The PILLS Act creates two new federal tax credits designed to boost domestic production of generic drugs and biosimilars. The first credit provides a 30 percent tax break on the value that manufacturers add to generic drugs and biosimilars produced in the United States, with an increased 35 percent rate for final drug substances and products, plus an additional bonus of up to 20 percent for using domestically sourced materials. The second credit offers a 25 percent investment tax credit for companies that build or upgrade facilities specifically for producing these medications, applicable to property placed in service after December 31, 2025, with construction beginning by December 31, 2027. These credits are available only to manufacturers that are not foreign entities of concern and apply to drugs approved under federal regulations, with both credits phasing out after 2029 and completely ending by 2033. The legislation aims to incentivize American pharmaceutical companies to manufacture affordable generic and biosimilar medications domestically rather than relying on foreign production.
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