On average, prescription drugs cost 2.56 times as much in the U.S. than they do in other countries. We’re pharma’s cash cow. The U.S. health care system, unlike health systems in other countries, isn’t set up to bargain with drug companies for lower prices. Until the Biden administration passed the Inflation Reduction Act, even Medicare was specifically prohibited from negotiating drug prices, thanks to the lobbying power of drug companies. (As I recall, preserving that prohibition was the price to be paid for the passage of the Affordable Care Act.) Medicare, by the way, is the world’s largest drug buyer.
Even though we’re overpaying for drugs, pharmaceutical
companies report earning hardly any profits on their U.S. sales. They do this
by using accounting tricks to avoid paying taxes on profits earned here. The
trick is to assign patents and
other forms of intellectual property to overseas subsidiaries located in
low-tax jurisdictions, such as Ireland, Luxembourg, and Bermuda. The drug companies
pay large fees to these overseas subsidiaries for the use of this intellectual
property. But the benefit to them is to cause profits to disappear in the U.S.
and reappear in one of the low-tax jurisdictions where they go largely untaxed.
(In the pharmaceutical industry, patents, rather than manufacturing facilities,
are companies’ principal assets.)
Because of these shenanigans, the U.S. government is losing
a lot of revenue. Cracking down on tax avoidance could significantly reduce
budget deficits. For the moment, however, the House is controlled by a party
that wants to deny the I.R.S. the resources it needs to go after tax evaders.
For an introduction to this blog, see I Just Say No; for a list of blog topics, click the Topics tab.
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