Industry tells Congress incentives needed to boost domestic drug manufacturing
Two pharmaceutical industry representatives told the House Energy and Commerce Health subcommittee on Wednesday that offering tax credits and long-term purchasing commitments to domestic pharmaceutical manufacturers would enhance the US manufacturing base.The hearing was held to discuss strategies to boost domestic manufacturing of essential medicines in the US and to reduce dependence on foreign sources for essential medicines.
Concerns from Democratic lawmakers about recent firings at the Department of Health and Human Services (HHS) and the Food and Drug Administration (FDA) overshadowed much of the hearing, which the lawmakers said could undermine efforts to enhance domestic manufacturing.
Congressman Buddy Carter (R-GA), Chairman of the Subcommittee on Health announced that the “hearing is critical in addressing our nation’s reliance on adversarial countries for essential medicines and health care products. This dependence not only jeopardizes our national security and patient safety but also highlights the urgent need to increase domestic and friend-shorted manufacturing.”
Patrick Cashman, the president of US Antibiotics, said his firm has more than 390,000 square feet of manufacturing space and is only using “a fraction of that” capacity. He added that “with the right pricing and the right economic incentives we can bring [manufacturing] back.” The firm, based in Bristol, Tennessee, is the sole US manufacturer of amoxicillin.
Cashman pointed out that generic antibiotics are typically among the lowest-cost pharmaceutical products, noting that Indian and Chinese manufacturers benefit from state subsidies, lower labor costs, and less stringent environmental and regulatory standards. These advantages enable them to undercut US manufacturers on price.
To revitalize domestic manufacturing of generic antibiotics, he recommended that federal agencies should enter long-term purchasing commitments with domestic producers of essential medicines. He said that generic manufacturers often operate without long-term purchasing agreements which destabilizes the industry.
He also recommended that the US government should establish a “Buy American “requirement for antibiotics purchased with federal funds. He noted that a 2023 Department of Defense review found the country of origin for active pharmaceutical ingredients (APIs) used in 22% of essential military drugs could not be identified.
John Murphy, the president and CEO of the Association for Accessible Medicines (AAM) concurred that the lack of government financial incentives hurts efforts to onshore pharmaceutical manufacturing. He added that a shortage of workers with specialized knowledge in manufacturing is another challenge. He noted that “half of all manufacturing jobs go unfilled.”
Murphy said that Congress can help boost domestic manufacturing by creating financial incentives for domestic manufacturing, and that Congress should provide the same level of support to the generic drug industry as it has done for the semiconductor industry with the recent CHIPS and Science Act.
Tax incentives in HR 1 would help
After hearing their testimony, Subcommittee Chair Brett Guthrie (R-KY) asked Cashman and Murphy on whether proposed reforms to the tax code under the One Big Beautiful Bill Act would help spur domestic manufacturing.
The bill has several provisions aimed at beefing up domestic manufacturing, including providing incentives for building new factories and making improvements to existing facilities.
Cashman said these provisions would help attract domestic manufacturers. “We only serve 5% of the US amoxicillin market despite having the capacity to serve 100%. The immediate expensing of new products and facility improvements and the domestic R&D expensing provision would better position us to make capital investments.”
Murphy concurred that the bill would incentivize generic companies to locate in the US. “We have often talked about the need to have tax credits and the ability to have flexibility in the tax code to make the investment necessary in the United States. We have a significant amount of dormant capacity in the United States that could be turned back on which would require some capital investment.”
He added that “our members have been pleased to hear that there is more attention being paid to this sector of the market from the tax perspective. It could help the industry.”
Concerns over health agency layoffs
Throughout the hearing, Democratic lawmakers voiced concern over the recent Trump Administration’s cuts to the HHS and FDA workforce, saying these actions undermine efforts to bolster the domestic supply chain.
“It is difficult for me to discuss the medical supply chain in the midst of the chaos and destruction the Trump administration has created,” said Committee Ranking Member Frank Pallone (D-NJ).
He added that “I don’t understand how Republicans can reconcile their desire to onshore domestic manufacturing with eliminating 2,000 jobs at FDA and proposing an 11 percent budget cut.”
Rep. Diana DeGette (D-CO) concurred. “It's hard to take this administration seriously on this issue when they are firing hard-working public servants who support generic drug approval. The COVID-19 pandemic laid bare the reality of the US supply chain. But our dependence on suppliers has been a problem for decades, we do not have a system that encourages a resilient supply chain.”
Democrats also criticized HHS Secretary Robert Kennedy Jr. for terminating all members of the Center for Disease Control and Prevention’s Advisory Committee for Immunization Practices (ACIP).
“The action on Monday when Kennedy fired all experts of the ACIP committee puts the health and well-being of our people and children at great risk and undermines vaccine safety,” Pallone said, adding that “this is all being done so that Kennedy can stack the committee with anti-vaxxers.”
Rep. Kim Schrier (D-WA) concurred, “I want to express my deep frustration with Kennedy for firing all 17 members of the ACIP committee.”
Schrier said that the firings serve to undermine faith in vaccines, which would also impact the construction of new vaccination facilities in the US.
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