Pharmaceutical corporations are top earners in the world when it comes to the profitability of their products. Intellectual property laws, such as patents, form effective monopolies for companies to act under for years, ensuring the profits of rockstar drugs. Lesser known is that tax laws also help these corporations avoid paying billions of dollars each year.
The common trick is to move a patent from the United States to a foreign entity at a fraction of what the patent will actually be worth once the drug is approved for marketing in the States. The company then records those profits with the foreign entity and pays the foreign tax rates, so long as the funds are not repatriated.
And these companies know how to keep their funds from being repatriated.
“This is partly the result of successful lobbying on behalf of Big Pharma and Big Business in congress to shift the tax burden onto the working class,” commented Wesley Bowden, an attorney with the Levin, Papantonio law firm. “Fifty years ago, for every $1 in tax revenue paid by corporations, the working class paid $2. Today, the ratio is $1 for businesses equals $4.50 paid by individuals.”
According to commentators familiar with the tax practices, the shifting of intellectual property to avoid tax burdens is almost standard practice for these companies. In the United States, the corporate tax rate can be as high as 35 percent. Other countries offer much more palatable rates, such as Ireland which offers an effective rate of about 12.5 percent.
That doesn’t stop these companies from raking the United States over the coals. The U.S. consistently ranks as one of the highest paying nations in the world for health care. According to data from the Center for Medicare and Medicaid Services (CMS), in 2013, the U.S. spent over $9,255 per person on healthcare.