Healthy Skepticism Library item: 11030

Warning: This library includes all items relevant to health product marketing that we are aware of regardless of quality. Often we do not agree with all or part of the contents.

Publication type: news

Goldstein J.
Drug Companies Seize Tax Break, Cut Jobs
The Wall Street Journal Health Blog 2007 Jul 24
http://blogs.wsj.com/health/2007/07/24/drug-makers-take-tax-break-cut-jobs/?mod=yahoo_hs

Full text:

A temporary tax break that allowed U.S. corporations to bring home foreign profits at a very low tax rate two years ago was supposed to encourage the creation of new U.S. jobs. At least half of that deal sounded good to the drug industry.

Drug makers were the “biggest beneficiaries” of the program, bringing home $100 billion of offshore profits, the New York Times reports this morning. But during the same period, the industry, beset by expiring patents and lackluster pipelines, has laid off tens of thousands of U.S. workers.

Pharmaceutical companies have long pushed profits offshore in an effort to lower their tax bills. Much of the maneuvering is completely kosher, though it sometimes crosses the line. Last fall, the WSJ reported on how Merck created a Bermuda subsidiary that helped the company avoid $1.5 billion in taxes. Early this year, the company wound up paying $2.3 billion to the IRS to settle that dispute and a few others. Last year, the British drug maker GlaxoSmithKline paid more than $3 billion to settle a protracted dispute with the IRS over transfer pricing between overseas and U.S. subsidiaries.

Pfizer reported that it set aside only 2% of its 2006 profits for U.S. taxes, while Lilly set aside 6%, according to the Times. Lilly told the paper that it had legally avoided more than $2 billion in U.S. taxes because of the tax break, which has now expired. The company said it has invested $1.3 billion in its home state of Indiana. But it has also cut its U.S. work force by more than 8% since the beginning of 2005.