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New Report: Pfizer’s Merger With Irish Drug Company Will Let It Dodge An Estimated $35 Billion In U.S. Taxes

Nearly 4 Million Floridians Are in Medicare Program; Pfizer Has Hiked Prices to Medicare on Seven Top Selling Drugs by 39% Over Two Years

 

WASHINGTON, D.C. –Pfizer—maker of Celebrex, Lipitor, Lyrica, and Viagra—is attempting to permanently dodge an estimated $35 billion of U.S. taxes it currently owes by merging with Allergan, a drug firm based in the tax haven of Ireland, according to a new Americans for Tax Fairness report released today. Pfizer will accomplish this by renouncing its American identity and largely changing its address to Ireland, as the combined company will still be primarily owned by Pfizer’s current shareholders and will continue to be directed and managed from New York.

In addition to dodging its fair share of taxes, Pfizer has also been aggressively raising prescription drug prices, thereby straining patients and our health care system and in some cases putting needed medications out of reach. Pfizer has routinely hiked the prices of dozens of prescription drugs at 10 times or more the rate of inflation each year since 2012. Moreover, seven of Pfizer’s top selling drugs had their prices hiked an average of 39% over two years—from 2013 to 2015—under the Medicare program, four times the prescription drug inflation rate.

The potential universe of people in Florida who are affected by Pfizer’s price gouging is substantial. In the Medicare program alone 3.8 million Floridians participate, including 2.7 million seniors with Medicare Part D prescription drug coverage. But as one of the world’s largest pharmaceutical companies and more profitable corporations, Pfizer sells its drugs to countless other Floridians not getting Medicare.

The report, “Pfizer: Price Gouger, Tax Dodger” is available here.

“By dodging taxes while boosting prescription drug prices, Pfizer squeezes American families and communities from two sides at once,” said Americans for Tax Fairness Executive Director Frank Clemente. “In the company’s biggest insult to America yet, Pfizer’s merger would allow it to go on enjoying all the benefits of being based here—everything from a publicly-educated workforce, to an excellent communications infrastructure, to a reliable patent system—without adequately paying to support them.”

The Obama Administration has the authority to take executive action and immediately close the loophole Pfizer intends to exploit by combining with an Irish tax-haven-based drug firm. Action by the President would remove the main tax benefit Pfizer hopes to gain by becoming an Irish company. Pfizer’s merger is not expected to be completed until the middle of 2016.

“Time and time again, Pfizer’s actions show it is only concerned with enriching its executives and stockholders, showing no regard for American consumers or taxpayers. The Obama Administration has an obligation to stop this bad actor from walking away from paying tens of billions of dollars in U.S. taxes as it heads out the door,” said Clemente.

Clemente added: “If Pfizer wants to be an Irish company to cut its taxes but still be based in America, then it should charge American patients the same much lower drug prices it charges Irish consumers. Pfizer charges 12 times as much on this side of the Atlantic under the Medicare program for the same seven top-selling drugs as it charges in Ireland.”

Some of the report’s other key findings:

  • Through its proposed merger with Allergan, Pfizer would be able to permanently dodge an estimated $35 billion in U.S. taxes owed on about $148 billion in profits it currently maintains offshore.
  • If collected, the estimated $35 billion Pfizer owes could fund the National Cancer Institute for almost seven years, provide high-quality preschool for all low- and moderate-income four-year olds for nearly five years, or provide free tuition for two years of community college for up to 9 million students over five years.
  • Under Medicare between 2013 and 2015, the cost of Lipitor, Pfizer’s widely-prescribed cholesterol treatment, jumped 35% and the cost of Pfizer’s Viagra jumped 41%. Pfizer’s nerve medication Lyrica spiked 77% between 2010 and 2014, under the program.
  • Pfizer contributes to sky-high drug prices by suppressing cheaper generic alternatives to its pricey brand-name drugs.
  • While Americans suffer from lost tax revenue and high drug prices, Pfizer thrives, showing profit margins of nearly 18% over the last five years. Pfizer’s 2015 earnings margin of 18.8% is up nearly 50% since 2011.
  • Pfizer took in $5 billion in federal contracts over a recent five-year span.
  • Taxpayers provided Pfizer with nearly $600 million in tax breaks over the last five years through federal research-and-experimentation tax credits and domestic-manufacturing tax deductions.
  • American taxpayers have spent up to $21 million over the last three years subsidizing huge paydays for Pfizer’s top executives.

Pfizer’s maneuver would be the culmination of many years of overseas tax avoidance that has reduced the company’s tax bill to a fraction of what it should be paying. Many of those tactics were detailed in ATF’s November 2015 report, Pfizer’s Tax Dodging Rx: Stash Profits Offshore.

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Americans for Tax Fairness is a diverse coalition of 425 national and state endorsing organizations that collectively represent tens of millions of members. The organization was formed on the belief that the country needs comprehensive, progressive tax reform that results in greater revenue to meet our growing needs. ATF is playing a central role in Washington and in the states on federal tax-reform issues.