S1407

1. **What happened and its current status**: On April 10, 2025, Senator Tom Cotton (R-AR) introduced S. 1407, the ABC Safe Drug Act. The bill was read twice and referred to the Senate Committee on Finance, where it remains as of the analysis date (April 28, 2026). It is an early-stage bill with no further legislative action. The bill would restrict federal health programs (HHS, VA, DoD, etc.) from purchasing drugs that contain active pharmaceutical ingredients (APIs) manufactured in China. It phases in: by January 2028, at least 60% of APIs must be from non-China approved countries; by January 2030, 100%. HHS can grant waivers through 2030, but none beyond that. The bill also includes labeling requirements (country of origin for each active ingredient) and a temporary 100% bonus depreciation (expensing) for qualified pharmaceutical and medical device manufacturing property placed in service after December 31, 2024 and before January 1, 2031. 2. **The money trail — authorization vs. appropriation**: This bill authorizes **no direct federal spending**. The restriction reduces federal procurement options, potentially increasing drug costs if domestic alternatives are more expensive. The tax incentive is a revenue provision: it allows companies to immediately deduct 100% of qualified manufacturing property costs, reducing federal tax revenue. The bill does not appropriate funds for reshoring or facility construction. The actual fiscal impact depends on IRS tax expenditure estimates and HHS waiver decisions. 3. **Structural winners and losers**: *Winners*: U.S. contract manufacturers and suppliers of pharmaceutical APIs and intermediates that do not source from China. Pure-play API manufacturers like $CAMT (Cambrex) or $CDMO (Avid Bioservices, now part of $CXM?) would benefit from increased demand for domestic API production. Companies with established U.S. biologics manufacturing ($AMGN, ) are less exposed to China API reliance. *Losers*: Big pharma with significant China-sourced APIs for small-molecule drugs face compliance costs. The tax incentive partially offsets these costs. Diversification timelines matter: companies needing to build new U.S. facilities will take years, and the tax incentive window closes in 2030. 4. **Real market data**: The provided Yahoo Finance data shows the five major pharma tickers in a broad 7-day decline: $PFE -1.19%, $MRK -2.53%, +0.75% (outlier), $LLY -5.15%, $AMGN -1.84%. The 30-day changes range from -0.48% ($LLY) to -8.02% ($MRK). These movements are consistent with sector-wide headwinds (e.g., IRA drug pricing negotiation, pipeline setbacks) rather than the ABC Safe Drug Act, which is at a procedural early stage with zero market pricing of its impact. 5. **Timeline**: The bill has no scheduled markup or hearing. It sits in the Senate Finance Committee. For it to become law, it must pass the committee, then the full Senate, then the House (or be inserted into must-pass legislation), and be signed by the President. The 119th Congress runs through January 2027, giving roughly 8 months for legislative action. The current bill's enforcement dates (2028/2030) are beyond the 119th Congress, meaning even if passed, implementation is years away. The recent Presidential Executive Order on Accelerating Medical Treatments for Serious Mental Illness (April 18, 2026) is unrelated to this bill's supply chain focus.