I 118th CONGRESS 1st Session H. R. 405 IN THE HOUSE OF REPRESENTATIVES January 20, 2023 Mr. Carter of Georgia (for himself and Ms. Blunt Rochester ) introduced the following bill; which was referred to the Committee on Energy and Commerce A BILL To amend the Public Health Service Act to provide for stockpiles to ensure that all Americans have access to generic drugs at risk of shortage, and for other purposes.

1. Short title This Act may be cited as the Essential Medicines Strategic Stockpile Act of 2023 . 2. Pilot program on ensuring medication supply stability Part D of title III of the Public Health Service Act ( 42 U.S.C. 254b et seq. ) is amended by adding at the end the following new subpart: XIII Ensuring Medication Supply Stability 340J. Ensuring medication supply stability (a) Award of contracts Beginning not later than January 1, 2024, the Secretary shall award contracts to eligible entities to each implement and test the effectiveness of acquiring, maintaining, managing, and distributing a stockpile that— (1) consists of generic drugs at risk of shortage; and (2) is of sufficient quantity to ensure that customers in the United States have access to such drugs for at least 6 months (as specified by the Secretary based on the historic demand for those drugs). (b) Selection of drugs (1) In general The Secretary shall— (A) select not more than 50 drugs that may be included by eligible entities in a stockpile pursuant to a contract under this section; (B) maintain an up-to-date list of such drugs; and (C) make such list publicly available. (2) Choice of eligible entities A contract awarded to an eligible entity under this section need not require the stockpile of the eligible entity to include all 50 drugs listed pursuant to paragraph (1). (c) Sufficient quantity For each generic drug listed pursuant to subsection (b)(1), the Secretary shall specify the quantity of such drug that is sufficient to ensure that consumers in the United States have access to such drug for at least 6 months. (d) Duration; liquidation of inventory (1) Duration A contract awarded under this section shall be for a term of no more than 3 years. (2) Liquidation of inventory A drug held in a stockpile pursuant to a contract under this section may be liquidated by the eligible entity at the end of the period of the contract. (e) Stockpile requirements (1) Ensuring availability of unexpired products Each eligible entity with a contract under this section for a stockpile of generic drugs at risk of shortage shall— (A) ensure that each drug maintained in the stockpile has an expiration date at least 1 year beyond the current date; and (B) to comply with subparagraph (A)— (i) sell drugs in the stockpile through normal commercial channels and replace those drugs; or (ii) if there is no commercial market for a drug in the stockpile, dispose of the drug and report such disposal to the Secretary. (2) Management of stockpile (A) In general The Secretary shall ensure that— (i) collectively, the eligible entities with contracts under this section for a stockpile of generic drugs at risk of shortage acquire, not later than 6 months following the date set in such contracts, and maintain thereafter, a 6-month supply of such drugs; and (ii) the 6-month supply required by clause (i) is in addition to the average levels of inventory held by eligible entities over the previous year for the respective drugs. (B) Inventory management Each eligible entity with a contract under this section for a stockpile of generic drugs at risk of shortage shall manage inventory to ensure that drugs in the stockpile are efficiently cycled to the commercial market. (C) Annual audits Not more than annually, the Secretary may request a physical audit count of the inventories of all eligible entities with a contract under this section to validate that each such entity is maintaining the appropriate amount of stockpiled inventory. (3) Reporting Each eligible entity with a contract under this section shall submit reports at such time and in such manner as the Secretary may require regarding— (A) current inventory levels of stockpiled drugs at a drug level; (B) indicators of current inventory levels of stockpiled drugs relative to acceptable minimums; and (C) such other matters as the Secretary determines appropriate. (f) Contract terms (1) Payment of monthly fees for management Subject to paragraph (2), the Secretary shall pay to each eligible entity with a contract under this section for a stockpile of generic drugs at risk of shortage appropriate monthly fees for the management of the stockpile. (2) Payment conditioned on stockpile adequacy (A) In general Except as provided in subparagraph (B), each contract with an eligible entity under this section shall provide that no payment under the contract may be made until the entity demonstrates to the Secretary that the entity has stockpiled such portion of the total quantity of drugs to be stockpiled under the contract as the Secretary determines to be acceptable for payment. (B) Exceptions for advance payments (i) In general A contract under this section may provide that, if the Secretary determines (in the Secretary’s discretion) that an advance payment, partial payment for significant milestones, or payment to increase capacity is necessary to ensure success of the terms of the contract, the Secretary shall pay, in advance of delivery, an amount not to exceed 10 percent of the total contract amount to be paid to the eligible entity by the Secretary pursuant to the contract over the full period of the contract. (ii) Cost of capital A contract under this section may provide for payments to compensate the contracting eligible entity for additional capital requirements related to the additional inventory to be maintained. (iii) Timing The Secretary shall, to the extent practicable, make any determination under clause (i) to make an advance payment at the same time as the issuance of a solicitation. (iv) Repayment If the Secretary makes an advance payment pursuant to clause (i), the Secretary shall require the eligible entity receiving such advance payment to repay it if there is a failure to perform by the eligible entity. (3) Termination Nothing in this section shall be construed as affecting the rights of eligible entities under provisions of statute or regulation (including the Federal Acquisition Regulation) relating to the termination of contracts for the convenience of the Government. (g) Congressional oversight (1) Independent evaluation and report Not later than 1 year after the date of enactment of this section and annually thereafter, the Comptroller General of the United States shall conduct an independent evaluation, and submit to the appropriate congressional committees a report, concerning the program under this section. (2) Contents of report The report under paragraph (1) shall review, assess, and provide recommendations, as appropriate, on the following: (A) Details on likely costs and resultant savings as compared to a stockpiling method that does not incorporate perpetual inventory cycling. (B) Identification of drawdowns from the stockpile, as evidence of market shortage avoidance. (C) The allocation of drugs included in the stockpiles funded pursuant to this section to the customers of the eligible entities with contracts under this section. (D) The degree to which eligible entities with contracts under this section fulfilled their obligations under such contracts. (h) Definitions In this section: (1) The term eligible entity means an entity that meets each of the following criteria: (A) The entity is licensed or registered in accordance with applicable Federal and State law and in good standing with respect to such licensure or registration. (B) If the entity is not a manufacturer, the entity agrees— (i) to purchase all drugs to be maintained in its stockpile funded under this section directly from the manufacturers of the drugs or the exclusive distributors of such manufacturers; or (ii) in the case of an entity that is a co-op or chain pharmacy warehouse— (I) to purchase drugs to be maintained in its stockpile funded under this section from an authorized distributor; and (II) distribute those drugs only to its member pharmacies. (C) The entity sells more than 90 percent of its drugs to dispensers. (D) The entity agrees to distribute inventory from its stockpile funded under this section only to wholesale distributors or dispensers that are customers of the entity. (2) The term generic drug at risk of shortage means a drug (as defined in section 201 of the Federal Food, Drug, and Cosmetic Act) that— (A) is approved pursuant to section 505(j) of such Act; (B) is included in the list of essential medicines published by the Food and Drug Administration; (C) is included, at any point during the preceding 36 months, on the drug shortage list in effect under section 506E of the Federal Food, Drug, and Cosmetic Act; and (D) is manufactured by 3 or fewer persons that are registered under section 510 of the Federal Food, Drug, and Cosmetic Act for purposes of such manufacture. (i) Authorization of appropriations To carry out this section, there is authorized to be appropriated $120,000,000 for fiscal years 2024 through 2026, to remain available until expended. .