America faces chronic drug shortages due to a collapse in domestic generic manufacturing and overdependence on risky foreign suppliers.
A Section 232 Tariff Rate Quota (TRQ) system would protect U.S. producers by limiting predatory imports, enforcing safety standards, and securing reliable supply from trusted sources.
The PILLS Act would jumpstart U.S. pharmaceutical production through targeted tax credits and investment incentives.
Together, these policies would restore U.S. manufacturing, rebuild secure supply chains, and ensure Americans have access to safe, reliable medicine made at home.
Generic medicines—used in 90% of all U.S. prescriptions— are now overwhelmingly manufactured abroad. Roughly 70–80% of our supply of finished generics and active pharmaceutical ingredients (APIs) comes from just two countries: India and China. These nations dominate not because of superior innovation or safety standards, but because they cut corners, exploit labor, and benefit from state subsidies that allow them to underprice American producers.
The FDA has uncovered extensive safety and compliance issues in overseas plants exporting to the U.S. from countries like India, but enforcement remains weak—and patients bear the cost. India alone supplies half of all U.S. generic finished drugs, yet Indian-made generics are 54% more likely to cause severe adverse events than U.S.-made counterparts.
In this rigged global system, American manufacturers are squeezed until they shut down. As a result, the U.S. is forced to rely on vulnerable import supply chains and a small pool of dominant foreign suppliers. Today, 40% of all generic drugs used in the U.S. are made by just one FDA-approved supplier, creating dangerous single points of failure.
The result? Drug shortages are no longer rare—they’re routine. Hospitals face critical gaps in antibiotics, injectable sedatives, cancer drugs, and cardiovascular medicines. Providers are forced to ration or delay care because supply chains can’t be trusted.
This is not a failure of logistics or demand forecasting. It is a failure of production capacity—and of U.S. policy. America simply no longer makes enough of its own medicine.
The Path Forward
We face a monumental challenge to our healthcare system. But there is a clear way forward: a nationwide revival of U.S. generic drug manufacturing. And that starts with two powerful, complementary policies:
A Section 232 Tariff Rate Quota (TRQ) system to defend domestic production under national security authority
The PILLS Act, a sweeping tax credit package to jumpstart a domestic pharmaceutical investment and production boom
Together, they form the foundation of a long-overdue pharmaceutical industrial strategy.
Section 232 TRQ: Securing U.S. Drug Supply and Stopping Unsafe Imports
The U.S. Department of Commerce has launched a Section 232 national security investigation into our import dependence on generic drug products and their key ingredients. The case is clear: the U.S. is dangerously exposed to foreign chokepoints for essential medicines, with an extremely limited domestic fallback for many critical drugs.
While no final determination has been made, President Trump has signaled tariff levels around 200% for generics—underscoring the seriousness of the crisis and the pressure domestic producers are under. But blanket tariffs alone are not the only solution.
We propose a more targeted and flexible remedy: a Tariff Rate Quota (TRQ) system under Section 232 authority.
This system would:
Guarantee supply reliability in the short term by preserving import flow from trusted countries
While rebuilding U.S. capacity over the long term through market protections and regulatory incentives
The framework would establish country-based import quotas for finished generics and APIs, based on verified U.S. demand minus current domestic production capacity. Within these quotas, qualifying imports would face 0% tariffs—but only if both the API and the finished drug come from countries with FDA Mutual Recognition Agreements (MRAs), such as the EU, UK, and Switzerland.
This ensures that any tariff-free imports meet robust safety standards—unlike medicines from high-risk jurisdictions like China and India. Imports from these non-MRA countries would face steep out-of-quota tariffs, potentially up to 300% (enforced as a specific tariff on a $/kg basis), to neutralize foreign subsidies, invoice fraud, regulatory arbitrage, and safety risks.
The TRQ system would be:
Adjustable, with quota volumes rebalanced annually (or as needed) to reflect domestic output, emergencies, and national stockpile goals
Traceable, requiring origin certificates for all in-quota imports and real-time oversight by Customs and the FDA
Enforceable, with facility inspection prioritization and severe penalties for falsification or evasion
This policy reorients U.S. drug markets toward quality, reliability, and sovereignty. It ends the race to the bottom, restricts unsafe drug supply, restores predictability for American producers, and gives U.S. firms the runway to scale up operations without being crushed by artificially cheap imports.
The PILLS Act: Rebuilding America’s Pharmaceutical Industrial Base
Smart tariffs create space in the market—but capital and tax incentives are essential to fill that space with real domestic production. The PILLS Act (Producing Incentives for Long-term production of Lifesaving Supply of Medicine) meets this need head-on.
America’s domestic pharmaceutical industry hasn’t failed for lack of ingenuity—it’s failed because the economic incentives have rewarded imports over domestic production. The PILLS Act fixes that by offering major federal tax credits for U.S. pharmaceutical manufacturing and supply chain investment.
