Four years into a Congressional probe of Big Pharma’s potential abuse of a 2017 tax break, Democratic lawmakers have homed in on Pfizer, accusing the New York drugmaker of some of the most egregious financial maneuvering they’ve uncovered.
By shifting profits offshore in 2019, Pfizer allegedly “carried out what could be the largest tax-dodging scheme in the history of Big Pharma,” Sen. Ron Wyden, D-Oregon, ranking member of the Senate Finance Committee, said of the situation on Thursday.
Wyden—who has been spearheading an investigation into large drugmakers’ tax strategies since 2021—delivered his remarks a little less than a year after setting the probe’s sights on Pfizer. The ongoing investigation by Democrats on the Senate Finance Committee has also unearthed purported tax-dodging schemes by companies like Amgen, AbbVie, Bristol Myers Squibb and Merck & Co.
According to the latest from the investigation, Pfizer logged around $20 billion in U.S. sales in 2019 but reported zero taxable U.S. profits for that year by tying those earnings to offshore subsidiaries. In turn, Pfizer was able to dodge billions of dollars in federal income taxes in a single year, the Committee said in a report (PDF) of its findings this week.
The report further alleges that “[t]his was not a one-off for Pfizer,” noting that the company reported zero taxable U.S. income in 2018 or 2020.
Democrats on the Finance Committee also accused Pfizer of engaging in “sweetheart tax deals” with Singapore and Puerto Rico, which exempt the drugmaker from income taxes in those countries and stymied the Committee’s investigation through non-disclosure agreements.
The report ties Pfizer’s actions to an “egregious tax gimmick” dubbed round-tripping, wherein U.S. companies log income from sales to U.S. customers as foreign for tax purposes. Wyden and his team have connected the practice to tax legislation enacted by President Donald Trump in 2017, which the Senator has previously said incentivizes large drugmakers to share profits with foreign countries.
Under the 2017 tax law—which cut the U.S. corporate tax rate from 35% to 21%—foreign subsidiaries of American companies can avoid that corporate rate and instead claim the global intangible low-taxed income rate of 10.5%. To hear Wyden and his team tell it, “Every dollar that big pharma can shift out of the U.S. gets its tax rate cut in half.”
Naturally, Pfizer sees the situation differently.
“The select information published by Senate Finance Committee Ranking Member Ron Wyden is not an accurate portrayal of the 2017 Tax Cut and Jobs Act (TCJA) effect on Pfizer,” a company spokesperson told Fierce Pharma on Friday.
“As we have communicated, substantially all of Pfizer’s worldwide income is subject to tax in the United States resulting in Pfizer paying U.S. tax on a larger portion of its global income than it had pre-TCJA,” she explained.
From 2021 through 2024, Pfizer paid more than $12.8 billion in U.S. income taxes, as publicly reported in the company’s financials and securities filings, the spokesperson added.
Wyden publicly took aim at Pfizer last May when he sent a letter to the company’s CEO, Albert Bourla, Ph.D., asking for clarification on why the drugmaker paid a “substantially lower” tax rate than the U.S. corporate rate in recent years.
“Despite generating over $364 billion in sales over the last six years, Pfizer incomprehensibly pays a lower tax rate than millions of working American families,” the Senator said at the time.
The ongoing investigation by Wyden and his Democratic compatriots from the Finance Committee has pointed the finger at multiple drugmakers in recent years, including Merck, which allegedly shifted profits on its megablockbuster Keytruda offshore to dodge billions of dollars in U.S. taxes.
In a 2022 report, Wyden noted that the U.S. made up $22.24 billion of Merck’s 2021 sales, though the company reported just $1.85 billion in local pretax income. That same year, Merck logged international pretax income of more than $12 billion from around $27 billion in international sales.
The Finance Committee’s Pfizer revelations come as potential tariffs—both regional and industry-specific—put financial pressure on the life sciences and healthcare industries at large. In singling out the pharmaceutical industry, Trump is reportedly leveraging those duties in a bid to convince drugmakers to move manufacturing onto U.S. soil.
The potential economic strain those tariffs could place on U.S. companies is already proving wildly unpopular with local biotechs big and small, according to results from a recent survey by the trade group the Biotechnology Innovation Organization (BIO).
Aside from signing executive orders calling for tariffs on imports from China, Mexico and Canada—plus renewed threats of duties on pharmaceuticals specifically—Trump this week also entertained the prospect of tariffs on Ireland, which the President has accused of luring away U.S. pharma companies.
The findings from the Wyden investigation made note of Pfizer’s strategy in Ireland as well.
“Pfizer also appears to book large amounts of profits in subsidiaries in Ireland, joining a trend of large multinational U.S. corporations that are exploiting subsidiaries in Ireland to capitalize on heavily favorable tax treatment,” the report contends.