It’s not just about pricing and patenting. AbbVie’s taxes now under scrutiny by Congress
AbbVie spent years responding to a congressional inquiry into its drug pricing and patenting strategies, with the results only becoming public at the end of last month. Now, in a recently unveiled investigation, Congressional Democrats are focusing on the company’s tax payments.
In one letter to CEO Richard Gonzalez on Wednesday, Senator Ron Wyden, D-Oregon, Chairman of the Senate Finance Committee, asked why Chicago-based AbbVie makes most of its income in the United States but has “consistently” reported net losses in its domestic market while earning money abroad. The company generated $ 34.9 billion in net revenue in the United States in 2020, or roughly 75% of its global sales.
That same year, AbbVie reported a pre-tax loss of $ 4.5 billion in the United States while it earned $ 7.9 billion overseas, Wyden said. It was a similar scenario in 2019: AbbVie lost $ 2.8 billion in the United States while earning $ 11.2 billion overseas. These losses came despite AbbVie’s possession of two of the world’s best-selling drugs, Humira and Imbruvica.
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It “appears that AbbVie is shifting its profits overseas while reporting a domestic loss in the United States to avoid paying corporate income tax in the United States,” Wyden wrote. He said the U.S. international tax system, reformed in 2017 under the Trump administration, appeared to encourage the drugmaker’s actions.
The Democratic president requested additional documents from AbbVie by June 16 as part of a larger investigation into how the 2017 law tricked businesses into shifting profits overseas to dodge U.S. taxes. The company did not immediately respond to Fierce Pharma’s request for comment.
This is not the first time that AbbVie has been accused of maneuvering around the US tax system. According to a Reuters survey in 2018, AbbVie has stored dozens of Humira patents in Bermuda, which have no corporate tax. The news agency noted that many drug companies file patents in tax havens and then affiliates pay royalties to market and manufacture a drug in a more lucrative market, such as the United States.
Although the company’s tax returns are not public, AbbVie has 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 corporate tax rate of 21%, AbbVie managed to reduce its income taxes to 8.6% in 2019 and 11.2% in 2020.
RELATED: Why Is AbbVie’s Tax Rate So Low? Humira patents hidden in Bermuda: Reuters
AbbVie had previously pledged to devote a portion of its savings to investment projects in the United States, accelerated pension funding, and charitable giving. The company also said it would increase compensation for non-executives.
However, AbbVie and others have come under fire for deploying their tax savings on share buybacks. In the letter, Wyden said AbbVie spent nearly $ 13 billion on share buybacks in 2018 and 2019, “quadruple” the amount spent in the two years leading up to the 2017 tax law.
AbbVie has been in the hot seat with Democratic lawmakers in recent weeks over its pricing and patenting strategies for the blockbuster drug Humira and the cancer drug Imbruvica.
In May, Chief AbbVie Gonzalez testified before House lawmakers who accused the company of systematically targeting the United States with higher prices for drugs while abusing the country’s patent system to build and maintain its monopoly on the market.