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Amends section 168(k) of the Internal Revenue Code to treat 'qualified pharmaceutical and medical device manufacturing property' placed in service during the specified period as 'qualified property' for purposes of section 168(k); sets the applicable percentage under section 168(k)(6) to 100 percent for such property; and makes paragraph (8) of section 168(k) inapplicable to such property. Adds a definitional rule for qualified pharmaceutical and medical device manufacturing property (tangible property placed in service in the United States as part of construction or expansion for manufacture of drugs or devices as defined in 21 U.S.C. 321).
Adds a new paragraph (hh) to section 502 of the Federal Food, Drug, and Cosmetic Act beginning: 'If it is a drug and its labeling does not specify the country of origin of each active ingredient contained in the drug..'.
Limits which drugs federal health agencies may buy based on where the active pharmaceutical ingredients (APIs) are made: starting 2028 purchases must be for drugs with at least 60% of APIs from approved (non‑PRC) countries and by 2030 purchases must be for drugs with 100% of APIs from approved countries; temporary waivers may be granted until 2031. Adds a country‑of‑origin labeling requirement for active ingredients. Separately, it authorizes a temporary tax incentive allowing immediate 100% expensing for qualifying tangible property used to build or equip U.S. pharmaceutical and medical device manufacturing facilities placed in service between 2025 and 2030.
Scope: Applies to the purchase of a drug by the Department of Health and Human Services, the Department of Veterans Affairs, the Department of Defense, or any other Federal health care program (as defined in section 1128B(f) of the Social Security Act (42 U.S.C. 1320a–7b(b))).
Beginning on January 1, 2028, an agency or program described above may purchase only drugs for which 60 percent or more of the active pharmaceutical ingredients are manufactured in countries described in paragraph (2).
Beginning on January 1, 2030, an agency or program described above may purchase only drugs for which 100 percent of the active pharmaceutical ingredients are manufactured in countries described in paragraph (2).
Definition of 'countries described' (paragraph (2)): countries other than the People’s Republic of China, and that meet the health and safety standards of the Food and Drug Administration.
Waiver authority: The Secretary of Health and Human Services may issue waivers of the requirements under paragraph (1) for any agency or program that is unable to meet such requirements and demonstrates a need for the waiver.
Who is affected and how:
Drug manufacturers and active‑ingredient suppliers: They must document and—where necessary—change sourcing so APIs come from approved countries; suppliers that rely on PRC production face loss of federal market access unless they shift production or demonstrate approved-country content. Compliance will require supply‑chain tracing, certifications, and potentially factory relocation or new supplier contracts.
Federal health purchasers and procurement offices (HHS, VA, DoD, Indian Health Service, federal prisons, and other agencies that buy drugs): They must revise acquisition procedures, require supplier certifications on API origin and percentage content, and manage waiver requests during the transition period. This adds administrative burden and may temporarily constrain drug availability.
Department of Health and Human Services / FDA: Responsible for implementing the approved‑country standard, issuing label requirements, and enforcing documentation and waiver processes. FDA will need to develop guidance and verification mechanisms.
Owners and developers of U.S. pharmaceutical and medical device manufacturing property: Eligible to claim 100% expensing for qualifying tangible property placed in service from 2025 through 2030, improving cash flow and lowering after‑tax costs for investments made in that window. This creates a strong near‑term incentive to expand or build domestic production facilities.
Health care providers and patients served by federal programs: Potential impacts include changes in drug availability, procurement delays during the transition, and possible price changes if domestic or approved‑country supplies are more costly. Over time, reshoring could stabilize supply but may not lower prices immediately.
Fiscal and economic effects: The expensing provision will reduce federal tax receipts while in effect and may boost private capital spending in U.S. manufacturing. Procurement restrictions could raise federal acquisition costs depending on the relative price and availability of compliant drugs.
Trade and international relations: Explicit exclusion of the People’s Republic of China as an approved source may prompt diplomatic or trade responses and could redirect supply chains to other countries that meet FDA standards.
Overall, the bill pushes federal purchasing toward APIs produced outside the PRC and seeks to spur U.S. manufacturing investment via a temporary tax incentive; implementation will require new procurement and verification workstreams and may cause short‑term cost and availability pressures while encouraging longer‑term domestic capacity growth.
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Read twice and referred to the Committee on Finance.
Introduced April 10, 2025 by Thomas Bryant Cotton · Last progress April 10, 2025
Read twice and referred to the Committee on Finance.
Introduced in Senate