The PILLS Act creates two new tax credits to incentivize domestic production of generic drugs and biosimilar medications. The first credit provides a 30 percent tax credit on the value added during production of eligible generic drugs and biosimilars, with a higher 35 percent rate for final drug manufacturing, 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 manufacturing facilities for generic drugs and biosimilars in the United States, applicable to property placed in service after December 31, 2026. Both credits exclude foreign entities of concern and facilities with unresolved Food and Drug Administration warning letters. The production credit begins immediately upon enactment and phases out gradually between 2031 and 2034, while the investment credit expires for projects beginning after December 31, 2028, creating time-limited incentives to boost American pharmaceutical manufacturing capacity.
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