Obama raises spectre of overseas-earnings tax

Are drugmakers facing a big increase in U.S. taxes? It's certainly a possibility, as In Vivo points out. In President Obama's State of the Union speech on Wednesday night, he resurrected an idea he promoted during his campaign: Taxing U.S. companies' overseas earnings. "To encourage these and other businesses to stay within our borders," the president said (as quoted by In Vivo), "it's time to finally slash the tax breaks for companies that ship our jobs overseas and give those tax breaks to companies that create jobs in the United States of America."

Now, that's not targeted only at Big Pharma. Plenty of industries have been taking advantage of lower costs overseas. But drugmakers certainly have been doing quite a bit of it. India, China, Japan, Brazil, South Africa, Mexico ... the list goes on. And with emerging markets on practically every drugmaker's to-do list--and U.S. pharma growth slowing almost to a standstill, particularly if healthcare reform doesn't pass--those overseas earnings are only going to grow.

So as In Vivo points out, it's no wonder that PhRMA is continuing to back healthcare reform. Not only would the Senate's version of the industry overhaul tend to boost pharma sales--from nil to 3 percent annually, says IMS Health--but would cost pharma only $80 billion, or maybe $90 billion if the House gets its way. If Congress goes in another direction--say by taxing overseas earnings and allowing drug reimportation and opening the door to Medicare price negotiation--the price tag could be lots bigger, and without the boost of near-universal insurance coverage. That's a little something to think about over the weekend.

- read the In Vivo post

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