PILLS Act

This bill creates two new tax credits to encourage the production of generic drugs and biosimilars in the United States. It amends the Internal Revenue Code to establish a production credit for manufacturers and an investment credit for building or upgrading facilities.

Sec. 2, Generic drugs and biosimilars production credit: This section creates a new tax credit for taxpayers who produce eligible components (approved generic drugs, licensed biosimilars, and related materials) in the United States and sell them to an unrelated person. The credit amount is based on the value added by the taxpayer multiplied by a base credit percentage, which is generally 30% but increases to 35% for final production of drug substances, drug products, or biological products. A domestic content bonus can increase the percentage further. The credit phases down starting in 2030 and ends after 2032. Taxpayers that are foreign entities of concern are disqualified. Certain components from facilities with unresolved FDA warning letters are excluded.

Sec. 3, Generic drugs and biosimilars investment credit: This section creates a new investment tax credit equal to 25% of the qualified investment in a qualified facility whose primary purpose is producing eligible components. Qualified property includes tangible depreciable property integral to the facility, including buildings and structural components (but not offices or unrelated functions). The credit applies to property placed in service after December 31, 2025, but does not apply to property whose construction begins after December 31, 2027. Eligible taxpayers must not be foreign entities of concern and must not have made an applicable transaction during the taxable year.