More Pharmaceutical Follies
I hate to say I told you so, but… more than two years ago, in a series of articles titled, Pharmaceutical Follies, I denigrated the pharmaceutical industry and its reprehensible use of a massive group of lobbyists (some 6000 in total), whose sole function was to influence legislation at both the federal and state levels, to insure a continuation of the industry’s enormous degree of profitability. What follows could have been a part of the recent movie, Sicko — Michael Moore would have had a picnic with this, so read on.
In July of 2005, I wrote, “A more recent lobbying effort resulted in a piece of legislation that few are even aware of and even if you did read about it, the ramifications, especially as they affect the pharmaceutical companies, are virtually unknown. With a most appealing title, certain to resonate with every logically minded citizen, the underlying impact of the legislation is totally hidden. How can anyone argue against the ‘American Job Creation Act,’ signed into law by President Bush in October 2004? The more appropriate and realistic title should have read, ‘The Foreign Tax Giveaway to Big Pharma Act.’
“In the past, the tax law required that all profits from foreign subsidiaries be taxed at a 35 percent rate when these profits were returned to the U.S. Most companies have avoided this tax by merely keeping those profits overseas. The new act encourages the repatriation of profits by reducing the tax rate from that 35 percent to the astonishingly low rate of 5.25 percent.
“Assumedly the differential would be invested in operations and facilities that would create new jobs. The major beneficiaries of this law will be—ta dah!—the pharmaceutical companies, since, as you will soon see, they derive more of their profits from overseas operations than any other industry. Yet, despite its intent to repatriate at least $28 billion, thus saving over $8 billion as a result of the act, in April, Pfizer announced it would cut its annual costs by $4 billion over the next three years, undoubtedly cutting, not creating jobs in the process.” I then explained how the pharmaceutical companies generate the bulk of their profits (or so they maintain), from their foreign operations, and scrupulously and spuriously avoid domestic taxes.
Let’s forward now to an article in the July 24 th issue of this year’s The New York Times. The headline said it all: “Tax Breaks Used by Drug Makers Failed to Add Jobs as Advertised.”Is anyone really surprised that the lobbyists, their huge campaign contributions and other, perhaps more nefarious activities aimed at our not so naive politicians, were once more victorious in their efforts to add to the pharmaceutical industry’s already record high profits?
Here is what The Times wrote: “Two years ago, when companies received a big tax break to bring home their offshore profits, the president and Congress justified it as a one-time amnesty that would create American jobs.” As The Times further relates, nothing of the sort happened. “Drug makers were the biggest beneficiaries of the amnesty program, repatriating about $100 billion (My article was way off on that number) in foreign profits and paying only minimal taxes. But the companies did not create many jobs in return. Instead, since 2005 the American drug industry has laid off tens of thousands of workers, in this country.” To add insult to injury (and don’t think the American taxpayer has not been injured by this bogus legislation), the article adds, “And now drug companies are once again using complex strategies, many of them demonstrably legal, to shelter billions of dollars in profits in international tax havens, according to their financial statements and independent tax experts.”
In my article two years ago, I quoted several well-known individuals, and their thoughts about politicians. See if you don’t think they are even more valid today. The famous Roman orator Cicero observed, “Never was [there] a government that was not composed of liars, malefactors, and thieves.” Mark Twain commented, “There is no distinctively native criminal class except for congress.” Ronald Reagan’s classic, “Politics is supposed to be the second oldest profession. I have come to realize it bears a very close resemblance to the first.” And most appropriately, Mark Twain’s remark made over 70 years ago, “We have the best Congress money can buy.”
Remember, you heard it all here first, two years ago. Where are you when we need you Michael Moore?