[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[S. 1891 Introduced in Senate (IS)]
<DOC>
119th CONGRESS
1st Session
S. 1891
To amend the Internal Revenue Code of 1986 to establish the generic
drugs and biosimilars production credit, and for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
May 22, 2025
Mr. Cotton introduced the following bill; which was read twice and
referred to the Committee on Finance
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to establish the generic
drugs and biosimilars production credit, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Producing Incentives for Long-term
production of Lifesaving Supply of medicine Act'' or the ``PILLS Act''.
SEC. 2. GENERIC DRUGS AND BIOSIMILARS PRODUCTION CREDIT.
(a) In General.--Subpart D of part IV of subchapter A of chapter 1
of the Internal Revenue Code of 1986 is amended by adding at the end
the following new section:
``SEC. 45BB. GENERIC DRUGS AND BIOSIMILARS PRODUCTION CREDIT.
``(a) In General.--
``(1) Allowance of credit.--For purposes of section 38, the
generic drugs and biosimilars production credit for any taxable
year is an amount equal to the credit amount determined under
subsection (b) with respect to each eligible component which
is--
``(A) produced by the taxpayer in the United
States, and
``(B) sold by such taxpayer to an unrelated person
(as determined by the Secretary) during the taxable
year.
``(2) Production and sale must be in trade or business.--
Rules similar to the rules of section 45X(a)(2) shall apply.
``(3) Disallowance of credit.--The credit under this
subsection shall not be allowed to any taxpayer which, at any
time during the taxable year, was a foreign entity of concern
(as defined in section 9901(8) of the William M. (Mac)
Thornberry National Defense Authorization Act for Fiscal Year
2021 (15 U.S.C. 4651)).
``(b) Credit Amount.--For purposes of this section--
``(1) In general.--Subject to paragraph (4), the amount
determined under this subsection with respect to any eligible
component is an amount equal to the base credit percentage of
the value added to such component by the taxpayer.
``(2) Value added.--The value added to a component by a
taxpayer is an amount equal to--
``(A) the gross receipts received by the taxpayer
from the sale of the eligible component, minus
``(B) the cost of eligible components purchased
from an unrelated person in connection with the
production of the component by the taxpayer.
``(3) Base credit percentage.--
``(A) In general.--Except as provided in
subparagraphs (B) and (C), the base credit percentage
is 30 percent.
``(B) Increased base credit percentage for certain
eligible components.--The base credit percentage is 35
percent in the case of the final production of--
``(i) a drug substance,
``(ii) a drug product, or
``(iii) a biological product.
``(C) Domestic content bonus credit.--
``(i) In general.--In the case of an
eligible component which contains domestic
content, the base credit percentage determined
under this paragraph (determined without regard
to this subparagraph) shall be increased by an
amount equal to--
``(I) the domestic content
percentage, multiplied by
``(II) 0.20.
``(ii) Domestic content percentage.--For
purposes of this subparagraph, the term
`domestic content percentage' means the
percentage of the total cost of the eligible
components taken into account for purposes of
paragraph (2) which is attributable to
materials and components that were produced in
the United States.
``(iii) Documentation rules.--
``(I) Record keeping.--No domestic
content bonus credit shall be
determined under this subparagraph
unless the taxpayer provides
documentation supporting the domestic
content percentage (in such form and
manner as the Secretary shall
prescribe).
``(II) Certification by unrelated
party.--In the case of materials or
components provided to the taxpayer by
an unrelated party, the Secretary shall
accept certification (in such form and
manner as the Secretary shall
prescribe) by such unrelated party that
the materials or components were
produced in the United States.
``(4) Phase out.--
``(A) In general.--In the case of any eligible
component sold after December 31, 2030, the amount
determined under this subsection with respect to such
component shall be equal to the product of--
``(i) the amount determined under paragraph
(1) with respect to such component (determined
without regard to this paragraph and after the
application of paragraphs (2) and (3)), and
``(ii) the phase out percentage.
``(B) Phase out percentage.--For purposes of
subparagraph (A), the phase out percentage is--
``(i) in the case of an eligible component
sold during calendar year 2031, 75 percent,
``(ii) in the case of an eligible component
sold during calendar year 2032, 50 percent,
``(iii) in the case of an eligible
component sold during calendar year 2033, 25
percent, and
``(iv) in the case of an eligible component
sold after December 31, 2033, 0 percent.
``(c) Definitions.--For purposes of this section--
``(1) Eligible component.--
``(A) In general.--Except as provided in
subparagraphs (B) and (C), the term `eligible
component' means--
``(i) an approved generic drug,
``(ii) a licensed biosimilar, and
``(iii) any drug substance, intermediate
raw material, starting material, reagent,
component, in-process material, inactive
ingredient, container closure system,
packaging, quality testing, or other material
or service used, or sold with intention for
use, in the production of an approved generic
drug or a licensed biosimilar.
