Being ill and poor in the US just got more expensive
THE biggest losers from the GOP tax plans would be the 87 million middle class families facing higher taxes, plus the 13 million people who would lose their healthcare. The biggest winners? Millionaires and corporations, of course.
Chief among those corporations: America’s top drug makers. Pharmaceutical firms will get tens of billions of dollars in tax cuts on their offshore profits alone, while continuing to gouge consumers with ever-higher prices.
A new report by my organization, Americans for Tax Fairness, finds the nation’s 10 biggest drug companies — the Pharma Big 10 — jacked up prices on some of their most widely prescribed drugs by 40-70 percent over a recent four-year period, depending on the buyer. That upper figure was 14 times the rate of inflation.
Meanwhile, those 10 big drug firms have stashed US$500 billion in profits offshore, mostly in tax havens, on which we estimate they owe US$133 billion in unpaid US taxes.
How does their offshore tax dodge work?
First, they shift control of a drug formula to a foreign subsidiary, say in Ireland or Bermuda. Then they license the formula back to the US parent at a steep price. This increases the parent company’s costs, thereby reducing its profits and thus its taxes. Meanwhile, profits are artificially booked where they’ll be taxed little if at all.
Their highly mobile patents make drug companies particularly adept at this kind of “profit shifting.”
But rather than crack down on Big Pharma’s tax dodging, the Republican tax plans would reward drug companies with a tax cut we estimate at nearly US$80 billion on their half trillion dollars of offshore profits.
Our report examines the pricing of 31 of some of the most widely-prescribed drugs from US pharmaceutical companies between 2011 and 2015 (the most recent data available).
We found the average retail price of nine of the drugs most frequently prescribed for older Americans jumped 71 percent. Dozens of drugs purchased through Medicare and Medicaid rose an average 44 percent and 40 percent, respectively. Among the biggest spikes: the retail price of Pfizer’s nerve medication Lyrica doubled, while the price paid by Medicaid for Johnson & Johnson’s HIV treatment Prezista was up 131 percent.
What happened to all the profits from these outrageous price hikes? The earnings were shifted to offshore tax havens to avoid US taxes. How patriotic.
Between 2011 and 2016, basically the same period in which they were strenuously jacking up drug prices on consumers and taxpayers, the Pharma Big 10 increased their offshore profits by two-thirds, to around US$500 billion.
The firms owe an estimated US$133 billion in US taxes on those profits under current rules. But the GOP tax bills would slash the tax rate on those earnings from 35 percent now to 14 percent.
That lost revenue could pay for a year-and-a-half of Medicaid prescription drug spending, or five years of healthcare for nine million kids under the Children’s Health Insurance Program.
Worse, the proposed corporate tax giveaways that will so generously reward big drug firms will likely be paid for by cuts to Medicare and Medicaid, the very programs that Big Pharma is price gouging.
The attack has already begun. The Senate GOP’s tax plan would help cover the cost of its US$1.4 trillion in tax cuts for corporations and the wealthy by repealing a core part of the Affordable Care Act — 13 million people would lose their healthcare and premiums would rise for millions more.
Clemente is executive director of Americans for Tax Fairness. Copyright: American Forum.