S. 2004 - Emergency Access to Insulin Act of 2019

SEC. 4. IDENTIFICATION OF INSULIN PRICE SPIKES; APPLICATION OF EXCISE TAX.

(a) DEFINITIONS. — In this section:

(1) APPLICABLE ENTITY. — The term "applicable entity" means the holder of an application approved under subsection (c) or (j) of section 505 of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355), or of a license issued under subsection (a) or (k) of section 351 of the Public Health Service Act (42 U.S.C. 262), for an insulin product.

(2) COMMERCE. — The term "commerce" has the meaning given such term in section 4 of the Federal Trade Commission Act (15 U.S.C. 44).

(3) INSPECTOR GENERAL. — The term "Inspector General" means the Inspector General of the Department of Health and Human Services.

(4) PRICE SPIKE. —

(A) IN GENERAL. — The term "price spike" means an increase in the wholesale acquisition cost in commerce of an insulin product for which the price spike percentage is equal to or greater than the applicable price increase allowance.

(B) PRICE SPIKE PERCENTAGE. — The price spike percentage is the percentage (if any) by which —

(i) the wholesale acquisition cost of an insulin product in commerce for the calendar year; exceeds

(ii) the wholesale acquisition cost of such insulin product in commerce for the calendar year preceding such year.

(C) APPLICABLE PRICE INCREASE ALLOWANCE. — The applicable price increase allowance 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) of the Internal Revenue Code of 1986) for that year exceeds the C–CPI–U for the preceding calendar year.

(5) PRICE SPIKE REVENUE. —

(A) IN GENERAL. — The price spike revenue for any calendar year is an amount equal to —

(i) the gross price spike revenue, minus

(ii) the adjustment amount.

(B) GROSS PRICE SPIKE REVENUE. — The gross price spike revenue for any calendar year is an amount equal to the product of —

(i) an amount equal to the difference between clause (i) of paragraph (4)(B) and clause (ii) of such paragraph; and

(ii) the total number of units of the insulin product which were sold in commerce in such calendar year.

(C) ADJUSTMENT AMOUNT. — The adjustment amount is the amount, if any, of the gross price spike revenue which the Inspector General has determined is due solely to an increase in the cost of the inputs necessary to manufacture the insulin product subject to the price spike.

(b) SUBMISSION BY PHARMACEUTICAL COMPANIES OF INFORMATION TO INSPECTOR GENERAL. —

(1) IN GENERAL. — For each insulin product, the applicable entity shall submit to the Inspector General a quarterly report that includes the following:

(A) For each insulin product of the applicable entity —

(i) the total number of units of the insulin product which were sold in commerce in the preceding calendar quarter;

(ii) the average and median wholesale acquisition cost per unit of such insulin product in commerce in the preceding calendar quarter, disaggregated by month; and

(iii) the gross revenues from sales of such insulin product in commerce in the preceding calendar quarter.

(B) Such information related to increased input costs or public health considerations as the applicable entity may wish the Inspector General to consider in making a determination under clause (ii) of subsection (c)(2)(B) or an assessment in clause (iii) of such subsection for the preceding calendar quarter.

(C) Such information related to any anticipated increased input costs for the subsequent calendar quarter as the applicable entity may wish the Inspector General to consider in making a determination under clause (ii) of subsection (c)(2)(B) or an assessment in clause (iii) of such subsection for such calendar quarter.

(2) PENALTY FOR FAILURE TO SUBMIT. —

(A) IN GENERAL. — An applicable entity described in paragraph (1) that fails to submit information to the Inspector General regarding an insulin product, as required by such paragraph, before the date specified in paragraph (3) shall be liable for a civil penalty, as determined under subparagraph (B).

(B) AMOUNT OF PENALTY. — The amount of the civil penalty shall be equal to the product of —

(i) an amount, as determined appropriate by the Inspector General, which is —

(I) not less than 0.5 percent of the gross revenues from sales of the insulin product described in subparagraph (A) for the preceding calendar year; and

(II) not greater than 1 percent of the gross revenues from sales of such insulin product for the preceding calendar year; and

(ii) the number of days in the period between —

(I) the applicable date specified in paragraph (3); and

(II) the date on which the Inspector General receives the information described in paragraph (1) from the applicable entity.

(3) SUBMISSION DEADLINE. — An applicable entity shall submit each quarterly report described in paragraph (1) not later than January 17, April 18, June 15, and September 15 of each calendar year.

