Three years into a Senate Finance Committee investigation into Big Pharma’s tax strategies, committee Chair Ron Wyden, D-Oregon, has set his sights on Pfizer.
By sending a letter to Pfizer CEO Albert Bourla, Ph.D., Wyden hopes to learn more about the tax payments made by the pharma giant in recent years. The senator noted that the company's 9.6% tax rate in 2022—and its negative tax rate last year—were “substantially lower” than the U.S. corporate tax rate of 21%.
“Despite generating over $364 billion in sales over the last six years, Pfizer incomprehensibly pays a lower tax rate than millions of working American families,” Wyden wrote in the letter (PDF).
In annual Securities and Exchange Commission (SEC) filings, Pfizer has said that the “jurisdictional location of earnings" plays into its effective tax rate.
Foreign subsidiaries of U.S. corporations avoid the U.S.' 21% corporate tax rate and instead can claim the lower global intangible low-taxed income rate of 10.5%, an approach allowed under former President Donald Trump’s 2017 tax law.
A finance committee analysis of the Pfizer’s SEC filings found that the company's effective tax rate sank by 75% following the passage of the law.
While Pfizer generated 42% of its global sales in the U.S. in 2022, the company only booked 16% of its profits in the U.S. that year, according to Wyden.
In his letter, Wyden asked the company to provide detailed documents showing information about its taxes and earnings, specifically those that could shine light on tax incentive agreements in Puerto Rico, Singapore and potentially Ireland.
A company spokesperson confirmed that Pfizer received the letter but did not offer any comment on the matter.
Wyden’s larger investigation, which kicked off in 2021, explores the effects of Trump’s 2017 tax legislation for pharmaceutical companies. Offshoring is a strategy drugmakers have often caught heat for, and, in Pfizer’s case, the change in tax laws may “encourage and reward” its profit-shifting to foreign countries, Wyden wrote.
The spotlight on Pfizer follows similar inquisitions aimed at AbbVie, Amgen, Bristol Myers Squibb and Merck, all of which have been targeted over the senator’s three-year-long investigation.
Last May, Wyden and the finance committee revealed findings exposing the “full extent of the tax break Republications handed Big Pharma” in 2017. In all, the probe found that the industry's average tax rate fell by more than 40% after the passage of the law, with 75% of its taxable income being recorded by foreign subsidiaries.