6 Reasons Pharma Manufacturing Has Eyes On Puerto Rico

By Katie Anderson, Chief Editor, Pharmaceutical Online

The Commonwealth of Puerto Rico is home to a little over three million people across roughly 3,500 square miles, with almost a quarter of North Carolina’s population and one-fourteenth of its land area. So why is the island referred to as “the medicine cabinet of the U.S.” and “pharma island,” and why have 11 of the largest pharmaceutical manufacturers chosen to make medicine there?

The answer is multifactorial. Pharmaceutical manufacturing in Puerto Rico accelerated in the 1960s, when Operation Bootstrap helped transform the island’s agricultural economy into one based on modern manufacturing. Section 936 followed, creating a tax incentive that eliminated federal taxes for manufacturers that sent revenue from medicines made in Puerto Rico back to the U.S.

Unfortunately, Section 936 expired in 2005, dampening the momentum for biotechs with facilities in Puerto Rico. More recently, efforts to onshore or nearshore U.S.-bound drugs and strengthen the supply chain have reignited interest in “pharma island,” with four manufacturers announcing developments or expansions there in 2025 and 2026, totaling more than $1.5 billion.

Several advantages explain why Puerto Rico continues to attract pharma investment, especially as manufacturers reassess supply chain risk and look for options closer to the U.S. mainland.

1. Same Regulatory Framework

As a commonwealth of the United States, the pharmaceutical industry in Puerto Rico falls under the GMP manufacturing and drug approval regulatory framework of the U.S. Food and Drug Administration. This, of course, eliminates the need for manufacturers to navigate additional regulatory oversight for manufacturing or approval. It also shares the same legal framework when it comes to patents and legal protections.

2. Financial Incentives

Although Section 936 expired in 2005, Act 60 set about a number of financial incentives for pharmaceutical manufacturers upon its passing in 2019. They include a 4% fixed corporate income tax rate, an up to 50% tax credit for R&D, a 75% property tax exemption, and a 100% tax credit for profits from exempt manufacturing operations.

3. Proximity to the U.S.

First and foremost, Puerto Rico’s proximity to the U.S. offers companies a significant advantage, with the ability to ship time-sensitive materials and drug product back to the U.S. efficiently and expediently. The island is known for its expertise in cold chain shipping, with “coolports” at all major airports. Because the island falls under the U.S. Foreign Trade Zone (FTZ) agreement, material brought into Puerto Rico to be used for drug product are exempt from customs duties. In addition, drug product sent to the U.S. from the island does not have to go through the traditional customs checks.

4. High-tech Facilities and Technology

Perhaps one of the biggest draws to manufacturing pharmaceuticals on pharma island is the technological prowess it has developed over the past seven decades. The advanced facilities in Puerto Rico are known for their master of complex biopharmaceuticals, high-tech, sterile fill-finish operations, custom and advanced solid dose manufacturing capabilities, and specialized API synthesis. As if these capabilities were not impressive enough, the facilities are designed to withstand hurricanes.

5. Pioneering Sustainability

Though much of the global pharmaceutical industry is focused on increasing sustainability efforts, the limited resources available on the island has led Puerto Rico’s facilities to pioneer sustainability efforts in renewable energy, low emissions and water conservation. For example, Amgen’s Juncos facility employs advanced wastewater treatment, and iPR Pharmaceuticals turns methane from landfills into Renewable Liquified Natural Gas (RLNG) that fuels its cogeneration plant.

6. Skilled Workforce

With 70 years of pharma innovation under its belt, it is no surprise that there is a talented workforce on the island. However, that isn’t something the economy takes for granted, as it continually invests in developing the future generation of pharmaceutical manufacturing professionals. Pharmaceutical companies in Puerto Rico partner with Ponce Health Sciences and The University of Puerto Rico to train future generation of manufacturing experts. The Puerto Rico Research Science and Technology Trust also has established BioLeap to support bioscience entrepreneurs and foster science research and innovation on the island.

Positioned For Pharma Success

Puerto Rico’s appeal to pharma manufacturers is not the result of one advantage, but of several working together: U.S. regulatory alignment, targeted tax incentives, proximity to the mainland, mature technical infrastructure, sustainability leadership, and a deep manufacturing workforce. As supply chain resilience remains a priority, the island is positioned to remain a central player in U.S. pharmaceutical manufacturing.