MADE in America Act
Bill: S.2082 | Sponsor: Sen. Scott, Tim (R-SC)
Policy area: Health

Summary:
Manufacturing API, Drugs, and Excipients in America Act or the MADE in America Act
This bill establishes a tax credit for taxpayers engaged in medical production activities in certain areas and contains other provisions related to pharmaceuticals.
An eligible taxpayer may claim a tax credit equal to 25% of qualified expenditures related to the production of pharmaceuticals, medical devices, or other related items in a designated qualified opportunity zone with a poverty rate higher than 30%. The bill provides for increases to this tax credit in certain situations, such as if a substantial portion of the employees reside in areas with certain poverty levels.
In addition, the Food and Drug Administration (FDA) must continue programs to facilitate the development and review of new drug or biological products that are manufactured using certain advanced manufacturing technologies. The bill imposes various requirements on these programs, including deadlines for evaluating such a technology.
Furthermore, the Department of Health and Human Services must ensure timely and effective internal coordination and alignment between FDA field investigators and the staff of the Center for Drug Evaluation and Research's Office of Compliance and Drug Shortage Program regarding reports and feedback related to facility inspections.

To mitigate drug shortages and provide incentives for maintaining, 
 expanding, and relocating the manufacturing of active pharmaceutical 
 ingredients, excipients, medical diagnostic devices, pharmaceuticals, 
 and personal protective equipment in the United States, and for other 
                               purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Manufacturing API, Drugs, and 
Excipients in America Act'' or the ``MADE in America Act''.

SEC. 2. TABLE OF CONTENTS.

    The table of contents of this Act is as follows:

Sec. 1. Short title.
Sec. 2. Table of contents.
                       TITLE I--HEALTH PROVISIONS

Sec. 101. Report to Congress on barriers to domestic manufacturing of 
                            medical products.
Sec. 102. Enhance intra-agency coordination and public health 
                            assessment with regard to compliance 
                            activities.
Sec. 103. Reporting of mutual recognition agreements for inspections 
                            and review activities.
Sec. 104. Enhancing transparency of drug facility inspection timelines.
Sec. 105. Advanced manufacturing technologies program.
   TITLE II--TAX INCENTIVES TO INCREASE DOMESTIC PHARMACEUTICAL AND 
                       MEDICAL DEVICE PRODUCTION

Sec. 201. Credit for pharmaceutical and medical device production 
                            activities in distressed zones.

                       TITLE I--HEALTH PROVISIONS

SEC. 101. REPORT TO CONGRESS ON BARRIERS TO DOMESTIC MANUFACTURING OF 
              MEDICAL PRODUCTS.

    (a) Report.--Not later than 6 months after the date of enactment of 
this Act, the Secretary of Health and Human Services, the Secretary of 
the Treasury, the Secretary of Commerce, and the United States Trade 
Representative (collectively referred to in this section as the 
``Secretaries'') shall submit to the Committee on Health, Education, 
Labor, and Pensions of the Senate and the Committee on Energy and 
Commerce of the House of Representatives a report on barriers to 
domestic manufacturing of active pharmaceutical ingredients, finished 
drug products, and devices that are imported from outside of the United 
States.
    (b) Contents.--Such report shall--
            (1) identify factors that limit or otherwise discourage the 
        domestic manufacturing of active pharmaceutical ingredients, 
        drugs, and devices that are currently imported from outside of 
        the United States, including any Federal, State, local, or 
        Tribal laws that hinder domestic manufacturing opportunities; 
        and
            (2) recommend specific strategies to overcome the 
        challenges identified under paragraph (1), including 
        strategies--
                    (A) to develop effective incentives for domestic 
                manufacturing; and
                    (B) to make changes to laws or regulations that 
                hinder domestic manufacturing opportunities.
    (c) Consultation.--In preparing the report under subsection (a), 
the Secretaries shall consult with--
            (1) the Food and Drug Administration, the Centers for 
        Medicare & Medicaid Services, the Department of Defense, the 
        Department of State, the Department of Veterans Affairs, the 
        Department of Justice, and any other Federal agencies as 
        appropriate; and
            (2) relevant stakeholders, including drug, device, and 
        active pharmaceutical ingredient manufacturers, and other 
        entities, as appropriate.
    (d) Definition.--In this section, the term ``active pharmaceutical 
ingredient'' has the meaning given to such term in section 207.1 of 
title 21, Code of Federal Regulations (or any successor regulations).
    (e) Publication.--The Secretary shall make the report under 
subsection (a) available on the public website of the Department of 
Health and Human Services.

