Prescription Drug Price Monitoring Commission Act of 1998

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 interventions in treating common 
        acute and chronic diseases, many Americans, especially elderly 
        and other vulnerable populations, are unable to afford 
        necessary medications because of excessive and persistent 
        prescription drug price inflation.
            (2) Between 1981 and 1998, the rate of inflation 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-pocket medical care cost for 
        75 percent of elderly patients, surpassed only by costs of 
        long-term care services.
            (4) The Federal Government and the American taxpayer 
        provide substantial subsidies to the pharmaceutical 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 advertising 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 Federal 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 following 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 research priorities.
            (3) A study on drug prices in other industrialized 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 subparagraph (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 manufacturers to 
                price their products fairly in the United States, 
                including a system of compulsory 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 
        recommendations regarding national and international drug 
        policy issues, such as--
                    (A) trends and changes in prices for prescription 
                and nonprescription drugs in the inpatient and 
                outpatient setting in the United States;
                    (B) trends and changes in prices for prescription 
                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 accessibility and affordability 
                of public and private insurance 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 Security 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 assistance programs;
                    (G) evaluation of technologies available for 
                efficient third-party prescription drug program 
                administration, such as electronic claims management 
                and payment technologies;
                    (H) methods of providing reimbursement under 
                Federal health care programs to providers for drug 
                products;
                    (I) evaluation of the use and efficiency of all 
                Federal tax credits and subsidies given to the 
                pharmaceutical industry for various purposes, including 
                the tax credit allowed under section 936 of the 
                Internal Revenue Code of 1986; and
                    (J) evaluation of the effect of direct marketing on 
                price, the volume of sales, and advertising 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 Representatives shall 
        appoint one member.
            (3) The minority leader of the House of Representatives 
        shall appoint one member.
            (4) The majority leader of the Senate shall appoint one 
        member.
            (5) The minority leader of the Senate shall appoint 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 financing 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 advocate for 
                medicare and medicaid recipients.
            (2) Limitation.--No more than 2 individuals who are, or 
        have been, in the full- or part-time employ 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 appointed 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 Schedule 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 section 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 
Commission:
            (1) Subsection (c)(4) (relating to compensation of 
        members).
            (2) Subsection (d) (relating to staffing and 
        administration).
            (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 provide 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 PHARMACEUTICAL 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 industry (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 developing 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 allowable Federal tax 
        credits;
            (D) comparable financial incentives, subsidies, and tax 
        credits provided to the pharmaceutical industry by other 
        industrialized nations and the use of such incentives, 
        subsidies, and credits by such industry;
            (E) the relationship between the total Federal financial 
        support provided to the pharmaceutical industry 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 pharmaceutical 
        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 Secretary 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 REPORTING 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''.

Summary: Prescription Drug Price Monitoring Commission Act of 1998 - Establishes the Prescription Drug Price Monitoring Commission which shall conduct specified studies concerning U.S. pharmaceutical prices, including the establishment of a pharmaceutical products price review board.  Terminates the Commission on a specified date. 
Directs the Secretary of Health and Human Services to study and report on Federal subsidies and incentives provided to the pharmaceutical industry. 
Amends title XIX (Medicaid) of the Social Security Act to require drug manufacturers participating in the Medicaid rebate program to report within a certain time after the end of each calendar year (currently, after each rebate period) on the average price at which the manufacturer sold each covered outpatient drug in Canada, Australia, Mexico, and the European Union countries.