- The six major US pharmaceutical firms that provide fairly detailed data reported making $215 billion worth of sales in the US for 2022.
- They reported earning very little in profits — in some cases, absolutely nothing — in the US. Of their $100 billion combined profit thus paid almost nothing in taxes.
- It’s allowed by the tax law, but it is morally wrong.
- America’s corporate tax rate is 21%, but the country’s largest and most profitable pharmaceutical companies don’t pay anything close to that.
(Business Insider) To get a sense of just how much money these pharmaceutical companies are moving around, it’s helpful to look at a case study. Take AbbVie, the producer of the blockbuster immunosuppressive drug Humira, which treats various conditions, including arthritis and Crohn’s disease. An investigation by Democratic Sen. Ron Wyden of Oregon found the company booked 99% of its profit abroad in 2020, despite generating only three-quarters of its sales overseas. More recently, AbbVie claimed it’s losing money in America: The company reported a $5 billion loss on its US operations in 2022 while generating a $18 billion profit outside the US. Rather remarkably, AbbVie said only $12 billion in non-US sales, meaning its reported profit outside the US exceeded its revenue.
Merck, the maker of the blockbuster (and expensive) drug Keytruda, reported earning only $1 billion in profit on its $27 billion in US sales in 2022 while saying it earned $15 billion abroad on its $32 billion in sales overseas.
Pfizer, which famously produced the first mRNA coronavirus vaccine, now reports — unlike in the past — making a bit of money in the US. The discrepancy is quite large: $5 billion in the US in 2022 and $30 billion abroad. Before the surge in revenues and profits associated with its successful vaccine, Pfizer somehow always seemed to lose money in the US.
Of the eight biggest US pharmaceutical companies, only Gilead reports earning most of its income in the US. The other seven companies appear to have paid the US government just over $2 billion on their $108 billion global profit in 2022 (this sum includes Eli Lilly, which reports the distribution of its tax payments but not the distribution of its earnings). Governments outside the US collected more tax revenue from these seven “American” pharmaceutical companies than the US government: $11.5 billion.Business Insider
Trump’s corporate-tax reform made it worse. The law imposed a remarkable 10.5% tax rate on profits earned outside the US. This would seem to solve the issue — money parked in other countries was still subject to collection from the Treasury. But the new rules allowed companies to blend all of their foreign profits in one big pot: A company with gains in a high-tax country such as Germany could use its mandatory payments to offset some of the earnings attributable to no-tax jurisdictions such as Bermuda. It couldn’t do the same with its US profit. So with some accounting, companies could avoid paying the minimum tax on their offshore income. The overall result was an “America last” tax code: US pharmaceutical firms got a big tax cut, while the incentive to move production of new drugs to low-tax jurisdictions such as Ireland remained.
America’s pharmaceutical companies have made great contributions to medicine. But there’s no reason to think that they wouldn’t make the same contribution to human health if they actually paid US taxes on the profits from their US sales.
Brad W. Setser is the Whitney Shepardson senior fellow at the Council on Foreign Relations (CFR).
Once again, big pharma reaffirms that nothing is more important than profits, shareholders, and Wall Street. They dare to sue the Government for price negotiations for Medicare. Morally wrong, legally OK.