Senate Finance chair calls on Merck and Abbott to comply with his investigation into their offshore tax schemes
Senate Finance committee chair Ron Wyden (D-OR) on Wednesday sent follow-up letters to Merck and Abbott after both companies failed to answer questions and comply with his investigation into how a 2017 tax law helped slash tax rates for large, US-based pharma companies thanks to shifting profits offshore.
Last April, Wyden sent a stern letter to Merck’s CEO and president Robert Davis questioning the company’s ability to go from an effective tax rate of 22.9% in 2020 to less than half that a year later, down to 11% in 2021, thanks largely to Merck’s use of subsidiaries in several well-known low-or-zero tax jurisdictions.
For Merck’s mega-blockbuster cancer drug Keytruda, Wyden alleged that since Merck, which lobbied heavily in favor of the 2017 law, holds the IP rights to Keytruda in the Netherlands and manufactures the drug entirely in Ireland, the company is able to avoid billions of dollars in taxes in the US.
Similarly, in a committee investigation into AbbVie, which pulls in tens of billions every year in the US thanks to its Humira monopoly that runs out in January, Wyden reveals how the 2017 law’s international provisions rewarded large multinational corporations that shift profits overseas.
“That Merck located more than 85% of its profits in foreign jurisdictions in 2021 implies that the current U.S. international tax system created by the 2017 Republican tax law has encouraged and rewarded Merck’s shifting of profits offshore,” Wyden wrote on Wednesday.
He previously requested country-specific information related to Merck’s pre-tax earnings, profit margins, employee headcount and tax paid for tax years 2018 – 2021, but the company declined to send the information.
“Unfortunately, Merck has twice declined to provide the Committee this information, choosing to keep secret how much of its profits are reported by offshore subsidiaries for tax purposes. As noted in previous communications on this matter, there appears to be a substantial discrepancy between where Merck generates prescription drug sales and where Merck books profits from those drug sales for tax purposes,” Wyden wrote to Merck on Wednesday.
Wyden also sent a letter Wednesday to Abbott, which similarly did not respond to requests for info and used its foreign ops to pay an effective US tax rate of 9.6% in 2019, 10% in 2020 and 13.9% in 2021, despite the US being the company’s “biggest customer market and profit center.”
He added: “The American public deserves to understand why Abbott, a multinational pharmaceutical corporation with annual sales of $43 billion, paid a lower tax rate than a postal service worker or a preschool teacher.”