 
been subject to a price spike has an average 
manufacturer price of not greater than $10 for 
a 30 day supply; and 
(ii) such drug is marketed by not less than 
3 other holders of applications approved under 
subsection (c) or (j) of section 505 of the Fed-
eral Food, Drug, and Cosmetic Act (21 U.S.C. 
355), where such applications approved under 
such subsection (j) use as a reference drug the 
drug so approved under such subsection (c). 
(2) CLARIFICATION.—In considering, under 
paragraph (1)(A), information submitted pursuant 
to subsection (b)(1)(B), the Secretary— 
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(A) has the discretion to determine that 
such information does not warrant a for-cause 
price increase exemption; and 
(B) shall exclude from such consideration 
any information submitted by the applicable en-
tity threatening to curtail or limit production of 
the prescription drug if the Secretary does not 
grant an exemption from the application of the 
tax under section 4192 of the Internal Revenue 
Code of 1986. 
(e) INSPECTOR GENERAL REPORT
TO INTERNAL 
REVENUE SERVICE.— 
(1) IN GENERAL.—Subject to paragraph (3), 
not later than the last day in February of each year, 
the Inspector General shall transmit to the Internal 
Revenue Service a report on the findings of the In-
spector General with respect to the information the 
Inspector General received under subsection (b)(1) 
with respect to the preceding calendar year and the 
assessment carried out by the Inspector General 
under subsection (c)(1)(A) with respect to such in-
formation. 
(2) CONTENTS.—The report transmitted under 
paragraph (1) shall include the following: 
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(A) The information received under sub-
section (b)(1) with respect to the preceding cal-
endar year. 
(B) The price spikes identified under sub-
paragraph (A) of subsection (c)(2). 
(C) The price spike revenue determinations 
made under subparagraph (B)(i) of such sub-
section. 
(D) The determinations and assessments 
made under clauses (ii) and (iii) of subpara-
graph (B) of such subsection. 
(3) NOTICE
AND
OPPORTUNITY
FOR
HEAR-
ING.— 
(A) IN
GENERAL.—No report shall be 
transmitted to the Internal Revenue Service 
under paragraph (1) in regards to a prescrip-
tion drug unless the Inspector General has pro-
vided the applicable entity with— 
(i) the assessment of such drug under 
subsection (c)(1)(A); and 
(ii) notice of their right to a hearing 
in regards to such assessment. 
(B) NOTICE.—The notice required under 
subparagraph (A) shall be provided to the ap-
plicable entity not later than 30 days after com-
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pletion of the assessment under subsection 
(c)(1)(A). 
(C) REQUEST FOR HEARING.—Subject to 
subparagraph (E), an applicable entity may re-
quest a hearing before the Secretary of Health 
and Human Services not later than 30 days 
after the date on which the notice under sub-
paragraph (B) is received. 
(D) COMPLETION
OF
HEARING.—In the 
case of an applicable entity which requests a 
hearing pursuant to subparagraph (C), the Sec-
retary of Health and Human Services shall, not 
later than 12 months after the date on which 
the assessment under subsection (c)(1)(A) was 
completed by the Inspector General— 
(i) make a final determination in re-
gards the accuracy of such assessment; 
and 
(ii) provide the report described in 
paragraph (2) to the Internal Revenue 
Service. 
(E) LIMITATION.—An applicable entity 
may request a hearing under subparagraph (C) 
with respect to a particular prescription drug 
only once within a 5-year period. 
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(4) PUBLICATION.— 
(A) IN GENERAL.—Not later than the last 
day in February of each year, subject to sub-
paragraph (B), the Inspector General shall 
make the report transmitted under paragraph 
(1) available to the public, including on the 
Internet website of the Inspector General, sub-
ject to subparagraph (B). 
(B) 
PROPRIETARY
INFORMATION.—The 
Inspector General shall ensure that any infor-
mation made public in accordance with sub-
paragraph (A) excludes trade secrets and con-
fidential commercial information. 
(f) NOTIFICATION.—The Secretary of the Treasury, 
in conjunction with the Inspector General, shall notify, at 
such time and in such manner as the Secretary of the 
Treasury shall provide, each applicable entity in regard 
to any prescription drug which has been determined to 
have been subject to a price spike during the preceding 
calendar year and the amount of the tax imposed on such 
applicable entity pursuant to section 4192 of the Internal 
Revenue Code of 1986. 
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SEC. 3. EXCISE TAX ON PRESCRIPTION DRUGS SUBJECT TO 
PRICE SPIKES. 
(a) IN GENERAL.—Subchapter E of chapter 32 of the 
Internal Revenue Code of 1986 is amended by adding at 
the end the following new section: 
‘‘SEC. 4192. PRESCRIPTION DRUGS SUBJECT TO PRICE 
SPIKES. 
