The drug industry has taken heat from patient advocates and a U.S. senator for handing out its tax savings to shareholders instead of using its tax reform windfall to help patients or lower drug prices. Now, one of its own is calling out the industry, too.
At a BIO panel this week, Ovid Therapeutics CEO Jeremy Levin, formerly Teva's chief executive, said the industry should have focused on building up their businesses, rather than buying back shares, according to Scrip Pharma Intelligence. Top drugmakers have announced at least $45 billion in buybacks in recent months.
Levin previously made that argument during a FierceBiotech executive breakfast at the J.P. Morgan Healthcare Conferece in San Francisco, shortly after the U.S. government ushered in its tax changes—and before most of Big Pharma had decided what, exactly, to do with the money.
At the January panel, Levin called on pharma to boost spending in individual disease areas such as Alzheimer's rather than buying back "a single share" or paying out larger dividends. He also said the industry should change executive compensation strategies to prioritize drug development.
After tax reform, pharma vet Jeremy Levin says Big Pharma shouldn't buy back "a single share" and should change exec compensation structures to incentivize drug development.— FiercePharma (@FiercePharma) January 9, 2018
"If they do that, I think there will be a fundamental change in the industry." #JPM18 #FierceLive
Many drugmakers expect to save billions as a result of U.S. tax reform—ushered in late last year by Congress and the Trump Administration—and before or shortly after the changes, several companies authorized tens of billions in share buybacks.
Five U.S. drug companies—Pfizer, Merck, AbbVie, Amgen and Celgene—implemented share buybacks totaling $45 billion before or shortly after U.S. lawmakers passed tax reform, according to an April report from Sen. Cory Booker, D-N.J. With the savings from the law, Booker said, companies should have lowered their drug prices.
PhRMA responded that the companies were "cherry picked for inclusion" in Booker's report, adding that those drugmakers committed $23 billion for U.S. capital projects and R&D.
In addition to buybacks, companies have also announced some increases in R&D spending, employee pay or bonuses, charitable contributions and new capital projects. Amgen, for instance, unveiled a plan to build a $165 million "next-generation" biomanufacturing plant in Rhode Island. AbbVie recently donated $100 million to Puerto Rico hurricane relief efforts.
In earnings releases and conference calls after the law made its way through government, executives for Pfizer, Amgen, Regeneron, AbbVie and many other companies said they expect lower tax rates. Leadership for Allergan, Teva, Novartis and AstraZeneca said they expect increases.
Projected tax rate decreases as a result of tax reform:
|Company||Projected percentage point decrease||Projected 2018 tax rate (%)|
|Roche||3-6.6*||"The low 20s"|
Projected tax rate increases:
|Company||Projected percentage point increase||Projected 2018 tax rate (%)|
|Teva Pharmaceutical Industries||1.7-3.7||17-19|