The ABC Safe Drug Act restricts federal health programs from purchasing drugs with active ingredients sourced from China and provides a temporary 100% tax deduction for domestic pharmaceutical and medical device manufacturing investments.
Tom Cotton
Senator
AR
The ABC Safe Drug Act aims to secure the U.S. drug supply chain by restricting federal health programs from purchasing prescription drugs with active ingredients sourced from China, phasing in a 100% requirement by 2030. To encourage domestic production, the bill also provides a temporary 100% immediate tax deduction for U.S. investments in pharmaceutical and medical device manufacturing property through 2030. Furthermore, it mandates clear labeling of the country of origin for all active drug ingredients.
ABC Safe Drug Act Mandates 100% Non-Chinese Drug Sourcing for VA/DoD by 2030, Offers Huge Tax Break to US Manufacturers
The “ABC Safe Drug Act” is trying to tackle two big problems at once: securing the U.S. medical supply chain and giving domestic manufacturing a major shot in the arm. Essentially, it uses a carrot and a stick approach to push drug production back onto U.S. soil and away from China.
The Stick: Federal Drug Sourcing Ban
This is the part that will hit federal agencies and the companies supplying them the hardest. Starting January 1, 2028, federal health programs—think the VA, the Department of Defense (DoD), and HHS—cannot buy prescription drugs unless at least 60% of the active pharmaceutical ingredients (APIs) were made in FDA-approved countries other than the People’s Republic of China (SEC. 2). This isn’t a gradual phase-out; it’s a hard deadline. The requirement gets even tougher on January 1, 2030, when the rule jumps to 100% of the APIs needing to be sourced outside of China and within approved countries. If you’re a veteran relying on the VA for medication, or a service member, this change is designed to ensure the drugs you receive aren’t vulnerable to foreign supply disruptions.
The Catch: Short-Term Supply Jitters
The law does allow the Secretary of Health and Human Services to grant temporary hardship waivers if a program can’t meet the new sourcing rules. However, these waivers have an expiration date: January 1, 2031, meaning every single federal drug purchase must meet the 100% non-Chinese API rule by then. This is a tight timeline, and the biggest concern here is the potential for short-term drug shortages or price spikes for federal programs. If domestic or approved foreign manufacturing can’t scale up fast enough to replace current Chinese sources, federal purchasers—and ultimately the taxpayers—could face higher costs or temporary supply gaps for critical medicines.
The Carrot: Massive Tax Breaks for Domestic Factories
To help companies make this shift, the bill offers a significant financial incentive (SEC. 3). For companies that buy and use new manufacturing equipment in the U.S. between January 1, 2025, and December 31, 2030, they can immediately deduct 100% of the cost of that equipment from their taxable income. This is called “100% immediate expensing” and it’s a huge deal. Instead of writing off the cost of a multi-million dollar piece of machinery over seven or ten years, they can take the entire deduction in year one. This is a powerful signal to pharmaceutical and medical device companies: invest in U.S. production now, and the tax savings will be substantial.
New Rules for Drug Labels
Finally, the bill adds a new requirement to the Federal Food, Drug, and Cosmetic Act: every drug label must clearly state the country of origin for every single active ingredient (SEC. 2). If a label doesn't include this detailed information, the drug is considered mislabeled. For the average person, this means better transparency about where their medicine is actually coming from. For drug manufacturers, this creates an immediate compliance challenge, as they must now track and disclose the origin of every API to avoid having their products pulled from the market due to mislabeling.