With its patents expiring next year, Humira is nearing the end of a remarkable run as the world’s best-selling drug. Illinois-based AbbVie has raked in sales of more than $200 billion for the treatment and—thanks to the company’s skillful use of offshore tax shelters—it has kept a nice chunk of those proceeds that otherwise would have gone to Uncle Sam.
There’s nothing new here. AbbVie and many other companies have faced scrutiny over the tactic for years. But now Congress is making a renewed push to do something about it.
A Senate Finance Committee report, authored by Democrats, has zeroed in on AbbVie’s strategy, blaming provisions in a 2017 Republican-led tax law that have allowed pharma companies to slash their U.S. tax burdens.
“A multinational pharmaceutical corporation with annual sales over $50 billion paid a lower tax rate than a postal service worker or a preschool teacher,” reads the report. “It is unacceptable.”
In 2020, for example, while AbbVie made more than 75% of its sales in the United States, it recorded only 1% of its taxable income in the U.S., the report says.
Instead of ponying up the going tax rate of 21% for U.S. companies, AbbVie is paying roughly half that by parking assets in subsidiaries in Bermuda and Puerto Rico, the lawmakers wrote.
Chairman Ron Wyden (Oregon) said that the committee was also looking into similar strategies by Merck and Bristol Myers Squibb.
AbbVie has stashed dozens of its patents in Bermuda, which has no corporate taxes, according to the report. Its company there, AbbVie Biotechnology Ltd. has no Bermuda-based employees, the lawmakers said.
AbbVie Biotechnology also operates a facility in Puerto Rico which manufactures pre-filled syringes of Humira, according to the report. The syringes are sold to AbbVie, which then packages and sells them.
AbbVie also has subsidiaries in Singapore and the Netherlands which produce Humira. According to the report, none of the manufacturing of the drug or its fill-finish takes place in the U.S.
In 2017, when the Trump administration slashed the U.S. corporate tax rate to 21%, it also attached a provision that profits from tax havens be taxed by the U.S. at a rate of 10.5%. But companies can apply U.S. losses against that rate to further lower their tax bills. Under the law, companies that record profits overseas can benefit from running a loss in the U.S.
AbbVie paid tax rates of 8.7% in 2018, 8.6% in 2019 and 11.2% in 2020, the report says.