Two Democratic lawmakers have renewed accusations that large pharma companies have evaded paying U.S. taxes through a legislative loophole that drugmakers are allegedly lobbying to retain.
In letters (PDF) published Tuesday, Sen. Elizabeth Warren, D-Mass., and Congresswoman Jan Schakowsky, D-Ill., accused AbbVie, Pfizer, Amgen, Merck & Co. and Johnson & Johnson of paying little to nothing in federal taxes since 2018 by moving intellectual property ownership and production outside the U.S.
During the same period, the companies have raked in hundreds of billions of dollars in combined global profits, the lawmakers said in a press release.
The two lawmakers placed part of the blame on the 2017 Tax Cuts and Jobs Act, which they say created new incentives for pharmaceutical companies to shift the vast majority of their profits offshore. In making the argument, the two cited an article published last year by the independent nonprofit Council on Foreign Relations.
Among the five companies singled out by Warren and Schakowsky, Amgen has indicated that the company paid $110,000 in U.S. federal taxes last year, compared with $4.61 billion in total profit. AbbVie, J&J, Merck and Pfizer all claimed to owe negative taxes in the U.S. while earning $3.72 billion, $16.69 billion, $19.94 billion and $8 billion, respectively, in total profits, according to the lawmakers.
Together, these five large U.S. pharmas paid almost nothing in U.S. taxes since 2018 but made more than $429 billion in profits during the time, according to the lawmakers.
In separate letters, the lawmakers are asking leaders of each company about their lobbying efforts around potential tax legislation as well as their estimated tax liabilities if a year’s worth of profits were held entirely in the U.S.
Every one of the five drugmakers spent more in the last three months of 2024 lobbying on international tax issues than they have spent on federal taxes in the past six years, the lawmakers noted, citing data from OpenSecrets.
Congress is currently in the thick of reviewing Trump’s “big, beautiful bill,” which could retain the tax loophole Warren and Schakowsky are attacking. The House passed the tax and spending bill in May, and the Senate just released its first iteration of the legislation Monday.
“Congress should not slash Social Security, Medicare, Medicaid, or other assistance to Americans trying to afford their prescription medication in order to pay for massive tax breaks for Big Pharma companies making record profits,” Warren and Schakowsky wrote in each letter.
In a separate article in March, the Council on Foreign Relations proposed reforms to Trump’s 2017 tax bill with such measures as taxing the profits on the intrafirm transfers of IP. By closing the loopholes used by pharma companies, the reforms would lead to $100 billion in new U.S. corporate income tax revenue over 10 years, the report asserts.
The companies were given until July 1 to respond to the lawmakers’ letters.
“We look forward to clarifying Johnson & Johnson’s significant U.S. tax contributions and cooperatively responding to Senator Warren and Representative Schakowsky’s letter,” a J&J spokesperson said in a statement to Fierce Pharma.
The other companies did not immediately respond to Fierce Pharma’s requests for comments by publication time.
The renewed scrutiny on pharma’s tax contributions coincides with Trump’s criticism of the industry’s offshore operations in his threats to impose tariffs on pharmaceuticals. The president has singled out Ireland for luring away pharma companies with its low tax rate. Rather than tax evasion, Trump is viewing the phenomenon from an angle of trade imbalances and manufacturing job losses.
Warren and Schakowsky’s inquiry follows an investigation into drugmakers’ tax strategies launched by Sen. Ron Wyden, D-Ore., in 2021. A March report from the probe homed in on Pfizer, alleging that the New York pharma engaged in an “egregious tax gimmick” in which U.S. companies log profits from drugs sold to U.S. customers to a foreign location of production or IP ownership for tax purposes.
This is the same tactic highlighted by Warren and Schakowsky.