Big pharma lobbies for slice of US chip industry tax breaks

Big pharma has asked Joe Biden’s administration to extend generous tax breaks and subsidies contained in its $280 billion (€261 billion) semiconductor support package to drugs companies as part of an effort to build up the US biotechnology industry.

The president announced a national biotechnology and biomanufacturing strategy in September to strengthen supply chains, create American jobs and ward off competition, particularly from China.

It has allocated $2 billion in initial funding to support the strategy and asked stakeholders in the health, climate and food industries to provide specifics on the type of federal funding, incentives and other policies required to support increased investment in biomanufacturing and research.

PhRMA, the main lobby group for industry, has asked the White House to offer companies an advance manufacturing tax credit of 25 per cent to help offset the cost of building and expanding biomanufacturing plants, according to a submission to the US Office of Science and Technology Policy seen by the Financial Times.

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It proposes cutting taxes on manufacturing income for drugs produced in the US and federal funding to cover the cost of loans, arguing these incentives would help companies expand and prevent a reoccurrence of the type of coronavirus pandemic product shortages.

“Given the costs and time frames for building, expanding or modernising domestic manufacturing capabilities and processes, the Chips Act [Chips and Science Act] suggests potential policies that could be applicable,” said PhRMA.

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The lobby group said tax breaks and other incentives should be offered to all companies expanding manufacturing in the US, regardless of where they are headquartered. This might require exemption from a rule enacted in 2017 that sets a minimum tax of 10 per cent for certain multinationals, it said.

PhRMA said the measures are needed to offset some of the advantages available in other countries such as China, which has lower energy and water costs than the US. Labour costs are estimated to be 30-40 per cent less in China and India versus the US and European countries, it said.

A decision by the Biden administration to follow PhRMA’s recommendations and introduce tax cuts and subsidies for drugmakers could reignite tensions with allies. Brussels has warned that US policies offering hundreds of billions of dollars in subsidies for green energy investment in the Inflation Reduction Act will stoke global protectionism. – Copyright The Financial Times Limited 2023