It’s not enough that Bristol Myers Squibb profits handsomely from the U.S. failure to rein in drug prices. Jesse Drucker reports for the New York Times that, with help from its lawyers at White & Case and its auditors at PwC, the IRS found that it skirted its federal tax obligations as well.
Bristol Myers created an offshore subsidiary which the Internal Revenue Service called an “abusive” tax shelter when it learned of it. It was an inappropriate excuse to pay $1.4 billion less in taxes. Needless to say, Bristol Myers does not admit to having done anything wrong and did not tell its shareholders that the US was demanding these unpaid taxes back.
Bristol Myers behaves like many pharmaceutical companies. It keeps its taxes down by using foreign subsidiaries to hold patent rights to its most profitable drugs. It chooses countries with low tax rates.
President Joe Biden’s infrastructure plan would make sure that companies could not play these games. It would raise the amount companies must pay in taxes on foreign subsidiaries. Between 2009 and 2011, Bristol Myers was paying 24 percent when the corporate tax rate was 35 percent.
Then, with the help of the accounting firm, PwC, and the law firm, White & Case, Bristol Myers set up a subsidiary in Ireland. And, Bristol Myers paid negative 7 percent in taxes in 2012. PwC and White & Case provided cover for Bristol Myers’ tax avoidance strategy. In lengthy letters, they claimed it was legal. But, they knew that the IRS would not look favorably on what they had done as it had gone after Merck and Dow Chemical for undertaking similar efforts.
In 2020, the IRS found Bristol Myers to have violated an anti-abuse provisions that precludes this profit-shifting arrangement. Neither White & Case nor PwC considered this provision in their analyses of the tax strategy, which many believe was intentional, a way to give Bristol Myers the ability to say that it did not know it had acted illegally.
The IRS mistakenly posted its 20-page determination with Bristol Myers’ name on it when it should have been redacted.
Here’s more from Just Care:
- Pharmaceutical companies continue winning in Washington
- Millions safely import low-cost drugs from abroad
- Most of Congress continues to accept campaign contributions from the pharmaceutical industry
- How to ensure the drugs you take are safe and effective
- Avoid brain-boosting supplements
