Biotech
Friday, August 12th, 2022 8:52 am EDT
Last year, Amgen paid taxes equivalent to just over 12% of its nearly $7 billion in pre-tax profits, well below the U.S. corporate rate of 21%. The year before, the California-based biotechnology company paid even less, 10.7%, and for all but one of the past 10 years its effective tax rate has been below 16%.
Ron Wyden, the powerful Democratic lawmaker who chairs the Senate Finance Committee, wants to know how. In a letter sent Thursday to Amgen CEO Robert Bradway, Wyden asked the drugmaker for detailed, country-by-country information on its pre-tax earnings, profit margins and taxes paid. The senator also wants an accounting of how Amgen’s operations in Puerto Rico, a territory granted different tax status under federal law, impacts the bill the company owes the U.S. government.
“The American public deserves to understand why Amgen, a multinational pharmaceutical corporation based in the U.S., with annual sales of $26 billion primarily made to U.S. customers, paid a lower tax rate than a postal service worker or a preschool teacher,” Wyden wrote in the letter.
While Amgen booked nearly $18.2 billion in U.S. revenue last year, it only reported almost $1.9 billion in pre-tax profits from those sales. By comparison, the drugmaker reported nearly $4.9 billion in pre-tax profits on $7.8 billion in revenue elsewhere in the world.
Wyden’s inquiry is part of a wider probe by the Finance Committee into the lower tax rates paid by pharmaceutical companies after the 2017 passing of the Tax Cuts and Jobs Act. An analysis of the law by BioPharma Dive found the 10 largest U.S. drugmakers collectively paid $6 billion less in taxes in 2020 than they did in 2016, the year before the law’s enactment.
Wyden recently sent a similar letter to Merck & Co., and the Finance Committee in early July published a report on how AbbVie exploited subsidiaries in lower-tax jurisdictions overseas, such as Bermuda.
In Amgen’s case, Wyden is focused on Puerto Rico, where the biotech has a large manufacturing site. “Sadly, it appears that exploiting subsidiaries in Puerto Rico and other low tax jurisdictions has been a longstanding practice for Amgen,” Wyden wrote.
Under the 2017 tax law, income from corporate entities in Puerto Rice are treated as foreign and taxed at a lower rate of 10.5%, rather than the 21% statutory minimum. In its annual report for 2021, Amgen notes that “substantially all” of the benefit to the company’s effective tax rate from foreign earnings “results from” its operations in the U.S. territory.
Additionally, the company notes that its operations there are subject to tax incentive grants through 2035, a detail on which Wyden is seeking more information.
Wyden and the Finance Committee aren’t the only ones interested in Amgen’s tax practices and operations in Puerto Rico. The Internal Revenue Service is reportedly seeking $10.7 billion in back taxes it says the biotech owes as a result of underreporting taxable profits by $24 billion between 2010 and 2015, according to The Wall Street Journal.
In a regulatory filing, Amgen said it disagrees with the IRS’ calculations and will contest the agency’s claims. “We believe our accrual for income tax liabilities is appropriate,” the company’s annual report reads. “[H]owever, due to the complexity of the provision for income taxes and the uncertain resolution of these matters, the ultimate outcome of any tax matters may result in payments substantially greater than amounts accrued.”
Of particular interest to Wyden, it appears, is Amgen’s best-selling inflammatory disease drug Enbrel, which has earned the company nearly $75 billion in sales through 2020. Amgen has shielded the drug from competition with a thicket of patents that have helped extend is market monopoly through 2029, when biosimilar competition is expected to enter the U.S. market.
Wyden is asking which entities own patents on Enbrel, and where Amgen paid taxes on Enbrel sales between 2018 and 2021.
The lawmaker is seeking similar information from Merck related to its best-selling cancer drug Keytruda.
This post has been syndicated from a third-party source. View the original article here.
