PILLS Act
- Bill Number
- H.R. 1396
- Origin Chamber
- House
- Congress
- 119th Congress, Session 1
- Policy Area
- Taxation
- Status
- Introduced
- Latest Action
- 2025-02-14: Referred to the House Committee on Ways and Means.
- Last Updated
- 2025-12-05T22:47:33Z
AI-Generated Summary
Purpose of the Legislation
The PILLS Act (Producing Incentives for Long-term production of Lifesaving Supply of medicine Act), H.R. 1396, aims to encourage the domestic production of generic drugs and biosimilars—affordable alternatives to brand-name medications—by providing tax incentives. This is intended to boost U.S. manufacturing of essential medicines, reduce reliance on foreign suppliers, and improve access to lower-cost drugs for public health needs.
Key Provisions
- Generic Drugs and Biosimilars Production Credit (Section 45BB):
- Offers a tax credit for eligible components (e.g., approved generic drugs, licensed biosimilars, and materials like raw ingredients or packaging used in their production) that are made and sold in the U.S. by the taxpayer to an unrelated buyer.
- Credit amount: Generally 30% of the "value added" (sales revenue minus costs of purchased components), increasing to 35% for final production steps of drugs or biological products. An additional 20% bonus applies based on the percentage of U.S.-sourced materials (domestic content).
- Exclusions: No credit for production at facilities with unresolved FDA warning letters (issued after September 1, 2009) or for taxpayers that are "foreign entities of concern" (e.g., certain Chinese military-linked companies, as defined in existing law).
- Phase-out: Credit reduces gradually starting in 2031 (75% of full amount), reaching 0% after 2033.
- Applies to production after the bill's enactment.
- Generic Drugs and Biosimilars Investment Credit (Section 48F):
- Provides a 25% tax credit on investments in "qualified facilities" (U.S.-based sites primarily for producing eligible components) and related property (e.g., equipment or buildings used in production, but not offices).
- Qualified property must be new or taxpayer-built, with depreciation allowed under tax rules.
- Ends for facilities where construction begins after December 31, 2028; applies to property placed in service after December 31, 2026.
- Additional Features for Both Credits:
- Elective Payment: Taxpayers (including non-profits or governments) can opt to receive direct payments from the IRS instead of using credits to offset taxes.
- Transferability: Credits can be sold or transferred to other taxpayers for cash.
- Definitions: "Generic drug" means FDA-approved equivalents to brand drugs; "biosimilar" means FDA-licensed biological products similar to originals. Production includes all manufacturing steps like mixing, testing, and packaging, all done in the U.S.
- IRS authority to issue rules for implementation, including documentation for domestic content claims.
Significant Changes to Existing Law
- Adds two new sections (45BB and 48F) to the Internal Revenue Code (IRC), modeled after advanced manufacturing credits (e.g., for clean energy under Section 45X).
- Expands elective payment (Section 6417) and credit transfer (Section 6418) rules to include these new credits, allowing broader access beyond traditional corporate taxpayers.
- Introduces exclusions tied to FDA enforcement (warning letters) and national security (foreign entities), which are not standard in most production credits.
- Coordinates with other IRC provisions, like barring double-dipping with rehabilitation or certain energy credits.
Potential Impacts
- On Government Agencies: The IRS will administer new credits, potentially increasing administrative workload and reducing federal tax revenue (exact cost not specified). The FDA's role is indirect, via referenced approvals and warning letters, but could see more facility inspections.
- On Citizens: Could lower drug prices by spurring more U.S.-made generics and biosimilars, improving access to affordable medicines and enhancing supply chain resilience (e.g., during shortages). Benefits public health but may indirectly raise taxes or deficit if revenue losses aren't offset.
- On International Relations: Promotes U.S. self-sufficiency in pharmaceuticals, potentially straining ties with countries like China (via foreign entity exclusions), while encouraging allied domestic production.
Main Stakeholders Affected
- Pharmaceutical Manufacturers: Especially generic and biosimilar producers, who gain incentives for U.S. investments and production; brand-name drug makers may face indirect competition.
- Taxpayers and Investors: Companies or entities investing in facilities can reduce tax liability or receive payments, benefiting shareholders.
- Healthcare Consumers and Providers: Hospitals, pharmacies, and patients could see more stable, cheaper drug supplies.
- U.S. Government: IRS and Treasury for enforcement; broader agencies like HHS/FDA for supply chain oversight.
- Foreign Entities: Excluded companies (e.g., certain Chinese firms) lose eligibility, shifting market dynamics.
Notable Legal, Constitutional, or Political Implications
- Legal: Strengthens tax code incentives for strategic industries without major conflicts; relies on existing FDA definitions for clarity, reducing litigation risk. Phase-out and documentation rules promote accountability but may invite IRS audits.
- Constitutional: Aligns with Congress's taxing and spending powers (Article I); no apparent free speech, due process, or equal protection issues, as incentives are voluntary and neutrally applied (except security-based exclusions).
- Political: Supports "America First" policies on drug supply chains, appealing to national security and affordability concerns. Could spark debate on corporate subsidies versus deficit impact, or trade tensions, but focuses on domestic economic growth without overt partisanship.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Rep. Tenney, Claudia [R-NY-24]
Cosponsors (2)
Rep. Malliotakis, Nicole [R-NY-11], Rep. Steube, W. Gregory [R-FL-17]
Recent Actions
- 2025-02-14: Referred to the House Committee on Ways and Means.
- 2025-02-14: Introduced in House
- 2025-02-14: Introduced in House
Bill Versions
- Producing Incentives for Long-term production of Lifesaving Supply of medicine Act — issued 2025-02-14 — PDF (18 pages)