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Executive Summary

U.S. pharmaceutical companies with Section 936 Puerto Rico operations have made "twin plant" investments of approximately $ 16.4 mil. in the Caribbean Basin in the past two years, according to a recent progress report on the Caribbean Development initiative. Prepared by the government of Puerto Rico and submitted to the House Ways and Means Committee on Sept. 15, the report lists 12 pharmaceutical companies with operations in Puerto Rico that "committed themselves with the Governor of Puerto Rico and with representatives of the U.S. government to make new investments in the Caribbean Basin, if Section 936 remains unchanged." he largest health care-related capital investment to date in the Caribbean Basin made by Baxter, which invested $ 2.2 mil. in a Costa Rican plastic tube assembly and packing plant that opened in January, the report notes. Baxter also has two medical device plants in operation in the Dominican Republic constructed at an expense of $ 5.2 mil. The three Baxter plants employ over 1,060 combined. Other companies supporting the "twin plant" concept are Merck, which spent $ 1 mil. on a plant in Costa Rica that manufactures I.V. delivery systems for ivermectin, and Schering-Plough, which invested $ 1 mil. in a pharmaceutical facility in Grenada. In addition, a joint venture between Upjohn, Lilly and Abbott, CBI Uniforms, has invested $ 2 mil. in a Costa Rican plant that produces medical-related apparel, such as hospital gowns. Abbott also has committed to a $ 1.1 mil. enteral-feeding system tubes assembly plant in Grenada (see chart below). U.S. DRUG INDUSTRY 936 CORPORATION "TWIN PLANT" COMMITMENTS(NEW LINE)Chart from progress report on Caribbean Development Program prepared by the Commonwealth of Puerto Rico for the U.S. House of Representatives Ways and Means Committee; dollars in thousands Note: This table may be divided, and additional information on a particular entry may appear on more than one screen. U.S. DRUG INDUSTRY 936 CORPORATION "TWIN PLANT" COMMITMENTS Chart from progress report on Caribbean Development Program prepared by the Commonwealth of Puerto Rico for the U.S. House of Representatives Ways and Means Committee; dollars in thousands (FOOTNOTE) * Two plants in operation. (END FOOT) Also mentioned in the report, but not listed among the 936 commitments, is a Syntex plant in the Bahamas and a small American Home Products' plant in the Dominican Republic. The Syntex twin plant in the Bahamas supplies raw materials to the company's 936 pharmaceutical plant in Puerto Rico. However, four drug companies that originally committed to additional investments in the Caribbean Basin "have had to cancel their plans to invest," the report states, "due to corporate restructuring or to market conditions and regulatory changes." Besides the twin plant commitments, another important aspect of Sec. 936 is the use of tax credit capital in Puerto Rico for development loans in the Caribbean Basin. However, an initial stumbling block has been the U.S. government's requirement that Carribean Basin governments interested in 936 funds agree to tax information exchange with the U.S. Treasury Dept. So far, only Barbados, Grenada, Jamaica and, most recently, Dominica have signed such agreements. As a result, only $ 133.9 mil. in 936 funds have been endorsed for projects in Jamaica, Barbados and Dominica. Another $ 171.5 mil. in investments for eight other projects in the four countries is under evaluation the report notes. The report was prepared for a Sept. 15 hearing before the Ways & Means/Trade Subcommittee on HR 3101, a bill designed to expand the programs established by the Caribbean Basin Economic Recovery Act. The bill does not contain provisions affecting 936 tax credits.

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