Protectionist industrial policies are back in vogue as governments around the world seek to reshore critical supply chains after years of tumult caused by the pandemic. Yet the pharmaceutical manufacturing boom occurring in the U.S. shows governments don’t need to resort to counterproductive schemes that distort free markets. By simply creating a predictable tax framework and getting out of the way, Washington has ably prepared the playing field for a clear run of domestic investment by the pharmaceutical industry. Other economic sectors are moving forward too.
The enactment of the One Big Beautiful Bill Act (OBBBA) in July 2025 established a clear and predictable tax framework for American businesses. By maintaining key provisions of the 2017 Tax Cuts and Jobs Act (TCJA), OBBBA gives businesses the policy continuity needed to plan and make long-term investments.
For example, the 2017 corporate tax cut, which lowered the top rate from 35% to 21%, is preserved under OBBBA. In the pharmaceutical industry, where building a modern manufacturing facility can take five to seven years or longer, this kind of stability is critical.
While keeping a competitive corporate tax rate is helpful, the truly transformative aspect of OBBBA is that it makes permanent key provisions from TCJA that were previously set to expire. Few are as important for businesses as “100% bonus depreciation,” more properly and accurately called full expensing. This allows companies to deduct the full cost of new investments like equipment from their taxes immediately, rather than spreading those deductions over several years.
TCJA originally allowed full expensing at 100% on a temporary basis from 2017 through 2022, after which it was gradually phased down by 20% annually and set to expire completely by 2027. OBBBA restores 100% bonus depreciation and makes it permanent starting in 2025.
It’s hard to overstate how valuable full expensing is for companies planning major capital investments. Pharmaceutical manufacturing is notoriously capital-intensive, with high upfront costs and long construction timelines. Specialized equipment like bioreactors and cleanroom systems can easily raise the cost of building a new manufacturing plant to hundreds of millions, or even billions of dollars. According to some manufacturers’ websites, a cleanroom alone can run up to $1,500 per square foot.
Even with a competitive corporate tax rate, many projects would struggle to be viable over the long run without the immediate tax deduction. Now that full expensing is codified in permanent law, manufacturers can plan ahead and break ground on new plants with confidence. According to the Tax Foundation, this provision alone is expected to account for nearly half of the economic growth impact of OBBBA.
OBBBA’s reinstatement of immediate research and development (R&D) expensing is another key reform for business investment. Under TCJA, companies could not immediately deduct R&D costs and had to amortize them over five years. OBBBA reverses this and codifies immediate R&D expensing into permanent law.
It’s not difficult to see how important this is for promoting drug development. Relative to sales, no other industry spends more money on R&D than the pharmaceutical sector. In 2024, U.S. pharmaceutical firms spent a whopping 21% of their combined global revenues on R&D.
The impact of these tax reforms is unmistakable. In the past year alone, pharmaceutical companies have announced a gargantuan $486 billion in domestic investments to expand manufacturing and R&D facilities. This represents a staggering 1,471% increase in announced U.S. facility investments versus 2024.
From Montana to North Carolina, Texas to Florida, states across the U.S. are benefitting from this economic activity. Puerto Rico, historically considered a hub for health care products, is another American destination for OBBBA-related development. Recently, one firm, Amgen, unveiled a massive $650 million plan to expand a facility in Juncos, PR, adding to some $40 billion of investment since 2017. According to the company, “The enactment of pro-growth tax policies in TCJA, extended and reinforced by the One Big Beautiful Bill Act of 2025, further facilitates Amgen’s ability to invest domestically in cutting-edge science and manufacturing.”
This surge in domestic production not only strengthens the resilience of a critical supply chain, but also powers the creation of high-skilled manufacturing jobs across the country. The economic impact is even more pronounced after taking into account various spill-over effects, including the thousands of construction jobs required to build these facilities.
The sheer scale of this investment boom would have been difficult to imagine under a top-down, government-led effort to guide the private sector with price controls or tariffs. Heavy-handed attempts to steer the investment decisions of private companies undercut economic efficiency and invariably leave consumers and producers worse off.
Proposals to introduce Most Favored Nation (MFN) drug pricing, a government-imposed price control system that ties U.S. drug prices to lower rates set abroad, would crush the incentive to develop new drugs. Tariffs are no solution either. Given the country’s dependence on foreign inputs for its pharmaceutical products, tariffs would simply leave many of those expensive new factories idle or running below capacity.
The pharmaceutical industry’s momentous investment binge dispels the notion that a manufacturing renaissance can only be achieved by technocrats using the power of government to micromanage private companies. Indeed, other key firms in the American economy, outside of drug manufacturing, are recognizing the value of OBBBA’s provisions as well. Rather than compelling pharmaceutical companies with onerous regulations, lawmakers in Washington can simply set clear tax rules to let the free market work. It turns out that predictability and certainty are among the most effective industrial policies out there.