I have 5 Pokemon on my team with the Pickup ability, and they were generating loot regularly before the update. Now that we've updated from 9.0.2 to 9.0.3, I've been using this team for about 5 hours and haven't seen any loot from Pickup in over 100 encounters in which I've knocked out wild Pokemon. None of my Pickup Pokemon are holding items, and there is plenty of space in my inventory.
The server I'm in uses Forge 36.2.34 and the following mods: Oh the Biomes You'll Go, Assorted Decor, Chisel, Ender Storage, Explorer's Compass, Nature's Compass, WAWLA, Iron Chest, JourneyMap, Macaw's Fences/Furniture/Lights/Paintings, and Pixelmon-1.16.5 version 9.0.3. All of those other mods were present when our server was on 9.0.2, when Pickup was working as expected. The only change in mods was the Pixelmon update.