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Productive workforce lends appeal to manufacturing in Puerto Rico

In this Q&A, Healthcare Packaging (HCP) discusses the business climate on the island with well-known speaker and quick-changeover expert John Henry (JH), CPP. HCP: Please describe your packaging experience in Puerto Rico. JH: I was the engineering manager for Alcon Laboratories in Puerto Rico from 1976 to 1985. Since then I have owned a company that designs, sells, and services packaging machinery. For the past eight years I have also spent about half my time consulting on manufacturing effectiveness, particularly on changeover. I am a frequent speaker at PackExpo and other shows and conferences and have published a couple dozen articles on packaging, packaging machinery, changeover, and related topics. (Subscribe to the Quick Changeover newsletter.) HCP: How are drugs packaged and distributed in Puerto Rico compared with the process in the mainland United States? JH: In Puerto Rico, we do everything from compounding, including biotech and sophisticated processing synthesizing, to final end-user packaging. Different companies distribute differently. Some send truckloads to distribution centers in the United States and elsewhere. Others, and this was the case when I worked for Alcon, send orders as small as mixed product cases to individual pharmacies.

HCP: What are the advantages and disadvantages for drug or medical device companies to package their products in Puerto Rico?

JH: Originally, it was a tax advantage. That went away a few years ago. Now the reason they stay is a very experienced and highly productive workforce as well as an infrastructure of supporting companies.

HCP: Can you elaborate on the tax advantages?

JH: It used to be that under Section 936 of the internal revenue code, companies with operations in Puerto Rico paid minimal or no federal taxes on Puerto Rico profits. This went away with a revision of the tax code in the 1990s. I believe that the last of these tax exemptions expires this year.
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