Biopharma industry lobbies for tax breaks related to US-based manufacturing

The business-friendly tax reform enacted in 2017, under the watch of former President Donald Trump, allowed some of the pharma industry’s top companies to slash much of their tax burden.

Six years later, the industry is working to gain another edge, The Financial Times reports. Specifically, the industry is targeting subsidies and tax breaks that could become available with an executive order President Joe Biden signed in September to advance manufacturing innovation in the United States.

The executive order came in response to semiconductor shortages, which exposed flaws in the U.S. manufacturing landscape. At the time, Biden announced that the effort would extend to biotech and biomanufacturing and requested industry input.

In its response to the U.S. Office of Science and Technology Policy (OSTP), PhRMA has asked for a 25% tax credit to compensate for the cost of building new manufacturing facilities and enhancing existing ones in the United States. This same measure is a feature of the recent CHIPS Act, designed to bolster semiconductor manufacturing in the U.S.

PhRMA also is suggesting a reduced tax rate on U.S. manufacturing income generated from producing pharmaceuticals and medical devices in the U.S., according to a document seen by Fierce Pharma.

Additionally, PhRMA is requesting funding to cover loans which would “support increased U.S. investments by vendors and suppliers including those involved in key starting materials.”

Active pharmaceutical ingredients (API) are among the starting materials referenced by PhRMA in its OSTP response. Shortages of key APIs were evident during the pandemic, particularly for generic products.

“Federal investments and increased public-private partnerships can serve a key role in enhancing U.S. manufacturing infrastructure and increasing U.S. competitiveness,” PhRMA wrote to the OSTP.

Tax reforms enacted during the Trump administration benefited companies that took advantage of offshoring loopholes. For example, while AbbVie made more than 75% of its sales in the United States in 2020, it recorded only 1% of its taxable income in the U.S.

That piece of information came from a Senate Finance Committee report, authored by Democrats, which zeroed in on AbbVie’s strategy. After facing years of scrutiny around patents on blockbuster immunology drug Humira, AbbVie's tax setup has become the target of increased lawmaker attention lately.

Since the start of the pandemic, meanwhile, officials and industry stakeholders have placed more emphasis on domestic drug manufacturing. Before September's executive order, for example, President Biden in June 2021 unveiled a plan to bolster U.S. drug production.