Drug makers were the “biggest beneficiaries” of the program, bringing home $100 billion of offshore profits, the New York Times reports this morning. But during the same period, the industry, beset by expiring patents and lackluster pipelines, has laid off tens of thousands of U.S. workers.
Pharmaceutical companies have long pushed profits offshore in an effort to lower their tax bills. Much of the maneuvering is completely kosher, though it sometimes crosses the line. Last fall, the WSJ reported on how Merck created a Bermuda subsidiary that helped the company avoid $1.5 billion in taxes. Early this year, the company wound up paying $2.3 billion to the IRS to settle that dispute and a few others. Last year, the British drug maker GlaxoSmithKline paid more than $3 billion to settle a protracted dispute with the IRS over transfer pricing between overseas and U.S. subsidiaries.
Pfizer reported that it set aside only 2% of its 2006 profits for U.S. taxes, while Lilly set aside 6%, according to the Times. Lilly told the paper that it had legally avoided more than $2 billion in U.S. taxes because of the tax break, which has now expired. The company said it has invested $1.3 billion in its home state of Indiana. But it has also cut its U.S. work force by more than 8% since the beginning of 2005."
