AbbVie has spent years responding to a congressional probe over its drug pricing and patenting strategies, with the findings just becoming public late last month. Now, in a newly unveiled probe, congressional Democrats are zeroing in on the company’s tax payments.
In a letter to CEO Richard Gonzalez dated Wednesday, Sen. Ron Wyden, D-Oregon, chairman of the Senate Finance Committee, questioned why Chicago-based AbbVie makes most of its revenues in the U.S. but has “consistently” reported net losses in its domestic market while making money abroad. The company generated $34.9 billion in U.S. net revenue in 2020, or about 75% of its global sales.
That same year, AbbVie reported a pretax loss of $4.5 billion in the U.S. while it gained $7.9 billion abroad, Wyden said. It was a similar scenario in 2019: AbbVie lost $2.8 billion in the U.S. while gaining $11.2 billion abroad. Those losses came despite AbbVie’s ownership of two of the world’s best-selling drugs, Humira and Imbruvica.
It “appears that AbbVie shifts profits offshore while reporting a domestic loss in the United States to avoid paying U.S. corporate income taxes,” Wyden wrote. He said the U.S. international tax system, reformed in 2017 under the Trump administration, seemed to encourage the drugmaker’s actions.
The Democratic chair requested additional materials from AbbVie by June 16 as part of a larger probe into how the 2017 law incentivized corporations to shift profits overseas to dodge U.S. taxes. The company didn’t immediately respond to Fierce Pharma’s request for comment.
This isn’t the first time AbbVie has been charged with maneuvering around the U.S. tax system. According to a 2018 Reuters investigation, AbbVie stored dozens of Humira patents in Bermuda, which has no corporate taxes. The news agency noted that many drug companies park patents in tax havens and then affiliate companies pay royalties to market and manufacture a drug in a more lucrative market, such as the U.S.
Although the company’s tax returns aren’t public, AbbVie reported income and registered its patents in low-tax jurisdictions, Wyden said in the letter, citing company documents and public records. Instead of paying the overall 21% corporate tax rate, AbbVie successfully lowered its income taxes to as low as 8.6% in 2019 and 11.2% in 2020.
AbbVie previously pledged to spend part of its savings on U.S. capital projects, accelerated pension funding and charitable gifts. The company also said it would boost nonexecutive compensation.
However, AbbVie and others have been criticized for deploying their tax savings for share buybacks. In the letter, Wyden said AbbVie spent nearly $13 billion on share buybacks in 2018 and 2019, “quadruple” the amount it spent in the two years prior to the 2017 tax law.
AbbVie has been in the hot seat with Democratic lawmakers in recent weeks over its pricing and patent strategies surrounding blockbuster drug Humira and cancer med Imbruvica.
In May, Gonzalez testified before House lawmakers who accused the company of consistently targeting the U.S. with higher prices for the drugs while abusing the nation’s patent system to build and maintain its market monopoly.
by Noah Higgins-Dunn
Source: fiercepharma.com
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