In 2020, over 75% of AbbVie’s’ sales were made to American consumers, yet only 1% of AbbVie’s’ income was reported in the United States for tax purposes. AbbVie’s’ ability to exploit subsidiaries in offshore tax havens to avoid paying billions of dollars in taxes on U.S. prescription drug sales signals that big pharma will do anything to avoid hurting profits.
Under the Republican tax law, AbbVie has continuously paid an effective tax rate of less than half the U.S. corporate tax rate of 21% and the marginal tax rate of 22% paid by an American family with a combined income of $84,000. A multinational pharmaceutical corporation with annual sales of over $50 billion in yearly sales paid a lower tax rate than a postal service worker or a preschool teacher. It is unacceptable that this Republican-led giveaway has only created more loopholes for big pharma to shift profits offshore.
Ok. So they didn’t break the law, but morality is doing the “right thing” when nobody is looking.
For several years, Humira was the best-selling prescription drug in the world.1 AbbVie is an enormously profitable company that does most of its business in the United States. In 2021, AbbVie generated over $56 billion in worldwide sales, with over 77% of those sales made in the United States. Over the last four years, AbbVie has sold an astounding $62 billion Humira in the United States.
Since AbbVie began to sell Humira in 2003, the price of Humira has been raised 27 times. Humira is now priced at $2,984 per syringe, or $77,586 for a year’s supply, a 470 percent increase from when the drug entered the market. Additionally, multi-million dollar bonuses for AbbVie executives have been directly tied to rising revenue targets for Humira, creating incentives to continue raising drug prices.
The investigation found that the Republican tax law has enabled AbbVie to generate the bulk of its sales and profits for brand-name drugs like Humira in the United States while booking those profits offshore for tax purposes. In AbbVie’s’ own words, “The changes made by the 2017 tax law altered U.S. taxation on foreign earnings for U.S. corporations and have had a significant impact on AbbVie’s’ effective tax rate.
The maneuvers employed by AbbVie to avoid paying U.S. taxes on Humira profits involve several key elements:
- An AbbVie subsidiary in Bermuda, AbbVie Biotechnology Ltd., owns the patents, trademarks, economic rights, and all other intellectual property rights for sales of Humira in the United States.10 No manufacturing, packaging, or distribution of Humira or related inputs occurs in Bermuda. AbbVie Biotechnology Ltd. also has no employees in Bermuda.
2. Though legally domiciled in Bermuda, AbbVie Biotechnology Ltd. operates through a branch in Puerto Rico that manufactures the Humira bulk drug substance and a fill-finish operation in which the bulk drug substance is filled into syringes or injectable pens.12 These pre-filled syringes are then sold by the Puerto Rico branch to AbbVie Inc. in the U.S., which then packages and sells Humira to third-party customers in the United States.
Data obtained by the Committee shows that AbbVie reports virtually no income in the U.S. for tax purposes
Throughout the Committee’s investigation, AbbVie repeatedly declined to provide country-by-country information regarding AbbVie’s’ pre-tax earnings, profit margins, employee headcount, and tax paid. AbbVie also declined to provide copies of AbbVie’s’ IRS form 8975, an annual country-by-country tax reporting for all entities that are subsidiaries of a large parent corporation with income over $850 million.
I wonder how the people at AbbVie feel? Their CEO was compensated for ensuring Humira didn’t go off patent. AbbVie requested employees return to the office when COVID was still dangerous, and now they played a shell game with profits to avoid paying their fair share of taxes.
Once again, AbbVie is the poster of everything that’s wrong with pharma,