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US mulls Federal Trade Zone status for Neolpharma Puerto Rico plant

By Gareth MacDonald+

Last updated on 19-Aug-2014 at 16:23 GMT2014-08-19T16:23:11Z

US mulls Federal Trade Zone status for Neolpharma Puerto Rico plant

US authorities are reviewing a Neolpharma request for tax breaks for APIs imported to a former Pfizer-owned plant it operates in Puerto Rico.

In an announcement this week the US Department of Commerce said it has accepted and begun a review of Mexico-based Neolpharma's request for Federal Trade Zone (FTZ) status for its solid dose manufacturing facility in Caguas, Puerto Rico. 

If granted the FTZ status would reduce the duties on foreign-made drug actives, intermediates and production equipment brought to the site.

Neolpharma originally asked for consideration in March 2013  when finance director, Marco Monroureau, told the Puerto Rico Industrial Development Company (PRIDCO) the aim was to “lower customs related costs” of importation, manufacturing and distribution activities and “to facilitate warehousing” at the site.

According to the original application, drugs manufactured at the Caguas site will be sold in Mexico and in markets across Latin, Central and South America which, under FTZ rules, will mean the imported active pharmaceutical ingredient (APIs) will not be subject to US import levies.

Neolpharma also said it plans to seek US Food and Drug Administration (FDA) approval for some drugs made at the site. If the products are approved in the US the firm will then be able to choose to pay taxes on either the original APIs of the finished products.

Former Pfizer plant

Neolpharma bought the Caguas site from Pfizer in 2012, two years after the US drug major announced its intention to close the facility as part of a wider reduction of its global manufacturing footprint.

At present Neolpharma imports four APIs for the facility: clarithromycin; azithromycin; levothyroxine; hydroxyzine pamoate; and hydroxyzine hydrochloride, which it describes as “foreign-status materials” sourced outside the US.

If Neolpharma is granted FTZ status – its application is now open to public comment for 40 days – the firm stands to reduce its tax bill by up to 6.5% for each API it imports that is used in a product subsequently sold in the US.

According to the US Department of Commerce website a number of pharmaceutical companies already have FTZ-designated facilities in Puerto Rico, including Bristol Myers Squibb (B-MS), Abbvie, Eli Lilly , Patheon, Amgen and Pfizer.

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