Don’t get too excited about U.S. corporate tax reform, pharma. It may not all be pretty

SAN FRANCISCO—Here at the JPMorgan Healthcare Conference, some drugmakers are speaking up about the corporate tax reform that could take place under U.S. President-elect Donald Trump. Amgen CEO Robert Bradway, for one, proclaimed Monday that Amgen "will be a clear beneficiary of that change.”

But as Johnson & Johnson CEO Alex Gorsky warned, for others, it won’t be so black and white.

“There are going to be some things that all of us really like that are likely going to go away,” he cautioned, and “there’s going to be other things that we don’t necessarily like that may be introduced" in a new set of tax rules.

Right now, there’s a lot of mystery in particular surrounding what might be done to allow companies to bring home money they’re storing overseas without paying tax penalties, he noted.

“Is it just the cash that’s abroad, or is it in fact all of the earnings?" Gorsky asked. "What exactly is that rate? Is it 8%? Is it 3%? Is it 5%? What’s the timeline that might be associated with that? Is there a phasing period so you can manage it appropriately?

“At the end of the day it could mean for a company like Johnson & Johnson—and I would dare say others—that your tax rate could go up marginally,” he said.

That’s not to take away from the potential benefits tax reform could bring to pharma companies. Tax considerations might be less important under a new scheme, he said. “If changing up the rules brings drugmakers more flexibility in the long run to be able to deploy capital in ways that are not necessarily so heavily influenced by the tax regulations versus the strategic and actual financial outcomes, I think that’s a real positive,” Gorsky said.

Much attention has been focused on the cash-repatriation issue in the wake of a super-slow 2016 on the M&A front. Analysts are predicting that Trump’s reforms could kick-start dealmaking in the sector. However, Trump has also said he intends to bring down drug prices—a scenario the industry wouldn't be too fond of.