(LR) Richard A. Gonzalez, Chairman and CEO, AbbVie, Pascal Soriot, Executive Director and CEO, AstraZeneca, Giovanni Caforio, Chairman and CEO, Bristol-Myers Squibb, Jennifer Taubert , Executive Vice President and CEO Janssen Pharmaceutical Companies Global Chairman, Johnson & Johnson, Merck & Co. Chairman and CEO Kenneth C. Frazier, Pfizer CEO Albert Bourla and Sanofi CEO Olivier Brandicourt in Testimony before the Senate Finance Committee on ‘Drug Pricing in America: Prescriptions for Change, Part II’, February 26, 2019 at the Derksen Senate Office Building in Washington, DC.
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A Republican law has slashed the average tax rate for Big Pharma by more than 40 percent since it was enacted in 2017, Democrats on the Senate Finance Committee said in a statement. Report Thursday.
“Democrats’ warning in 2017 that the Republican tax code would amount to a massive giveaway to multinational corporations is evidence of the fact,” said Senator Ron Wyden, D-Oregon, chairman of the committee. ) in the press release about the report.
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The provision allows U.S.-based pharmaceutical companies to pay lower tax rates on their overseas income, Report explain.
It also creates a “tremendous incentive” for these companies to move profits, investments and jobs overseas, the Democrats added in the report.
Pharmaceutical companies report 75 percent of their taxable income from overseas, the report said.
From 2014 to 2016, before the law was passed, the average tax rate in the pharmaceutical industry was about 20%, according to the commission’s analysis.
The average tax rate fell to 11.6 percent in 2019 and 2020, saving drug companies billions of dollars in taxes, the report said.
“There is no question that the tax system was broken before 2017, but instead of fixing it, the Republicans gave Big Pharma the green light to play some of the most aggressive tax games a well-trained accountant could dream up, said Wyden.
He called for major tax overhaul to ensure big corporations “pay their fair share, while helping to stimulate investment in the United States rather than in foreign countries.”
The report is the latest in Wyden’s investigation into Big Pharma’s tax practices. The Oregon senator said the committee will release its final report on the investigation later this year.
Lawmakers have long criticized the industry for skyrocketing drug prices, which could deprive some patients of life-saving medicines. Wyden’s probing just added fuel to the fire.
In July, Wyden released a report detailing how drugmakers AbbVie Use offshore subsidiaries to avoid paying billions in prescription drug sales taxes.
That Report It found that Chicago-based AbbVie generated 75% of its 2020 sales from U.S. patients, but reported only 1% of its U.S. taxable income.
AbbVie holds its intellectual property in a Bermuda subsidiary that has no employees or other major operations, the report said. Bermuda does not tax the subsidiary’s profits, income, dividends or capital gains.
Wyden also obtained similar information from other U.S. pharmaceutical companies, including Abbott Laboratories, Amgen, Bristol-Myers Squibb and Merck.
For most companies, more than 80% of their taxable income is reported overseas.
Some companies have defend their approach to taxation following the commission’s investigation.
The companies did not immediately respond to a request for comment on Wyden’s findings.