SEC. 102. ENHANCE INTRA-AGENCY COORDINATION AND PUBLIC HEALTH 
              ASSESSMENT WITH REGARD TO COMPLIANCE ACTIVITIES.

    (a) Coordination.--Section 506D of the Federal Food, Drug, and 
Cosmetic Act (21 U.S.C. 356d) is amended by adding at the end the 
following:
    ``(g) Coordination.--The Secretary shall ensure timely and 
effective internal coordination and alignment among the field 
investigators of the Food and Drug Administration and the staff of the 
Center for Drug Evaluation and Research's Office of Compliance and Drug 
Shortage Program regarding the reviews of reports shared pursuant to 
section 704(b)(2), and any feedback or corrective or preventive actions 
in response to such reports.''.
    (b) Reporting.--Section 506C-1(a)(2) of the Federal Food, Drug, and 
Cosmetic Act (21 U.S.C. 356c-1(a)(2)) is amended to read as follows:
            ``(2)(A) describes the communication between the field 
        investigators of the Food and Drug Administration and the staff 
        of the Center for Drug Evaluation and Research's Office of 
        Compliance and Drug Shortage Program, including the Food and 
        Drug Administration's procedures for enabling and ensuring such 
        communication;
            ``(B) provides the number of reports described in section 
        704(b)(2) that were required to be sent to the appropriate 
        offices of the Food and Drug Administration with expertise 
        regarding drug shortage and the number of such reports that 
        were sent; and
            ``(C) describes the adoption and utilization of the 
        approach described in section 506D(g);''.
    (c) Applicability.--
            (1) Subsection (a).--The amendment made by subsection (a) 
        shall apply beginning on the date of enactment of this Act.
            (2) Subsection (b).--The amendment made by subsection (b) 
        shall apply beginning on the date that is 1 year after the date 
        of enactment of this Act.

SEC. 103. REPORTING OF MUTUAL RECOGNITION AGREEMENTS FOR INSPECTIONS 
              AND REVIEW ACTIVITIES.

    (a) In General.--Not later than the end of calendar year 2020, and 
annually thereafter, the Secretary of Health and Human Services 
(referred to in this section as the ``Secretary'') shall publish a 
report on the public website of the Food and Drug Administration on the 
utilization of agreements entered into pursuant to section 809 of the 
Federal Food, Drug, and Cosmetic Act (21 U.S.C. 384e) or otherwise 
entered into by the Secretary to recognize inspections between drug 
regulatory authorities across countries and international regions with 
analogous review criteria to the Food and Drug Administration, such as 
the Pharmaceutical Inspection Co-Operation Scheme, the Mutual 
Recognition Agreement with the European Union, and the Australia-
Canada-Singapore-Switzerland Consortium, in the previous fiscal year.
    (b) Content.--The report under subsection (a) shall include each of 
the following:
            (1) The total number of establishments that are registered 
        under section 510(i) of the Federal Food, Drug, and Cosmetic 
        Act (21 U.S.C. 360(i)), and of such establishments, the number 
        in each region of interest.
            (2) The total number of inspections conducted as described 
        in subparagraphs (A) and (B) of paragraph (5) at establishments 
        described in paragraph (1).
            (3) Of the inspections described in paragraph (2), the 
        total number of inspections in each of region of interest.
            (4) Of the inspections in each region of interest reported 
        pursuant to paragraph (3), the number of inspections in each 
        FDA inspection category.
            (5) Of the number of inspections reported under each of 
        paragraphs (3) and (4)--
                    (A) the number of inspections which have been 
                conducted pursuant to an agreement or other recognition 
                described in subsection (a); and
                    (B) the number of inspections which have been 
                conducted by employees or contractors of the Food and 
                Drug Administration.
    (c) Definitions.--In this subsection:
            (1) FDA inspection category.--The term ``FDA inspection 
        category'' means the following inspection categories:
                    (A) Inspections to support approvals of changes to 
                the manufacturing process of drugs approved under 
                section 505 of the Federal Food, Drug, and Cosmetic Act 
                (21 U.S.C. 355) or section 351 of the Public Health 
                Service Act (42 U.S.C. 262).
                    (B) Good manufacturing practice surveillance 
                inspections.
                    (C) For-cause inspections.
            (2) Region of interest.--The term ``region of interest'' 
        means China, India, the European Union, and any other 
        geographic region as the Secretary determines appropriate.

