• ACV Reports

China is the problem, Puerto Rico the answer to ending foreign supply of prescription medications

Ever watch Shark Tank? If you’re a conservative, probably not. You would have gotten sick of seeing Obama’s face every other episode and the panel’s constant push for the use of China factories for cheaper labor.

For those who haven’t ever watched it, Shark Tank is a reality show where entrepreneurs pitch their business ideas to a group of investors.

More than a few times, an entrepreneur came on the show to talk about the product they had developed, their costs and their margins and one of the Sharks would inevitably say something like, “Well, you know, we can get that two cents cheaper out of China.”

Such comments leave a really bad taste in the mouth. It not only is unpatriotic to American workers, but the dirty little secret about China is that it has long had issues producing safe products.

Just a few years earlier, there was the whole pet food recall issue when pet food sent from China was killing thousands of dogs and cats in America. It was a big deal in the animal welfare world and resulted in sweeping changes in U.S. buying habits.

It revealed just how much pet food and treats that China was making with their lack of safety standards and filthy factories. The result was the “Buy American” movement after that to feed our rescue pets and our own pets at home.

Pet food isn’t the only unsafe thing coming out of China though. Studies six years ago showed then that one-fifth of the soil in China is contaminated from air and water pollution. China has done nothing to clean up what could be crop-producing acreage. It could be worse by now. And yet the U.S. still imports food from them.

The volume of pharmaceuticals and their ingredients made in China is staggering and gives them a potential chokepoint to create economic and social disaster for any nation depending on them. (Photo: China News Agency)

Everyone has always known that we get a lot of products from China but the real scary stuff we’ve learned in the past few weeks is how many of our pharmaceuticals and their ingredients come from China. According to a Department of Commerce study, we know that ninety-seven percent of our antibiotics in the U.S. comes from China.

Republican Tennessee Senator Marsha Blackburn is trying to do something about it by pushing legislation to reduce our dependency on China. She told Fox and Friends that her bill, “Securing America’s Medicine Cabinet Act” would incentivize bringing pharmaceutical production back on the shores of the United States.

Further, her bill would change FDA legislation to prioritize issues that relate to drug shortages and national security. Given the circumstances of coronavirus now, the bill has garnered an impressive list of bipartisan sponsors.

Of course, the best action would be to assure that we manufacture our own ingredients and pharmaceuticals here in the U.S. That is almost immediately impossible from a surprising source.

Forty years ago, the U.S. Territory of Puerto Rico was a dominant player in the manufacture of prescription drugs. The reason that is no longer true? Taxes.

In Gerald Ford’s last year as President, the Democratic Congress passed — and Ford signed — the Tax Reform Act of 1976, which exempted from taxation corporate income generated in U.S. territories, like Puerto Rico, Guam, and the U.S. Virgin Islands. This policy, combined with Puerto Rican tax law, meant that corporate subsidiaries based in Puerto Rico enjoyed a zero percent corporate tax rate, so long as they distributed their profits as dividends.

The big drug companies were uniquely positioned to take advantage of the tax law. Companies could base their manufacturing operations in Puerto Rico, and thereby significantly reduce their U.S. tax burden. A 1993 report from the U.S. Government Accountability Office estimated that pharmaceutical companies represented, by far, the largest beneficiaries of the Puerto Rican corporate tax system, benefiting to the tune of $86 million in 1985.

The Pfizer Caguas Pharmaceutical Plant in Puerto Rico was sold off by the company after Congress whittled away and finally eliminated tax breaks that made the U.S. Territory a major player worldwide in the production of pharmaceuticals. (Photo: PharmaBioSource)

Over the years, however, Congress whittled away at the Puerto Rican tax break. Finally, in 1996, President Bill Clinton signed into law the Small Business Job Protection Act of 1996, which phased out the tax breaks for U.S. territories, fully repealing the tax break in 2006.

The measure was hailed at the time as “ending corporate welfare as we know it.” It also fit nicely with the Democrats’ secret desire to join China’s economy to the that of the U.S. so as to fast-track the failed globalization concepts.

The repeal of the tax breaks that enabled Puerto Rico to be a pharmaceutical powerhouse crashed the territory’s economy, resulting in the poverty we see today. The obvious and enormously beneficial response if for Congress to reinstate those tax breaks, thus allowing Puerto Rico to restore full employment, pay off its debt and become economically stable again.

President Trump is obviously geared to “America First” and he is now fighting to remove globalization from economic policy. At least he was, before the coronavirus hit. But supporting the reinstatement of the U.S. Territories’ tax breaks would be a big step in fighting globalization and in bringing pharmaceutical production home to the United States.

President Trump has always been ahead of the curve concerning China and how they take advantage of our country with trade policies and intellectual theft. He’s long accused them of manipulating their currency to make their exports more globally competitive. Even before he was president, he talked about them damaging United States businesses and workers.

He tweeted in September of 2011, “China is neither an ally or a friend —they want to beat us and own our country.”

It’s nice to see that more people are paying attention to that now.

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