``(B) Exclusion of certain components.--The term
`eligible component' shall not include a component any
portion of the production of which occurred at a
facility which is the subject of a warning letter--
``(i) which was issued by the Food and Drug
Administration on or after September 1, 2009,
and
``(ii) with respect to which the Food and
Drug Administration has not issued a close-out
letter.
``(C) Application with other credits.--The term
`eligible component' shall not include any property
which is produced at a facility if the basis of any
property which is part of such facility is taken into
account for purposes of the credit allowed under
section 48F after the date of the enactment of this
section.
``(2) Approved generic drug.--The term `approved generic
drug' means--
``(A) a drug for which an approval of an
application filed under section 505(j) of the Federal
Food, Drug, and Cosmetic Act (21 U.S.C. 355(j)) is in
effect, or
``(B) an authorized generic drug (as defined in
section 314.3 of title 21, Code of Federal Regulations
(or any successor regulation)).
``(3) Licensed biosimilar.--
``(A) In general.--The term `licensed biosimilar'
means a biological product for which a biologics
license has been issued under section 351(k) of the
Public Health Service Act (42 U.S.C. 262(k)).
``(B) Biological product.--The term `biological
product' has the meaning given such term in section
351(i)(1) of the Public Health Service Act (42 U.S.C.
262(i)(1)).
``(4) Other terms.--The terms `drug substance' and `drug
product' have the respective meanings given such terms in
section 314.3 of title 21, Code of Federal Regulations (or any
successor regulation).
``(5) Produced in the united states.--The term `produced in
the United States' means that all the production of the
material or component takes place in the United States,
regardless of the origin of the subcomponents of such material
or component.
``(6) Production.--The term `production' means all steps in
the manufacture, propagation, and preparation of an eligible
component, including synthesis, mixing, granulating, milling,
molding, lyophilizing, tableting, encapsulating, coating,
sterilizing, testing, filling, labeling, packaging, and storage
prior to release by the manufacturer.
``(d) Special Rules.--Rules similar to the rules of paragraphs (1),
(3), and (4) of section 45X(d) shall apply.
``(e) Regulatory Authority.--The Secretary shall prescribe such
regulations and other guidance as are appropriate or necessary to carry
out the purposes of this section.''.
(b) Elective Payment.--
(1) In general.--Section 6417(b) of the Internal Revenue
Code of 1986 is amended by adding at the end the following new
paragraph:
``(13) The generic drugs and biosimilars production credit
determined under section 45BB.''.
(2) Election with respect to other entities.--Paragraph (1)
of section 6417(d) is amended--
(A) by redesignating subparagraph (E) as
subparagraph (F),
(B) by striking ``or (D)'' each place it appears in
subparagraph (F), as so redesignated, and inserting
``(D), or (E)'', and
(C) by inserting after subparagraph (D) the
following new subparagraph:
``(E) Election with respect to generic drugs and
biosimilars production credit.--
``(i) In general.--If a taxpayer other than
an entity described in subparagraph (A) makes
an election under this subparagraph with
respect to any taxable year in which such
taxpayer has, after December 31, 2024, produced
eligible components (as defined in section
45BB(c)(1)), such taxpayer shall be treated as
an applicable entity for purposes of this
section for such taxable year, but only with
respect to the credit described in subsection
(b)(13).
``(ii) Other rules.--The rules of clauses
(ii) and (iii) of subparagraph (D) shall apply
for purposes of this subparagraph.''.
(c) Transfer of Credits.--Section 6418(f)(1)A) of the Internal
Revenue Code of 1986 is amended by adding at the end the following new
clause:
``(xii) The generic drugs and biosimilars
production credit determined under section
45BB.''.
(d) Conforming Amendments.--
(1) Section 38(b) of the Internal Revenue Code of 1986 is
amended--
(A) by striking ``plus'' at the end of paragraph
(40),
(B) by striking the period at the end of paragraph
(41) and inserting ``, plus'', and
(C) by adding at the end the following new
paragraph:
``(42) the generic drugs and biosimilars production credit
determined under section 45BB(a).''.
(2) The table of sections for subpart D of part IV of
subchapter A of chapter 1 of the Internal Revenue Code of 1986
is amended by adding at the end the following new item:
``Sec. 45BB. Generic drugs and biosimilars production credit.''.
(e) Effective Date.--The amendments made by this section shall
apply to generic drugs and biologics produced after the date of
enactment of this Act.
SEC. 3. GENERIC DRUGS AND BIOSIMILARS INVESTMENT CREDIT.
(a) In General.--Subpart E of part IV of subchapter A of chapter 1
of the Internal Revenue Code of 1986 is amended by inserting after
section 48E the following new section:
``SEC. 48F. GENERIC DRUGS AND BIOSIMILARS INVESTMENT CREDIT.
``(a) Establishment of Credit.--For purposes of section 46, the
generic drugs and biosimilars investment credit for any taxable year is
an amount equal to 25 percent of the qualified investment for such
taxable year with respect to any qualified facility of an eligible
taxpayer.