SEC. 104. ENHANCING TRANSPARENCY OF DRUG FACILITY INSPECTION TIMELINES.

    Section 902 of the FDA Reauthorization Act of 2017 (21 U.S.C. 355 
note) is amended to read as follows:

``SEC. 902. ANNUAL REPORT ON INSPECTIONS.

    ``Not later than March 1 of each year, the Secretary of Health and 
Human Services shall post on the public website of the Food and Drug 
Administration information related to inspections of facilities, 
including inspections that are necessary for approval of a drug under 
subsection (c) or (j) of section 505 of the Federal Food, Drug, and 
Cosmetic Act (21 U.S.C. 355), approval of a device under section 515 of 
such Act (21 U.S.C. 360e), or clearance of a device under section 
510(k) of such Act (21 U.S.C. 360(k)) that were conducted during the 
previous calendar year. Such information shall include the following:
            ``(1) The median time following a request from staff of the 
        Food and Drug Administration reviewing an application or report 
        to the beginning of the inspection, including--
                    ``(A) the median time for drugs described in 
                section 505(j)(11)(A)(i) of the Federal Food, Drug, and 
                Cosmetic Act (21 U.S.C. 355(j)(11)(A)(i));
                    ``(B) the median time for drugs described in 
                section 506C(a) of such Act (21 U.S.C. 356c(a)) only; 
                and
                    ``(C) the median time for drugs on the drug 
                shortage list in effect under section 506E of such Act 
                (21 U.S.C. 356f).
            ``(2) The median time from the issuance of a report 
        pursuant to section 704(b) of such Act (21 U.S.C. 374(b)) to 
        the sending of a warning letter, issuance of an import alert, 
        or holding of a regulatory meeting for inspections for which 
        the Secretary concluded that regulatory or enforcement action 
        was indicated, including the median time for each category of 
        drugs listed in subparagraphs (A) through (C) of paragraph (1).
            ``(3) The median time from the sending of a warning letter, 
        issuance of an import alert, or holding of a regulatory meeting 
        to resolution of the actions indicated to address the 
        conditions or practices observed during an inspection.
            ``(4) The number of facilities that were unable to 
        implement requested corrective or preventive actions following 
        a report pursuant to such section 704(b), resulting in a 
        withhold recommendation, including the number of such times for 
        each category of drugs listed in subparagraphs (A) through (C) 
        of paragraph (1).''.

SEC. 105. ADVANCED MANUFACTURING TECHNOLOGIES PROGRAM.

    Subchapter A of chapter V of the Federal Food, Drug, and Cosmetic 
Act (21 U.S.C. 351 et seq.) is amended by adding at the end the 
following:

``SEC. 524B. ADVANCED MANUFACTURING TECHNOLOGIES PROGRAM.