These measures include:
1. Production Tax Credit (PTC): Rewarding U.S.-Made Output
35% tax credit for the final U.S. production of:
Finished generic drug products
Active pharmaceutical ingredients (APIs)
Licensed biosimilars
30% tax credit for U.S.-based production of:
Intermediates, excipients, testing materials
Packaging, containers, and formulation components
Up to 20% bonus for domestic content:
Calculated as: (Domestic Content %) × 0.20
Example: 80% U.S. content = 16% bonus credit
Bonus requires formal documentation and third-party certification
This credit applies to the value added by U.S. producers and phases out gradually from 2030 to 2033, providing a stable runway for firms to plan investments and scale operations.
2. Investment Tax Credit (ITC): Building New Capacity
25% tax credit for investments in qualified pharmaceutical facilities:
Construction of new manufacturing sites
Expansion or modernization of existing plants
Equipment and infrastructure for drug or API production
Applies only to core production sites, excluding office space or unrelated operations
The PILLS Act transforms domestic drug manufacturing into a viable, long-term business model. It jumpstarts the revival of American pharmaceutical manufacturing investment and rewards firms that reinvest in American infrastructure, labor, and supply chains.
As a result, the PILLS Act would:
Boost U.S. production, especially for drugs facing chronic shortages
Raise safety standards by shifting manufacturing from risky overseas facilities to highly regulated U.S. plants
Expand domestic capacity, enabling sustained, reliable drug manufacturing
Stabilize supply chains, insulating the healthcare system from foreign disruptions
Why the Two Policies Work Best Together
Each policy is powerful on its own. The TRQ system carves out dedicated space in the market for U.S. producers by limiting predatory imports and steering supply through trusted, high-standard sources. The PILLS Act makes it economically viable to invest, expand, and rebuild manufacturing here at home.
But together, Section 232 and the PILLS Act are transformative.
The Section 232 TRQ system creates the space for U.S. manufacturers to compete and thrive in their own market. The PILLS Act fills that space with real production, real jobs, and real medicine. One secures the ground for U.S. producers. The other fuels the resurgence.
This is the essence of smart industrial policy. No great manufacturing economy emerged without aligning trade and industrial policy with national goals. It’s time to apply that strategy to one of the most vital industries of all: pharmaceuticals.
Let’s Bring Our Medicine Supply Home
There was a time in America when the only thing you had to trust about your medicine was your doctor and your pharmacist. Today, you need a global supply chain map and a strong stomach for shortages and higher rates of adverse drug reactions. We’ve handed control of our drug supply to countries that don’t share our values, don’t meet our standards, and don’t have our best interests at heart.
But this is a crisis we can fix.
We don’t have to accept shortages, price shocks, or unsafe pills as the cost of doing business. We have the tools. The Section 232 TRQ system is ready to deploy. The PILLS Act is ready to pass. It’s time to act.
America was built by people who believed in making things, especially things that mattered. It’s time to bring that spirit back. Let’s bring our medicine supply home. Let’s rebuild the factories, rehire the workers, and restore trust in the pill bottle again.
Because no nation is truly sovereign if it can’t control its own health, and no country should have to rely on fragile foreign supply chains for essential medicine.
MADE IN AMERICA.
CPA is the leading national, bipartisan organization exclusively representing domestic producers and workers across many industries and sectors of the U.S. economy.
Restoring America’s Generic Drug Independence
KEY POINTS
America’s generic drug supply is at a crisis point. As detailed in previous reports, the United States is dangerously reliant on a high-risk imported drug supply, and today’s widespread drug shortages stem not from shipping delays or unexpected demand—but from a collapse in domestic production.
The Crisis in America’s Generic Drug Supply
Generic medicines—used in 90% of all U.S. prescriptions— are now overwhelmingly manufactured abroad. Roughly 70–80% of our supply of finished generics and active pharmaceutical ingredients (APIs) comes from just two countries: India and China. These nations dominate not because of superior innovation or safety standards, but because they cut corners, exploit labor, and benefit from state subsidies that allow them to underprice American producers.
The FDA has uncovered extensive safety and compliance issues in overseas plants exporting to the U.S. from countries like India, but enforcement remains weak—and patients bear the cost. India alone supplies half of all U.S. generic finished drugs, yet Indian-made generics are 54% more likely to cause severe adverse events than U.S.-made counterparts.
In this rigged global system, American manufacturers are squeezed until they shut down. As a result, the U.S. is forced to rely on vulnerable import supply chains and a small pool of dominant foreign suppliers. Today, 40% of all generic drugs used in the U.S. are made by just one FDA-approved supplier, creating dangerous single points of failure.
The result? Drug shortages are no longer rare—they’re routine. Hospitals face critical gaps in antibiotics, injectable sedatives, cancer drugs, and cardiovascular medicines. Providers are forced to ration or delay care because supply chains can’t be trusted.
