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Democrats Grill Drugmakers Over Tax Savings

Posted 17 October 2018 | By Michael Mezher 

Democrats Grill Drugmakers Over Tax Savings

In letters to the CEOs of five top US drugmakers, 16 House Democrats question the companies’ actions on pricing, investment in research and development, employment, stock buybacks and executive compensation in light of tax savings as a result of the 2017 Tax Cuts and Jobs Act (TCJA).
The letters, sent to AbbVie, Amgen, Eli Lilly, Merck and Pfizer on Monday, come as healthcare systems in the US grapple with rising drug costs. Despite President Donald Trump’s prediction that drugmakers would voluntarily announce massive price cuts last May, drug prices continue to rise, albeit at a slower pace than in previous years.
Each of the companies addressed in the letters is expected to save billions in taxes in 2018 due to the lower corporate tax rate and a one-time tax cut on existing offshore profits. Pfizer stands to benefit the most from the tax cuts, with an estimated $1 billion in 2018 tax savings and $25.5 billion cut on its offshore profits.
While Republicans argued that the tax cuts would allow companies to invest more and boost wages, many large corporations have spent billions on stock buybacks and executive bonuses.
“It is unconscionable that these massive corporations are using their billion-dollar tax savings to benefit wealthy stockholders instead of to make their drugs more affordable,” Rep. Jan Schakowsky said in a statement.
Over the last year, four of the companies, AbbVie, Amgen, Merck and Pfizer, have also announced they would each buy back $10 billion in shares of their companies.
In each of the letters, the representatives asked the CEOs about whether their companies have dropped or increased prices since 28 November 2017. In the case of Merck, which announced price cuts to some of its products in July, the representatives asked how much the price cuts represented out of the company’s entire product portfolio.
The representatives also asked the companies how much they have spent on a range of activities over the last year, including clinical trials, preclinical development, acquisitions and marketing, as well as whether the companies have discontinued development of any drugs during that time.
Additionally, the lawmakers questioned Amgen over layoffs the company announced in 2017, asking the company whether it went through with the layoffs and how the TCJA factored into its decision-making.
Rep. Schakowsky

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