    ``(a) In General.--Not later than 1 year after the date of 
enactment of the Manufacturing API, Drugs, and Excipients in America 
Act, the Secretary shall continue in effect the programs to facilitate 
the development and review of an application under subsection (b) or 
(j) of section 505 of this Act or subsection (a) or (k) of section 351 
of the Public Health Service Act for a drug or biological product that 
is manufactured using one of more advanced manufacturing technologies 
that have been designated in accordance with subsection (b).
    ``(b) Designation.--The Secretary shall designate a method of 
manufacturing or development of a drug or biological product as an 
advanced manufacturing technology under this section if it incorporates 
a novel technology or uses an established technique or technology in a 
novel way that--
            ``(1) enhances drug quality; or
            ``(2) improves the flexibility, robustness, or efficiency 
        of the manufacturing process to--
                    ``(A) prevent or resolve a drug shortage;
                    ``(B) reduce premarket development time; or
                    ``(C) increase the supply of drugs described in 
                paragraph (1) or (2) of section 506C(a) for national 
                emergencies.
    ``(c) Consultation.--If the Secretary designates a method of 
manufacturing as an advanced manufacturing technology under this 
section, the Secretary shall take actions to expedite the development 
and implementation of such method of manufacture for purposes of 
approval of an application under subsection (c) or (j) of section 505 
of this Act or subsection (a) or (k) of section 351 of the Public 
Health Service Act, which may include, as appropriate, holding meetings 
between the sponsor of the application and appropriate Food and Drug 
Administration staff throughout the development of the drug of 
biological product using such advanced manufacturing technology.
    ``(d) Evaluation of an Advanced Manufacturing Technology.--
            ``(1) Package.--A person who seeks designation of an 
        advanced manufacturing technology under this section shall 
        submit to the Secretary a package of scientific evidence 
        supporting the implementation of the advanced manufacturing 
        technology in a particular context-of-use. The Secretary shall 
        assist with the development of such package by--
                    ``(A) providing timely advice to, and interactive 
                communication with, the sponsor regarding the 
                development of the technology; and
                    ``(B) involving senior managers and experienced 
                staff of the Food and Drug Administration, as 
                appropriate, in a collaborative, cross-disciplinary 
                review of the method of manufacturing.
            ``(2) Evaluation.--Within 90 days of receiving a package 
        under paragraph (1), the Secretary shall determine whether a 
        designated advanced manufacturing technology is validated for 
        the proposed context of use based on the scientific merit the 
        supporting evidence provided by the sponsor.
            ``(3) Effect of designation.--Upon designation of an 
        advanced manufacturing technology, the holder of the advanced 
        manufacturing technology designation, or a person the advanced 
        manufacturing technology designation holder authorizes, may 
        rely upon the advanced manufacturing technology for use across 
        multiple manufacturing or product lines within the same 
        context-of-use without having to re-submit data to the 
        Secretary validating the underlying technology.
    ``(e) Implementation and Reporting.--
            ``(1) Public meeting.--The Secretary shall publish in the 
        Federal Register a notice of a public meeting, to be held not 
        later than 1 year after the date of enactment of the 
        Manufacturing API, Drugs, and Excipients in America Act, to 
        discuss and obtain input and recommendations from stakeholders 
        regarding the goals and scope of, and a suitable framework and 
        procedures and requirements for, the program under this 
        section.
            ``(2) Program guidance.--The Secretary shall--
                    ``(A) not later than 1 year after the date of 
                enactment of the Manufacturing API, Drugs, and 
                Excipients in America Act, issue draft guidance 
                regarding the goals and implementation of the program 
                under this section; and
                    ``(B) not later than 2 years after the date of 
                enactment of the Manufacturing API, Drugs, and 
                Excipients in America Act, issue final guidance with 
                respect to the implementation of such program.
            ``(3) Report.--The Secretary shall make available on the 
        public website of the Food and Drug Administration an annual 
        report on the progress of the programs under this section.''.

   TITLE II--TAX INCENTIVES TO INCREASE DOMESTIC PHARMACEUTICAL AND 
                       MEDICAL DEVICE PRODUCTION

SEC. 201. CREDIT FOR PHARMACEUTICAL AND MEDICAL DEVICE PRODUCTION 
              ACTIVITIES IN DISTRESSED ZONES.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 is amended by adding at the end 
the following new section:

``SEC. 45U. DISTRESSED ZONE PHARMACEUTICAL AND MEDICAL DEVICE 
              PRODUCTION CREDIT.