(c) ASSESSMENT BY INSPECTOR GENERAL. —

(1) IN GENERAL. — Not later than the last day in February of each year, the Inspector General, in consultation with other relevant Federal agencies (including the Federal Trade Commission), shall —

(A) complete an assessment of the information the Inspector General received pursuant to subsection (b)(1) with respect to sales of insulin products in the preceding calendar year; and

(B) in the case of any insulin product which satisfies the conditions described in paragraph (1) or (2) of subsection (d), submit a recommendation to the Secretary of Health and Human Services that such insulin product be exempted from application of the tax imposed under section 4192 of the Internal Revenue Code of 1986 (as added by subsection (g)) for such year.

(2) ELEMENTS. — The assessment required by paragraph (1)(A) shall include the following:

(A) Identification of each price spike relating to an insulin product in the preceding calendar year.

(B) For each price spike identified under subparagraph (A) —

(i) a determination of the price spike revenue;

(ii) a determination regarding the accuracy 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 INSULIN PRODUCTS. —

(1) IN GENERAL. — The Secretary of Health and Human Services, upon recommendation of the Inspector General pursuant to subsection (c)(1)(B), may exempt any insulin product which has been subject to a price spike during the preceding calendar 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, based on information submitted pursuant to subsection (b)(1)(B), a for-cause price increase exemption should apply.

(2) CLARIFICATION. — In considering, under paragraph (1)(A), information submitted pursuant to subsection (b)(1)(B), the Secretary —

(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 entity threatening to curtail or limit production of the insulin product 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) REPORTS BY INSPECTOR GENERAL. —

(1) PUBLIC REPORT. —

(A) IN GENERAL. — Not later than the last day in February of each year, subject to subparagraph (C), the Inspector General shall issue a report containing the information described in subparagraph (B) to be made available to the public, including on the Internet website of the Inspector General.

(B) CONTENTS. — The report issued under subparagraph (A) shall include the following:

(i) The information received under subsection (b)(1) with respect to the preceding calendar year.

(ii) The price spikes identified under subparagraph (A) of subsection (c)(2).

(iii) The price spike revenue determinations made under subparagraph (B)(i) of such subsection.

(iv) The determinations and assessments made under clauses (ii) and (iii) of subparagraph (B) of such subsection.

(C) PROPRIETARY INFORMATION. — The Inspector General shall ensure that any information made public in accordance with subparagraph (A) excludes trade secrets and confidential commercial information.

(2) REPORT TO INTERNAL REVENUE SERVICE. —

(A) IN GENERAL. — Subject to subparagraph (C), 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 Inspector 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 information.

(B) CONTENTS. — The report transmitted under subparagraph (A) shall include the information described in paragraph (1)(B).

(C) NOTICE AND OPPORTUNITY FOR HEARING. —

(i) IN GENERAL. — No report shall be transmitted to the Internal Revenue Service under subparagraph (A) with respect to an insulin product unless the Inspector General has provided the applicable entity with —

(I) the assessment of such insulin product under subsection (c)(1)(A); and

(II) notice of their right to a hearing in regards to such assessment.

(ii) NOTICE. — The notice required under clause (i) shall be provided to the applicable entity not later than 30 days after completion of the assessment under subsection (c)(1)(A).

(iii) REQUEST FOR HEARING. — Subject to clause (v), an applicable entity may request a hearing before the Secretary of Health and Human Services not later than 30 days after the date on which the notice under clause (ii) is received.

(iv) COMPLETION OF HEARING. — In the case of an applicable entity which requests a hearing pursuant to clause (iii), the Secretary 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 regards to the accuracy of such assessment; and

(II) provide the report described in subparagraph (B) to the Internal Revenue Service.

(v) LIMITATION. — An applicable entity may request a hearing under clause (iii) with respect to a particular insulin product only once within a 5-year period.

(f) NOTIFICATION. — The Secretary of the Treasury shall notify, at such time and in such manner as the Secretary of the Treasury shall provide, each applicable entity in regard to any insulin product 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.

(g) EXCISE TAX ON INSULIN PRODUCTS SUBJECT TO PRICE SPIKES. —

(1) 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. INSULIN PRODUCTS SUBJECT TO PRICE SPIKES.

"(a) IMPOSITION OF TAX. —

"(1) IN GENERAL. — Subject to paragraph (3), for each taxable insulin product sold by an applicable 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 insulin product, or

"(B) subject to paragraph (2), the cumulative price spike tax for such insulin product.