This is not a failure of logistics or demand forecasting. It is a failure of production capacity—and of U.S. policy. America simply no longer makes enough of its own medicine.
The Path Forward
We face a monumental challenge to our healthcare system. But there is a clear way forward: a nationwide revival of U.S. generic drug manufacturing. And that starts with two powerful, complementary policies:
Together, they form the foundation of a long-overdue pharmaceutical industrial strategy.
Section 232 TRQ: Securing U.S. Drug Supply and Stopping Unsafe Imports
The U.S. Department of Commerce has launched a Section 232 national security investigation into our import dependence on generic drug products and their key ingredients. The case is clear: the U.S. is dangerously exposed to foreign chokepoints for essential medicines, with an extremely limited domestic fallback for many critical drugs.
While no final determination has been made, President Trump has signaled tariff levels around 200% for generics—underscoring the seriousness of the crisis and the pressure domestic producers are under. But blanket tariffs alone are not the only solution.
We propose a more targeted and flexible remedy: a Tariff Rate Quota (TRQ) system under Section 232 authority.
This system would:
The framework would establish country-based import quotas for finished generics and APIs, based on verified U.S. demand minus current domestic production capacity. Within these quotas, qualifying imports would face 0% tariffs—but only if both the API and the finished drug come from countries with FDA Mutual Recognition Agreements (MRAs), such as the EU, UK, and Switzerland.
This ensures that any tariff-free imports meet robust safety standards—unlike medicines from high-risk jurisdictions like China and India. Imports from these non-MRA countries would face steep out-of-quota tariffs, potentially up to 300% (enforced as a specific tariff on a $/kg basis), to neutralize foreign subsidies, invoice fraud, regulatory arbitrage, and safety risks.
The TRQ system would be:
This policy reorients U.S. drug markets toward quality, reliability, and sovereignty. It ends the race to the bottom, restricts unsafe drug supply, restores predictability for American producers, and gives U.S. firms the runway to scale up operations without being crushed by artificially cheap imports.
The PILLS Act: Rebuilding America’s Pharmaceutical Industrial Base
Smart tariffs create space in the market—but capital and tax incentives are essential to fill that space with real domestic production. The PILLS Act (Producing Incentives for Long-term production of Lifesaving Supply of Medicine) meets this need head-on.
America’s domestic pharmaceutical industry hasn’t failed for lack of ingenuity—it’s failed because the economic incentives have rewarded imports over domestic production. The PILLS Act fixes that by offering major federal tax credits for U.S. pharmaceutical manufacturing and supply chain investment.
These measures include:
1. Production Tax Credit (PTC): Rewarding U.S.-Made Output
This credit applies to the value added by U.S. producers and phases out gradually from 2030 to 2033, providing a stable runway for firms to plan investments and scale operations.
2. Investment Tax Credit (ITC): Building New Capacity
The PILLS Act transforms domestic drug manufacturing into a viable, long-term business model. It jumpstarts the revival of American pharmaceutical manufacturing investment and rewards firms that reinvest in American infrastructure, labor, and supply chains.
As a result, the PILLS Act would:
Why the Two Policies Work Best Together
Each policy is powerful on its own. The TRQ system carves out dedicated space in the market for U.S. producers by limiting predatory imports and steering supply through trusted, high-standard sources. The PILLS Act makes it economically viable to invest, expand, and rebuild manufacturing here at home.
But together, Section 232 and the PILLS Act are transformative.
The Section 232 TRQ system creates the space for U.S. manufacturers to compete and thrive in their own market. The PILLS Act fills that space with real production, real jobs, and real medicine. One secures the ground for U.S. producers. The other fuels the resurgence.
This is the essence of smart industrial policy. No great manufacturing economy emerged without aligning trade and industrial policy with national goals. It’s time to apply that strategy to one of the most vital industries of all: pharmaceuticals.
Let’s Bring Our Medicine Supply Home
There was a time in America when the only thing you had to trust about your medicine was your doctor and your pharmacist. Today, you need a global supply chain map and a strong stomach for shortages and higher rates of adverse drug reactions. We’ve handed control of our drug supply to countries that don’t share our values, don’t meet our standards, and don’t have our best interests at heart.
But this is a crisis we can fix.
We don’t have to accept shortages, price shocks, or unsafe pills as the cost of doing business. We have the tools. The Section 232 TRQ system is ready to deploy. The PILLS Act is ready to pass. It’s time to act.
America was built by people who believed in making things, especially things that mattered. It’s time to bring that spirit back. Let’s bring our medicine supply home. Let’s rebuild the factories, rehire the workers, and restore trust in the pill bottle again.
Because no nation is truly sovereign if it can’t control its own health, and no country should have to rely on fragile foreign supply chains for essential medicine.
MADE IN AMERICA.
CPA is the leading national, bipartisan organization exclusively representing domestic producers and workers across many industries and sectors of the U.S. economy.
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