Puerto Rico at one time supplied the USA with the bulk of our medical supplies and antibiotics. This was a very secure supply chain, since Puerto Rico is a territory of the USA and not a foreign country that may not have our best interests in mind.
Pharmaceutical and Medical Device companies started moving their manufacturing operations to Puerto Rico in 1976, when the Ford Administration signed into law a tax provision called section 936. This was a tax deferment that gave USA multinational companies the option of setting up operations in Puerto Rico, totally exempt from federal tax. In short order, our medical supply and pharmaceutical companies relocated the bulk of their manufacturing operations to this island to take advantage of the tax break. The reason for section 936 was allegedly to bring prosperity to Puerto Rico, who had been an economic basket case in the Caribbean and a drag on our tax dollars.
Although we benefited greatly from this strategic relationship with Puerto Rico, the relocated manufacturing did not pass much of the tax savings onto the islands general public. They kept wages artificially low, not increasing the general prosperity of the islands population. Further, by the time President Clinton was in office, the tax deferments became increasingly unpopular with our political class, and the President signed into law a bill eliminating section 936. This started in 1996, and over a 10 year period the tax break was gradually eliminated.
The elimination of section 936 started a flood of medical businesses moving out of Puerto Rico, many of them setting up business in China. Puerto Rico went from being our main supplier of manufactured drugs and medical devices to a secondary supplier, with just a skeleton of the infrastructure for manufacturing medicines and devices left in tact.
Since then Puerto Rico has once again become an economic basket case. Hurricanes and lack of jobs have left their younger people no choice but to immigrate to our mainland. However, the possibility of resurrecting their medical manufacturing is not only possible, but with the China threat, strategically imperative.
We need to give private industry an incentive to abandon their presence in China and other countries where our supplies of critical drugs and medical supplies can be halted on a political whim. We have an island that is part of our country that needs help to recover, and has the wherewithal to once again be our main “go to” for our drug and medical supplies. Let’s give our companies the incentive that they need to once again resurrect Puerto Rico’s legacy as our main drug and medical device supplier, and at the same time build in incentive to improve the lives of these islanders. Not only will Puerto Rico be in a position to come out of bankruptcy and rebuild their island, but their ex-patriots will have good reason to return home and assist in the island’s renaissance.