    ``(a) In General.--For purposes of section 38, the distressed zone 
pharmaceutical and medical device production credit for the taxable 
year shall be an amount equal to the applicable percentage of the 
qualified production activity expenditures of the taxpayer for the 
taxable year.
    ``(b) Applicable Percentage.--For purposes of this section--
            ``(1) In general.--Except as provided in paragraph (2), the 
        term `applicable percentage' means 25 percent.
            ``(2) Increased amount where employees reside in distressed 
        zone.--In the case of any qualified pharmaceutical or medical 
        device production business a substantial portion of the 
        employees of which reside in a distressed zone, the applicable 
        percentage shall be 30 percent.
    ``(c) Qualified Production Activity Expenditures.--For purposes of 
this section--
            ``(1) In general.--The term `qualified production activity 
        expenditures' means--
                    ``(A) wages paid or incurred to an employee of the 
                taxpayer for services performed by such employee in the 
                conduct of a qualified pharmaceutical or diagnostic 
                medical device production business in a distressed zone 
                (but only if the employee's principal place of 
                employment is in a distressed zone), and
                    ``(B) qualified pharmaceutical or medical device 
                production expenditures.
            ``(2) Qualified pharmaceutical or medical device production 
        business.--
                    ``(A) In general.--The term `qualified 
                pharmaceutical or medical device production business' 
                means the trade or business of producing qualified 
                pharmaceuticals in commercial quantities.
                    ``(B) Qualified pharmaceuticals.--
                            ``(i) In general.--The term `qualified 
                        pharmaceuticals' means pharmaceuticals, active 
                        pharmaceutical ingredients, excipients, medical 
                        diagnostic devices, or personal protective 
                        equipment.
                            ``(ii) Pharmaceutical.--The term 
                        `pharmaceuticals'--
                                    ``(I) means any drug (as defined in 
                                section 201 of the Federal Food, Drug, 
                                and Cosmetic Act); and
                                    ``(II) includes a biological 
                                product (as defined in section 351 of 
                                the Public Health Service Act).
                            ``(iii) Active pharmaceutical ingredient.--
                        The term `active pharmaceutical ingredients' 
                        has the meaning given to such term in section 
                        207.1 of title 21, Code of Federal Regulations 
                        (or any successor regulations).
                            ``(iv) Excipient.--The term `excipient'--
                                    ``(I) means any inactive ingredient 
                                that is intentionally added to a 
                                pharmaceutical that is not intended to 
                                exert therapeutic effects at the 
                                intended dosage, other than by acting 
                                to improve product delivery; and
                                    ``(II) includes any such filler, 
                                extenders, diluent, wetting agent, 
                                solvent, emulsifier, preservative, 
                                flavor, absorption enhancer, sustained 
                                release matrix, and coloring agent.
                            ``(v) Medical diagnostic device.--The term 
                        `medical diagnostic device' means any device 
                        (as defined in section 201(h) of the Federal 
                        Food, Drug, and Cosmetic Act) intended for use 
                        in the diagnosis of disease or other 
                        conditions.
                            ``(vi) Personal protective equipment.--The 
                        term `personal protective equipment' means--
                                    ``(I) any device (as defined in 
                                section 201(h) of the Federal Food, 
                                Drug, and Cosmetic Act) that is a face 
                                mask, filtering facepiece respirator, 
                                face shield, surgical mask, gown, other 
                                apparel, or glove that is intended for 
                                a medical purpose; and
                                    ``(II) any particulate filtering 
                                air purifying respiratory protective 
                                device that is approved by the National 
                                Institute for Occupational Safety and 
                                Health under part 84 of title 42, Code 
                                of Federal Regulations (or successor 
                                regulations).
            ``(3) Certain health plan expenses treated as wages.--
                    ``(A) In general.--The term `wages' shall include 
                so much of the eligible employer's qualified health 
                plan expenses as are properly allocable to such wages.
                    ``(B) Qualified health plan expenses.--For purposes 
                of this paragraph, the term `qualified health plan 
                expenses' means amounts paid or incurred by the 
                eligible employer to provide and maintain a group 
                health plan (as defined in section 5000(b)(1)), but 
                only to the extent that such amounts are excluded from 
                the gross income of employees by reason of section 
                106(a) of such Code.
                    ``(C) Allocation rules.--For purposes of this 
                paragraph, qualified health plan expenses shall be 
                allocated to qualified wages in such manner as the 
                Secretary may prescribe. Except as otherwise provided 
                by the Secretary, such allocation shall be treated as 
                properly made if made on the basis of being pro rata 
                among employees and pro rata on the basis of periods of 
                coverage (relative to the periods to which such wages 
                relate).
            ``(4) Qualified pharmaceutical or medical device production 
        expenditures.--
                    ``(A) Definition.--The term `qualified 
                pharmaceutical or medical device production 
                expenditures' means amount paid or incurred (whether or 
                not chargeable to capital account) for qualified 
                property used in the conduct of a qualified 
                pharmaceutical or medical device production business in 
                a distressed zone (but only if the primary use of such 
