Thanks to a pair of pricey hepatitis C treatments, Gilead Sciences has become one of the world’s largest drug makers. Since 2013, revenues have tripled to more than $32 billion and profits grew sixfold, exceeding $18 billion. But beyond successful marketing of lifesaving medicines, the company has excelled in another way — using loopholes to avoid paying billions of dollars in taxes.
By transferring certain key assets to Ireland, Gilead was able to take advantage of tax laws that allowed some US sales to be shifted overseas and yield a significantly lower tax rate. Those overseas profits, meanwhile, mushroomed to $28.5 billion, and Gilead was able to escape paying $9.7 billion in US taxes last year, according to a new report published on Wednesday by the Americans for Tax Fairness, an advocacy organization.
Adding insult to injury, the group pointed out that not only did the high cost of the hepatitis C medicines strain government health care programs, but the drugs were developed, in part, with US taxpayer dollars. The organization, which has chastised Pfizer for similar maneuvers, argues that Congress ought to close the loophole to prevent similar tax dodges and provide taxpayers with a better return.
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Fine by me, as long as they invest most of that windfall in developing their future business, because the company has demonstrated real ability to produce game-changing new medicines. Might be wishful thinking?
That $9.7B number is a little deceptive–looking at the report, it seems to be a cumulative calculation. However, all the other numbers are reported per annum. If you do the tax savings that way, you wind up with a smaller (less inflammatory?) result.
Hi NJB,
I repeatedly checked w/ATF and was told the figure referred to 2015.
Regards,
ed
Ed–As ever, I appreciate your diligence. But let’s say that the difference between 27.3% and 16.4% effective tax rates is entirely made up of avoidance of US taxes (I doubt it, but let’s say it is). Against revenue of $32bn, the tax savings amounts to $3.5bn–not $9.7bn. Unless I’m missing something?
Hi NJB,
I’d asked Bob Willens to review the report and that didn’t come up as an issue, but I’ve asked ATF again. I’ll pass along any reply.
Best
Ed
This is the report’s author. I’m at a conference and not able to provide u the specific cite but in appendix 1 and I believe in the text you will find the source info. This $9.7 b figure is from Gileads own report to the SEC for FY2015. It is what is owed at the end of the year.
I was so disgusted, I could not even read all of the article. Is it any wonder that the average family in the U.S. is doing worse financially every year. Corporations, like Gilead, essentially control regulation through lobbyists to congress. We are now officially an oligarchy.
Why are companies who relocate to avoid paying taxes allowed to do business with the U.S? They should be out-And why aren’t these tax loopholes being discontinued? I’ll tell you why-because our government in deeep in the pockets of these money grubbing pharma companies-As long as this is allowed to continue -it will continue to happen.
Hi Jennifer,
Thanks for your note. Gilead didn’t relocate, though. The analysis points out that its transferred economic rights to a key patent to its Irish subsidiary, a maneuver that recalibrated its profits and taxes.
In any event, the larger issue is the same – the tax code. Drug makers and others are allowed to pursue such maneuvers unless or until the code is changed, as Bob Willens points out.
Regards
ed