"(2) LIMITATION. — In the case of a taxable insulin product 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 insulin product pursuant to section 4(d) of the Emergency Access to Insulin Act of 2019, the amount of the tax determined under paragraph (1) for such insulin product 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 percentage of the price spike revenue received by the applicable entity on the sale of the taxable insulin product 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 insulin product which has been subject to a price spike percentage greater than the applicable price increase allowance (as defined in section 4(a)(4)(C) of the Emergency Access to Insulin Act of 2019) but less than 15 percent, 50 percent,

"(B) in the case of a taxable insulin product 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 insulin product which has been subject to a price spike percentage equal to or greater than 20 percent, 100 percent.

"(c) CUMULATIVE PRICE SPIKE TAX. —

"(1) IN GENERAL. — The amount of the cumulative price spike tax shall be equal to the applicable percentage of the cumulative price spike revenue received by the applicable entity on the sale of the taxable insulin product during the calendar year.

"(2) APPLICABLE PERCENTAGE. —

"(A) IN GENERAL. — For purposes of paragraph (1), the applicable percentage shall be equal to —

"(i) in the case of a taxable insulin product which has been subject to a cumulative price spike percentage greater than the cumulative price increase allowance but less than the first multi-year percentage, 50 percent,

"(ii) in the case of a taxable insulin product which has been subject to a cumulative price spike percentage equal to or greater than the first multi-year percentage but less than the second multi-year percentage, 75 percent, and

"(iii) in the case of a taxable insulin product which has been subject to a cumulative price spike percentage equal to or greater than the second multi-year percentage, 100 percent.

"(B) CUMULATIVE PRICE SPIKE PERCENTAGE. — The cumulative price spike percentage is the percentage (if any) by which —

"(i) the wholesale acquisition cost of the taxable insulin product in commerce for the preceding calendar year, exceeds

"(ii) the wholesale acquisition cost of such insulin product in commerce for the base year.

"(C) CUMULATIVE PRICE INCREASE ALLOWANCE. — For purposes of clause (i) of subparagraph (A), the cumulative price increase allowance 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 multiyear percentage and second multi-year percentage shall be determined in accordance with the following table:

"Number of years in applicable period	First multi-year percentage	Second multi-year percentage
2 years	17.5	22.5
3 years	20.0	25.0
4 years	22.5	27.5
5 years	25.0	30.0.

"(E) APPLICABLE PERIOD AND BASE YEAR. —

"(i) APPLICABLE PERIOD. — The applicable 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 insulin product was sold in commerce.

"(ii) BASE YEAR. — The base year shall be the calendar year immediately preceding the applicable period.

"(3) CUMULATIVE PRICE SPIKE REVENUE. — For purposes of paragraph (1), the cumulative price spike revenue for any taxable insulin product shall be an amount equal to —

"(A) an amount equal to the product of —

"(i) an amount (not less than zero) equal to —

"(I) the wholesale acquisition cost of such insulin product in commerce for the preceding calendar year, minus

"(II) the wholesale acquisition cost of such insulin product in commerce for the base year, and

"(ii) the total number of units of such insulin product which were sold in commerce in the preceding calendar year, minus

"(B) an amount equal to the sum of the adjustment amounts, if any, determined under section 4(a)(5)(C) of the Emergency Access to Insulin Act of 2019 for each calendar year during the applicable period.

"(d) DEFINITIONS. — For purposes of this section —

"(1) TAXABLE INSULIN PRODUCT. — The term 'taxable insulin product' means an insulin product which has been identified by the Inspector General of the Department of Health and Human Services, under section 4(c)(2)(A) of the Emergency Access to Insulin Act of 2019, as being subject to a price spike.

"(2) OTHER TERMS. — The terms 'applicable entity', 'price spike', 'price spike percentage', and 'price spike revenue' have the same meaning given such terms under section 4(a) of the Emergency Access to Insulin Act of 2019.".

(2) CLERICAL AMENDMENTS. —

(A) The heading of subchapter E of chapter 32 of the Internal Revenue Code of 1986 is amended by striking "Medical Devices" and inserting "Certain Medical Devices and Insulin Products".

(B) 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:

(C) 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. Insulin products subject to price spikes.".

(3) EFFECTIVE DATE. — The amendments made by this subsection shall apply to sales after the date of the enactment of this Act.

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