S. 1407: Anyone But China Safe Drug Act

This bill, known as the "Anyone But China Safe Drug Act," proposes to restrict the use of federal funds for purchasing drugs that contain active pharmaceutical ingredients produced in the People's Republic of China (PRC). Here are the key points:

Purchase Restrictions

Starting from January 1, 2028:

• Federal agencies such as the Department of Health and Human Services, Department of Veterans Affairs, and Department of Defense can only purchase drugs if at least 60% of their active ingredients are produced in countries other than the PRC that meet the safety standards set by the FDA.

From January 1, 2030:

• The requirement increases to 100%, meaning federal agencies can only buy drugs whose active ingredients are completely sourced from the approved countries.

Waivers

The Secretary of Health and Human Services is allowed to grant waivers for these requirements if a federal program can demonstrate an inability to comply and requires such a waiver. However:

• No waivers can be issued for drugs purchased after January 1, 2031.

Labeling Requirements

The bill also amends existing labeling regulations. It requires that:

• Drugs must clearly state the country of origin for each active ingredient on their labels, ensuring transparency regarding the sources of these components.

Tax Incentives for Domestic Manufacturing

The bill includes provisions for encouraging domestic production of pharmaceuticals and medical devices:

• It allows a temporary 100% expensing of qualified manufacturing properties for pharmaceutical and medical device manufacturers that start operations from January 1, 2025, to December 31, 2030. This means companies can deduct the full cost of certain equipment and facilities immediately on their tax returns, incentivizing investment in U.S. manufacturing.

Definition of Qualified Manufacturing Property

Qualified manufacturing property is defined as tangible property used in the construction or expansion of manufacturing sites for drugs and devices as per federal definitions.

Termination of Tax Incentives

The tax incentives outlined in this section will no longer apply to any property placed in service after December 31, 2030.

Overall Objective

The primary aim of this bill is to reduce reliance on Chinese-made drugs and their components in federal health programs, thereby ensuring that the drugs procured meet specific safety and quality standards while also promoting domestic pharmaceutical manufacturing.

Relevant Companies

• PFE (Pfizer): Pfizer, as a major pharmaceutical manufacturer, may need to adjust its sourcing strategies and potentially increase domestic production to comply with the bill's purchasing requirements.
• MRK (Merck & Co.): Merck could face similar operational challenges regarding sourcing ingredients, potentially impacting their supply chain management and cost structures.
• ABBV (AbbVie): As a company that develops and markets drugs, AbbVie may be required to shift manufacturing practices to meet the new requirements, possibly affecting its pricing and availability of products.