BIG PHARMA WATCH: PFIZER AVOIDED PAYING BILLIONS IN U.S. TAXES THROUGH “EGREGIOUS TAX GIMMICK”

Big Pharma Giant Used “Round-Tripping” Tax Avoidance Scheme to Attribute U.S. Sales as Foreign Income, While Charging Americans Higher Prices

Last week, U.S. Senate Committee on Finance Ranking Member Ron Wyden (D-OR) announced Pfizer had avoided paying billions in federal income taxes through a tax avoidance scheme that treated all sales to U.S. customers as foreign income, according to an investigation released by Democratic staff on the Senate Finance Committee. Ranking Member Wyden described Pfizer’s move as “what could be the largest tax-dodging scheme in the history of Big Pharma.” Other Big Pharma giants cited for similar practices include Merck, AbbVie and Amgen.

By exploiting regulatory loopholes in the tax system, Pfizer avoided paying billions in federal income taxes and instead shifted the tax burden onto American taxpayers, while Big Pharma continued charging Americans the highest drug prices in the world. 

The Big Pharma giant sold $20 billion in medicines to U.S. customers in 2019 but didn’t report the profits from those sales on its 2019 tax returns, arguing that those profits were earned offshore, thus allowing the company to avoid paying billions in federal income taxes. The investigation found that the pharmaceutical giant also declined to report any taxable income in the U.S. for 2018 and 2020. 

Pfizer was able to do so through a tax scheme known as “round-tripping,” which counts profits made from sales to U.S. customers as foreign income for tax purposes. As STAT News columnist Ed Silverman noted, “round-tripping refers to offshoring manufacturing to a foreign subsidiary located in another country or jurisdiction with lower tax rates.” 

The latest 2024 financial filings show that many of these Big Pharma companies still report a majority of their profits outside the U.S. in countries like Singapore, Puerto Rico and Switzerland, among others, which offer “sweetheart” deals that provide more favorable tax rates despite the same companies earning the bulk of their revenue in the U.S. 

Pfizer, like most of its Big Pharma peers, has consistently beat Wall Street analyst revenue expectations, including in 2019, 2020, 2021, 2022, 2023 and 2024, while dodging U.S. taxes and forcing Americans to pay the highest drug prices in the world. 

Examples of blockbuster Pfizer drugs with significantly higher prices in the U.S. compared to foreign countries include:

• Arthritis drug Xeljanz:
  • U.S: $68.26
  • Germany: $34.36
  • Sweden: $32.71
  • Japan: $20.94
  • United Kingdom: $16.76
  • Australia: $15.85
    
• Breast cancer drug Ibrance:
  • U.S: $538.94
  • United Kingdom: $191.12
  • Japan: $180.90
  • Australia: $141.30
  • Sweden: $127.38
  • Germany: $117.84

Read the full report HERE.

Learn more about market-based solutions to hold Big Pharma accountable and lower drug prices HERE.