‘‘(a) IMPOSITION OF TAX.— 
‘‘(1) IN GENERAL.—Subject to paragraph (3), 
for each taxable prescription drug sold by an appli-
cable entity during the calendar year, there is hereby 
imposed on such entity a tax equal to the greater 
of— 
‘‘(A) the annual price spike tax for such 
prescription drug, or 
‘‘(B) subject to paragraph (2), the cumu-
lative price spike tax for such prescription drug. 
‘‘(2) LIMITATION.—In the case of a taxable 
prescription drug for which the applicable period (as 
determined under subsection (c)(2)(E)(i)) is less 
than 2 calendar years, the cumulative price spike tax 
shall not apply. 
‘‘(3) EXEMPTION.—For any calendar year in 
which the Secretary of Health and Human Services 
has provided an exemption for a taxable prescription 
drug pursuant to section 2(d) of the Stop Price 
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Gouging Act, the amount of the tax determined 
under paragraph (1) for such drug or device for 
such calendar year shall be reduced to zero. 
‘‘(b) ANNUAL PRICE SPIKE TAX.— 
‘‘(1) IN GENERAL.—The amount of the annual 
price spike tax shall be equal to the applicable per-
centage of the price spike revenue received by the 
applicable entity on the sale of the taxable prescrip-
tion drug during the calendar year. 
‘‘(2) APPLICABLE PERCENTAGE.—For purposes 
of paragraph (1), the applicable percentage shall be 
equal to— 
‘‘(A) in the case of a taxable prescription 
drug which has been subject to a price spike 
percentage greater than the applicable price in-
crease 
allowance 
(as 
defined 
in 
section 
2(a)(6)(C) of the Stop Price Gouging Act) but 
less than 15 percent, 50 percent, 
‘‘(B) in the case of a taxable prescription 
drug which has been subject to a price spike 
percentage equal to or greater than 15 percent 
but less than 20 percent, 75 percent, and 
‘‘(C) in the case of a taxable prescription 
drug which has been subject to a price spike 
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percentage equal to or greater than 20 percent, 
100 percent. 
‘‘(c) CUMULATIVE PRICE SPIKE TAX.— 
‘‘(1) IN GENERAL.—The amount of the cumu-
lative price spike tax shall be equal to the applicable 
percentage of the cumulative price spike revenue re-
ceived by the applicable entity on the sale of the tax-
able prescription drug during the calendar year. 
‘‘(2) APPLICABLE PERCENTAGE.— 
‘‘(A) IN GENERAL.—For purposes of para-
graph (1), the applicable percentage shall be 
equal to— 
‘‘(i) in the case of a taxable prescrip-
tion drug which has been subject to a cu-
mulative price spike percentage greater 
than the cumulative price increase allow-
ance but less than the first multi-year per-
centage, 50 percent, 
‘‘(ii) in the case of a taxable prescrip-
tion drug which has been subject to a cu-
mulative price spike percentage equal to or 
greater than the first multi-year percent-
age but less than the second multi-year 
percentage, 75 percent, and 
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‘‘(iii) in the case of a taxable prescrip-
tion drug which has been subject to a cu-
mulative price spike percentage equal to or 
greater than the second multi-year percent-
age, 100 percent. 
‘‘(B) CUMULATIVE PRICE SPIKE PERCENT-
AGE.—The cumulative price spike percentage is 
the percentage (if any) by which— 
‘‘(i) the average manufacturer price of 
the taxable prescription drug in commerce 
for the preceding calendar year, exceeds 
‘‘(ii) the average manufacturer price 
of such prescription drug in commerce for 
the base year. 
‘‘(C) CUMULATIVE
PRICE
INCREASE
AL-
LOWANCE.—For purposes of clause (i) of sub-
paragraph (A), the cumulative price increase al-
lowance for any calendar year is the percentage 
(rounded to the nearest one-tenth of 1 percent) 
by which the C–CPI–U (as defined in section 
1(f)(6)) for that year exceeds the C–CPI–U for 
the base year. 
‘‘(D) MULTI-YEAR
PERCENTAGES.—For 
purposes of subparagraph (A), the first multi- 
year percentage and second multi-year percent-
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age shall be determined in accordance with the 
following table: 
‘‘Number of years in applicable period 
First multi- 
year per-
centage 
Second 
multi-year 
percentage 
2 years ....................................................................
17.5 
22.5
3 years ....................................................................
4 years ....................................................................
22.5 
27.5
5 years ....................................................................
30. 