``(b) Qualified Investment.--For purposes of this section--
``(1) In general.--The qualified investment for any taxable
year is the basis of any qualified property placed in service
by the taxpayer during such taxable year which is part of a
qualified facility.
``(2) Qualified property.--
``(A) In general.--The term `qualified property'
means property--
``(i) which is tangible property,
``(ii) with respect to which depreciation
(or amortization in lieu of depreciation) is
allowable,
``(iii) which is--
``(I) constructed, reconstructed,
or erected by the taxpayer, or
``(II) acquired by the taxpayer if
the original use of such property
commences with the taxpayer, and
``(iv) which is used as an integral part of
the qualified facility to produce eligible
components.
``(B) Buildings and structural components.--
``(i) In general.--The term `qualified
property' includes any building or its
structural components which otherwise satisfies
the requirements of subparagraph (A).
``(ii) Exception.--Clause (i) shall not
apply with respect to a building or portion of
a building used for offices, administrative
services, or other functions unrelated to the
production of eligible components.
``(3) Qualified facility.--The term `qualified facility'
means a facility--
``(A) which is owned (in whole or in part) by the
taxpayer,
``(B) which is located in the United States or any
territory of the United States, and
``(C) the primary purpose of which is the
production of eligible components.
``(4) Coordination with rehabilitation credit.--The
qualified investment with respect to any qualified facility for
any taxable year shall not include that portion of the basis of
any property which is attributable to qualified rehabilitation
expenditures (as defined in section 47(c)(2)).
``(5) Certain progress expenditure rules made applicable.--
Rules similar to the rules of subsections (c)(4) and (d) of
section 46 (as in effect on the day before the date of the
enactment of the Revenue Reconciliation Act of 1990) shall
apply.
``(c) Definitions.--For purposes of this section--
``(1) Eligible taxpayer.--The term `eligible taxpayer'
means any taxpayer which is not a foreign entity of concern (as
defined in section 9901(8) of the William M. (Mac) Thornberry
National Defense Authorization Act for Fiscal Year 2021 (15
U.S.C. 4651).
``(2) Eligible component.--The term `eligible component'
has the meaning given such term in section 45BB(c)(1).
``(3) Production.--The term `production' has the meaning
given such term in section 45BB(c)(6).
``(d) Termination of Credit.--The credit allowed under this section
shall not apply to property the construction of which begins after
December 31, 2028.
``(e) Regulatory Authority.--The Secretary shall prescribe such
regulations and other guidance as are appropriate or necessary to carry
out the purposes of this section.''.
(b) Elective Payment.--
(1) In general.--Section 6417(b) of the Internal Revenue
Code of 1986, as amended by section 2(b) of this Act, is
further amended by adding at the end the following new
paragraph:
``(14) The generic drugs and biosimilars investment credit
determined under section 48F.''.
(2) Election with respect to other entities.--Paragraph (1)
of section 6417(d) of such Code, as amended by this Act, is
further amended--
(A) by redesignating subparagraph (F) as
subparagraph (G),
(B) by striking ``or (E)'' each place it appears in
subparagraph (G), as so redesignated, and inserting
``(E), or (F)'', and
(C) by inserting after subparagraph (E) the
following new subparagraph:
``(F) Election with respect to generic drugs and
biosimilars investment credit.--If a taxpayer other
than an entity described in subparagraph (A) makes an
election under this subparagraph with respect to any
taxable year in which such taxpayer has placed in
service a qualified facility (as defined in section
48F(b)(3)), such taxpayer shall be treated as an
applicable entity for purposes of this section for such
taxable year, but only with respect to the credit
described in subsection (b)(14).''.
(c) Transfer of Credits.--Section 6418(f)(1)A) of the Internal
Revenue Code of 1986, as amended by this Act, is further amended by
adding at the end the following new clause:
``(xiii) The generic drugs and biosimilars
investment credit determined under section
48F.''.
(d) Conforming Amendments.--
(1) Section 46 of the Internal Revenue Code of 1986 is
amended--
(A) by striking ``and'' at the end of paragraph
(6),
(B) by striking the period at the end of paragraph
(7) and inserting ``, and'', and
(C) by adding at the end the following new
paragraph:
``(8) the generic drugs and biosimilars investment
credit.''.
(2) Section 49(a)(1)(C) of such Code is amended--
(A) by striking ``and'' at the end of clause (vii),
(B) by striking the period at the end of clause
(viii) and inserting ``, and'', and
(C) by adding at the end the following new clause:
``(ix) the basis of any qualified property
which is part of a qualified facility under
section 48F.''.
(3) The table of sections for subpart E of part IV of
subchapter A of chapter 1 is amended by inserting after the
item relating to section 48E the following new item:
``48F. Generic drugs and biosimilars investment credit.''.
(e) Effective Date.--The amendments made by this section shall
apply to property placed in service after December 31, 2026.
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