                property is in a distressed zone).
                    ``(B) Qualified property.--
                            ``(i) In general.--The term `qualified 
                        property' means any tangible personal property 
                        (other than a building or its structural 
                        components) used in the conduct of a qualified 
                        pharmaceutical or medical device production 
                        business in a distressed zone (but only if the 
                        primary use of such property is in a distressed 
                        zone).
                            ``(ii) Exception.--Such term shall not 
                        include any property described in section 50(b) 
                        (determined as if the United States included 
                        Puerto Rico).
    ``(d) Distressed Zone.--For purposes of this section, the term 
`distressed zone' means a population census tract--
            ``(1) which has been designated as a qualified opportunity 
        zone under section 1400Z-1, and
            ``(2) which has a poverty rate in excess of 30 percent for 
        the calendar year prior to the calendar year that includes the 
        date of enactment of this section.
    ``(e) Special Rules.--
            ``(1) Application to united states shareholders of 
        controlled foreign corporations.--
                    ``(A) In general.--In the case of a domestic 
                corporation that is a United States shareholder of a 
                qualified controlled foreign corporation, the credit 
                under subsection (a) (determined without regard to this 
                paragraph) shall be increased by an amount equal to 30 
                percent of the corporation's pro rata share (determined 
                under rules similar to the rules of section 951(a)(2)) 
                of qualified production activity expenditures of such 
                controlled foreign corporation for the taxable year of 
                the qualified controlled foreign corporation ending 
                with or within the taxable year of the domestic 
                corporation.
                    ``(B) Qualified corporation.--For purposes of 
                subparagraph (A), the term `qualified controlled 
                foreign corporation' means, for any taxable year, a 
                controlled foreign corporation which does not have 
                gross income that is effectively connected with the 
                conduct of a trade or business within the United States 
                for such taxable year .
            ``(2) Reduction in basis.--If a credit is determined under 
        this section with respect to any property by reason of any 
        qualified production activity expenditures described in 
        subsection (b)(1)(B), the basis of such property shall be 
        reduced by the amount of the credit so determined.
            ``(3) Coordination with other credits.--Any qualified 
        production activity expenditures taken into account in 
        determining the amount of the credit under subsection (a) shall 
        not be taken into account in determining a credit under any 
        other provision of this chapter.
    ``(f) Recapture.--
            ``(1) In general.--If, during any taxable year, property 
        take into account under subsection (c)(1)(B) is disposed of, or 
        otherwise ceases to be used by the taxpayer in the active trade 
        or business of producing qualified pharmaceuticals in 
        commercial quantities, before the close of the recapture 
        period, then the tax under this chapter for such taxable year 
        shall be increased by the recapture percentage of the aggregate 
        decrease in the credits allowed under section 38 for all prior 
        taxable years which would have resulted solely from reducing to 
        zero any credit determined under this section with respect to 
        such property.
            ``(2) Recapture percentage.--For purposes of subparagraph 
        (A), the recapture percentage shall be determined in the same 
        manner as under section 50(a)(1)(B).
            ``(3) Application to united states shareholders.--In the 
        case of any taxpayer to whom a credit is allowed by reason of 
        subsection (e)(1), paragraph (1) shall be applied by 
        substituting `the controlled foreign corporation with respect 
        to which the taxpayer is a United States shareholder' for `the 
        taxpayer'.
            ``(4) Application of other rules.--For purposes of this 
        paragraph, rules similar to the rules of paragraphs (3), (4), 
        and (5) (other than subparagraph (A) thereof) of section 
        50(a)(1) shall apply.''.
    (b) Credit Allowed Against Alternative Minimum Tax.--Section 
38(c)(4)(B) of such Code is amended by redesignating clauses (x), (xi), 
and (xii) as clauses (xi), (xii), and (xiii), respectively, and by 
inserting after clause (ix) the following new clause:
                            ``(x) the credit determined under section 
                        45U,''.
    (c) Credit Allowed Against Base Erosion Anti-Abuse Tax.--Section 
59A(b)(1)(B)(ii) of such Code is amended by striking ``plus'' at the 
end of subclause (I), by redesignating subclause (II) as subclause 
(III), and by inserting after subclause (I) (as so amended) the 
following new subclause:
                                    ``(II) the credit allowed under 
                                section 38 for the taxable year which 
                                is properly allocable to the distressed 
                                zone pharmaceutical and medical device 
                                production credit determined under 
                                section 45U(a), plus''.
    (d) Denial of Deduction.--Section 280C of such Code is amended by 
adding at the end the following new subsection:
    ``(i) Distressed Zone Pharmaceutical and Medical Device Production 
Credit.--No deduction shall be allowed for that portion of the 
qualified production activity expenditures (as defined in section 
45U(b)) otherwise allowable as a deduction for the taxable year which 
is equal to the amount of the distressed zone pharmaceutical and 
medical device production credit determined for such taxable year under 
section 45U(a).''.
    (e) Part of General Business Credit.--Section 38(b) of such Code is 
amended by striking ``plus'' at the end of paragraph (32), by striking 
the period at the end of paragraph (33) and inserting ``, plus'', and 
by adding at the end the following new paragraph:
            ``(34) the distressed zone pharmaceutical and medical 
        device production credit determined under section 45U(a).''.
    (f) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 is amended by adding at the end 
the following new item:

``Sec. 45U. Distressed zone pharmaceutical and medical device 
                            production credit.''.
    (g) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred after the date of the enactment of 
this Act.
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