Drugmakers don't just worry about drugs. Nor do they limit their concern to their employees to discover, made, sell and defend those drugs in court. They have to manage their cash, too. And if some recent IRS trouble is any indication, certain pharma firms might be managing their cash a bit too aggressively.
Here's the scoop, from BNet Pharma: Merck settled a U.S. Internal Revenue Service claim for $2.3 billion. The problem, as the tax folks saw it, was that Merck had set up a Bermuda unit and transferred its patents on Zocor and Mevacor to that unit--then licensed the drugs back, getting money out of the U.S. in the process.
Ironically, this IRS settlement follows a September tax-court judgment against Merck's newly merged Schering-Plough. Schering apparently had moved some cash to Ireland, BNet reports, to avoid paying taxes. The drugmaker lost the $437 million case.
Nor is this the last bit of tax trouble on the horizon for drugmakers. Merck itself is still in a tax dispute with Canada. And in its recent quarterly filing with the SEC, Pfizer disclosed that the IRS is auditing its 2006, 2007 and 2008 returns, and that the company is appealing audits from 2002 to 2005. We'll have to wait and see what the agency decides.
- read the BNet post