Brace yourself, pharma: Your beloved tax inversions could make a comeback

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The U.S. Treasury will review recently introduced regulations, including those that govern tax inversions.

The U.S. Treasury is set to review its recently introduced tax rules—and that means the crackdown that put an end to pharma’s tax-inversion mania could be in for a change.

President Donald Trump has signed an executive order directing the agency to look over its newest tax regulations—specifically those enacted in 2016 and 2017—and root out “things that are significant and create complexity and undue burdens,” Treasury Secretary Steven Mnuchin said Friday, as quoted by Bloomberg.

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Only one round of new rules fell within that time frame—the round that scuttled the record-breaking Pfizer-Allergan merger—and inversions are “obviously one of the significant things and one of the things we would be looking at,” Mnuchin said.

Pharma certainly wouldn’t mind if Treasury loosened the reins on inversions. Such deals allowed U.S. companies to lower their tax rates by buying up tax-advantaged targets. Before the first set of new rules—which prompted AbbVie to pull back on its takeover of Ireland’s Shire—drugmakers were inverting left and right.

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Lower tax rates were great for companies’ bottom lines, sure—but they also made them more competitive at the dealmaking table. Serial buyers, including Valeant and Actavis—now Allergan—took full advantage, leveraging their ability to cut costs out of an acquisition's tax structure to win big in the M&A arena.

If inversions came back to life, the event would mark just one corporate-friendly move that pharma players are expecting from the Trump administration. CEOs across the sector have talked up the potential for U.S. tax reform to pad pharma’s profits and free up overseas cash for buyouts.