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rug makers are promising to create tens of thousands of American jobs if President Donald Trump follows through on his promise to give them a big tax break if they “repatriate” cash they’ve stashed overseas.

But that’s not what happened last time pharma got a tax holiday.

Instead, drug makers used the tens of billions they brought back to the US to enrich their CEOs and drive up their stock prices. Rather than adding jobs, they laid off thousands of workers.

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In the end, the 2004 tax holiday cost the US government $3.3 billion in lost revenue and did nothing to increase employment or investment in research, according to a Senate report.

“This is one of the very few cases where we have a very clear experiment: Congress enacted a policy, and we have data and analyses showing that it was a failure on the promises that were made,” said Chye-Ching Huang, deputy director of the progressive Center on Budget and Policy Priorities.

Still, Trump wants to try it all again.

Right now, repatriation taxes can reach up to 35 percent. On the campaign trail, Trump said he’d institute a one-time rate of 10 percent to encourage companies to bring their cash home and invest domestically.

The holiday — in addition to Trump’s promised tax cuts and regulatory reforms — will help the drug industry add up to 350,000 jobs over the next 10 years, according to Stephen Ubl, CEO of the Pharmaceutical Research and Manufacturers of America, the industry lobbying group.

But here’s what happened after an even steeper repatriation tax cut in 2004:

  • Pfizer repatriated $35.5 billion — more than any other company — and then proceeded to cut nearly 12,000 jobs over the next three years. Payouts to its executives increased by $13 billion during that period.
  • Johnson & Johnson moved $10.7 billion into the US, and then shed more than 4,000 employees while hiking executive pay by $32 billion.
  • Merck repatriated $15.9 billion, laid off 1,000 workers, and boosted executive pay by more than $20 billion.

Only two major drug makers added jobs after repatriating: Schering-Plough and Wyeth, which collectively hired more than 7,500 people within three years of the holiday, according to the Senate report, released in 2011.

But those gains were quickly negated. In 2009, Pfizer bought Wyeth for $68 billion and laid off more than 20,000 workers. The same year, Merck acquired Schering-Plough for $41 billion and cut 15,000 people from its payroll.

There’s little reason to assume a second repatriation holiday would fare any differently, economists say.

“The best way to stimulate jobs is something like a tax credit for every new job — that’s the brute-force economist ideal,” said Mark Pauly, a professor at the University of Pennsylvania’s Wharton School. “This seems pretty far removed from that.”

But the holiday was a success by at least one measure: Stock prices soared. Buybacks and buyouts might not help the labor force, but they go over quite well on Wall Street.

And so some of the biggest cheerleaders for Trump’s promised repatriation redux are biopharma investors, convinced that a bolus of once-stranded cash will push drug companies to spend billions on acquisitions that will drive the market higher.

The biggest drug firms have about $175 billion in cash stockpiled overseas, according to Leerink Partners. That includes roughly $35 billion from Amgen, $29 billion from Gilead Sciences, $19 billion from Merck, and $14 billion from Pfizer.

“The prevailing view is they’re going to bring the money back and that could lead to pharma buying biotechs,” said Simos Simeonidis, a securities analyst at RBC Capital Markets.

But pharma acquisitions don’t lead to hiring sprees — quite the opposite, in fact.

“It might create wealth,” said Wharton’s Pauly, “but it will probably reduce jobs.”

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  • Really, this is the one industry that doesn’t need an incentive to create jobs unless they drastically reduce their pricing model. they do create jobs, good jobs, but it is on the backs of our nation that they do that. So tax break should be tied as Trump has long suggested to significant price reductions. I mean the rest of the industrialized world and even non-industrialized world: Latin America, Britain, Australia, Canada — they all pay markedly less for the same drugs that we do in US. Is that fair? I don’t think so and it is killing us, literally. I mean we all know pharma spend lavishly on non-clinical expenses like marketing and luxury offices and lavish offsites and meetings. Time to call it quits on that.

  • Liars, the one industry that doesn’t need an incentive to create jobs unless they drastically reduce their pricing model. they do create jobs, good jobs, but it is on the backs of our nation that they do that. So tax break should be tied as Trump has long suggested price reductions. I mean the rest of the industrialized world and on-industrialized world: Latin America, Britain, Australia, Canada — they all pay markedly less for the same drugs that we do in US. Is that fair?

  • I don’t find the article unbalanced by its time frame at all. It examines the impact over a 3 year time frame from the repatriation, ending 2 years before the financial meltdown. Frankly if a company is not going to invest that money in new jobs within 3 years, but instead fritters it away on laying employees off and hiking executive compensation – what makes anyone think they would would have spent it again in 2009 ? Bias or no bias, the historical precedent here is clear and disappointing.

    Bringing the cash back was a windfall for shareholders and executives. It didn’t create jobs then. It won’t create jobs now, without some rather carefully crafted legislative requirement.

    • Who cares if executives got paid more as long as shareholders through their board of directors approved it. Those (alleged) payments were taxed at top marginal tax rates and what was leftover was spent or invested. That generated economic activity. Meanwhile, shareholders benefited from dividend payments and share buybacks, which in turn were taxed and reinvested somewhere or spent. One needs to look further downstream than the sensationalistic headlines.

    • Yes, one would think that the 2004 tax holiday would have been a lesson learnt. But no, this Administration’s proposals demonstrate that it is in the business of enriching the few, widening the gulf, and then dissembling and creating alternate facts – which any sane person would recognise as lies – to befuddle and divide.

      By the way, the people below who are adamant that this article is unbalanced have vested interests – they are representatives of pharma. At least, this is what Dr Google told me.

  • Pfizer execs received $13 Billion in higher payouts over a three year period? J&J increased exec pay by $32 Billion, and Merck by $20 Billion? They would be the highest paid executives in history by a massive margin. Pfizer CEO’s actual total compensation was just under $13 million in 2005, below his 2004 compensation of about $17M.

    Intentional or not, this is sloppy.

  • Cash repatriated, if paid out to shareholders via dividends or share buybacks, can be redeployed by investors into other activities. That creates the economic growth and related extra tax revenue. The Pharma companies and any other repatriating companies don’t need to be the direct generators of this growth.

  • I find this article to be poorly balanced. A repatriation in 2004 connected to events in 2009 -2011, with no references to other significant market and financial influencers of that period, including the global financial crisis. Over simplification is convenient, but in our current political climate, is it wise?

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