Tax group blasts Pfizer, urges stop to its tax-cutting deal
A consumer group is accusing Pfizer of seeking to avoid $35 billion in U.S. taxes with its plan to buy fellow drugmaker Allergan in a deal structured to nominally move Pfizer's address to lower-tax Ireland, Allergan's home.
The group has been urging federal regulation changes to block not just the Pfizer deal, but a surge of other companies in various industries doing inversions to slash their U.S. tax bills. That lost revenue ultimately comes out of the pockets of consumers and other taxpayers.
Americans for Taxpayer Fairness also accuses Pfizer of gouging Americans with frequent and excessive price hikes on its medicines while benefiting from multiple loopholes and tax deductions that reduce Pfizer's U.S. tax rate, on average, to 6.4 percent. That's well below the 24 percent Pfizer has claimed.
At a news conference in Washington, the group and several members of Congress said the federal government can and should block Pfizer's $160 billion acquisition of Allergan. Pfizer, the world's second-biggest drugmaker by revenue, says the deal is set to be completed by December.
In a statement to The Associated Press, Pfizer said, "The proposed combination of Pfizer and Allergan will create a global, R&D-focused company with the ability to lead in the quest to find cures and treatments for patients with the most feared diseases and conditions of our time, such as Alzheimer's disease, Parkinson's disease, cancer and rare genetic disorders.
"This transaction is not structured to move jobs out of the United States, where we conduct the majority of our research," Pfizer wrote.
The 28-page report doesn't mention the deal's impact on U.S. jobs. But it discusses Pfizer's impact on U.S. patients and taxpayers in depth.
It says that in recent years, Pfizer has repeatedly raised prices of its top-selling drugs, including erectile dysfunction pill Viagra, pain treatments Lyrica and Celebrex and antibiotic Zyvox. Pfizer raised prices on those and three other drugs by an average of 39.2 percent from 2013 through 2015 — 23 times overall inflation during that period — and this year raised prices on about 60 drugs by more than 10 percent on average, according to the report.
The tax group states that patients in Ireland pay about one-twelfth what Americans do for Pfizer's seven top drugs. That's because Ireland and virtually every country except the U.S. sets limits on drug prices, which are unregulated here. The group suggests Pfizer should cut its drug prices in the U.S. to what it charges in Ireland, which isn't likely to happen.
Most of those seven drugs have patents that recently expired or will soon. It's standard procedure for Pfizer and most other drugmakers to jack up the price of their drugs at that point, to make as much money as possible before cheaper generic versions flood the market and grab most of the sales.
The report notes Pfizer benefits from an educated U.S. workforce and infrastructure here, and makes about 5 percent of its U.S. sales to the federal government, about $1.01 billion a year on average from 2011 through 2014.
The report also states that Pfizer gets tax credits averaging $118.1 million a year by writing off part of its costs for research and for manufacturing done within the U.S. It also claims Pfizer got tax breaks averaging $7 million a year from 2011 through 2014 due to a loophole that allows it to deduct excess compensation given to top executives in the form of stock options tied to their performance.
The report is the second one Americans for Taxpayer Fairness has issued since November criticizing Pfizer's planned inversion. The group is a coalition that claims 425 members which are national and state organizations pushing for what it calls "comprehensive, progressive tax reform."
Ironically, Pfizer and other U.S.-based drugmakers also want Washington to reform the tax rules. They claim they are at a disadvantage because the U.S. taxes their profits made both in the U.S. and in other countries, minus taxes paid to those countries. Drugmakers based in other countries generally only pay taxes on profits made in each country where they operate.
But while the U.S. companies complain that the nominal top corporate tax rate in the U.S. is about 35 percent, most in the pharmaceutical industry pay a tax rate of around 20 percent, due to various tax credits and other deductions