‘‘(E) APPLICABLE
PERIOD
AND
BASE 
YEAR.— 
‘‘(i) APPLICABLE PERIOD.—The appli-
cable period shall be the lesser of— 
‘‘(I) the 5 preceding calendar 
years, 
‘‘(II) all calendar years beginning 
after the date of enactment of this 
section, or 
‘‘(III) all calendar years in which 
the taxable prescription drug was sold 
in commerce. 
‘‘(ii) BASE
YEAR.—The base year 
shall be the calendar year immediately pre-
ceding the applicable period. 
‘‘(3) CUMULATIVE
PRICE
SPIKE
REVENUE.— 
For purposes of paragraph (1), the cumulative price 
spike revenue for any taxable prescription drug shall 
be an amount equal to— 
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‘‘(A) an amount equal to the product of— 
‘‘(i) an amount (not less than zero) 
equal to— 
‘‘(I) the average manufacturer 
price of such prescription drug in 
commerce for the preceding calendar 
year, minus 
‘‘(II) the average manufacturer 
price of such prescription drug in 
commerce for the base year, and 
‘‘(ii) the total number of units of such 
prescription drug which were sold in com-
merce in the preceding calendar year, 
minus 
‘‘(B) an amount equal to the sum of the 
adjustment amounts, if any, determined under 
section 2(a)(7)(C) of the Stop Price Gouging 
Act for each calendar year during the applicable 
period. 
‘‘(d) DEFINITIONS.—For purposes of this section— 
‘‘(1) 
TAXABLE
PRESCRIPTION
DRUG.—The 
term ‘taxable prescription drug’ means a prescrip-
tion drug (as defined in section 2(a)(5) of the Stop 
Price Gouging Act) which has been identified by the 
Inspector General of the Department of Health and 
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Human Services, under section 2(c)(2)(A) of such 
Act, as being subject to a price spike. 
‘‘(2) OTHER TERMS.—The terms ‘applicable en-
tity’, ‘average manufacturer price’, ‘price spike’, 
‘price spike percentage’, and ‘price spike revenue’ 
have the same meaning given such terms under sec-
tion 2(a) of the Stop Price Gouging Act.’’. 
(b) CLERICAL AMENDMENTS.— 
(1) The heading of subchapter E of chapter 32 
of the Internal Revenue Code of 1986 is amended by 
striking ‘‘Medical Devices’’ and inserting ‘‘Cer-
tain Medical Devices and Prescription 
Drugs’’. 
(2) The table of subchapters for chapter 32 of 
such Code is amended by striking the item relating 
to subchapter E and inserting the following new 
item: 
‘‘SUBCHAPTER E. CERTAIN MEDICAL DEVICES AND PRESCRIPTION DRUGS’’. 
(3) The table of sections for subchapter E of 
chapter 32 of such Code is amended by adding at 
the end the following new item: 
‘‘Sec. 4192. Prescription drugs subject to price spikes.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to sales after the date of the enact-
ment of this Act. 
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SEC. 4. STUDY ON MONOPOLY MEDICAL PRODUCTS. 
(a) IN GENERAL.—The Comptroller General of the 
United States shall conduct a study that examines— 
(1) how drug manufacturers and health plans 
(including private insurers, the Medicare program, 
and State Medicaid programs) establish initial 
launch prices for newly approved drugs; and 
(2) alternative methods that have been pro-
posed for setting the price of new drugs. 
(b) STUDY OF SPECIFIC DRUGS.—As part of the 
study described in subsection (a), the Comptroller General 
shall examine drug pricing with respect to several drugs 
approved within the 5-year period immediately preceding 
the date of enactment of this Act and explore potential 
alternative approaches to establish new drug prices that 
could help make new drugs more affordable, better reflect 
the clinical value of such drugs in treating patients, and 
maintain incentives for innovation. 
(c) FACTORS.—In conducting the study described in 
subsection (a), the Comptroller General shall consider— 
(1) what factors drug manufacturers and health 
plans consider in establishing initial launch prices; 
(2) how initial pricing decisions by drug manu-
facturers and health plans affect costs and use of 
services for patients and public programs such as 
the Medicare and Medicaid programs; 
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(3) efforts by health plans to limit costs, includ-
ing through benefit design or coverage limitations; 
(4) how prices change in the first few years fol-
lowing a new drug’s launch; and 
(5) recommendations manufacturers, health 
plans, and other experts have for alternative ap-
proaches to establishing new drug prices and the 
benefits and challenges associated with such alter-
native approaches. 
SEC. 5. REVENUES COLLECTED. 
There are authorized to be appropriated to the Sec-
retary of Health and Human Services such sums as are 
equal to any increase in revenue to the Treasury by reason 
of the provisions of this Act or the amendments made by 
this Act for the purposes of increasing amounts available 
to the National Institutes of Health for research and de-
velopment of drugs. 
Æ 
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