Pharma to pay under Obama tax plan

How does pharma fare under President Obama's proposed budget? The short answer is so-so. Generics makers would have to pay new fees. Multinational pharma firms most likely would pay more in taxes. But drugmakers wouldn't see as large a tax increase as they might have if the president had opted to go ahead with a full-scale collection of taxes on overseas income.

First, the fees: Generics makers would be subject to new fees to cover the cost of quicker review of regular generics and to set up a mechanism to review generic biologics. The fees would also help fund an effort to clear the backlog of current generic apps. According to Reuters, the generics firms have generally supported the idea of paying these new fees, provided the FDA follows through on its promise to speed up approvals.

Meanwhile, the foreign tax issue: The Obama administration had threatened to completely close the overseas-income tax loophole, collecting an additional $210 billion from U.S. businesses as a result. Instead, it's only expecting to collect an additional $122 billion, via a range of international tax changes.

The one most interesting to pharma is a change to rules on transferring licenses, patents, trademarks and other intangible property to overseas tax havens. The new rules would force companies to pay U.S. tax when income is generated by products whose licenses have been transferred to low-tax countries, and that income is considered an "excessive return" because of the tax savings, Bloomberg reports. If the law passes, we'd expect plenty of lawyers to leap on the chance to advise pharma on just what that excessive return might be.

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