Pharma on Trial: Multiple Companies are in Legal Crosshairs

AbbVie has been the target of multiple legal inquiries and challenges of its pricing and patent protections. Now, a U.S. senator is taking a gander at the company’s taxes, specifically how it benefited from recent changes to corporate tax laws under the previous administration.

Sen. Tom Wyden launched an investigation into the company’s tax practices as something of an indictment of the Republican tax plan signed into law during the Trump administration. Specifically, Wyden, a Democrat from Oregon, is looking for information on how the 2017 corporate tax law allowed the company to “further abuse tax havens and avoided paying taxes on U.S. prescription drug sales.” Wyden said the company has exploited loopholes in the law and keeps its tax rate lower than the corporate tax rate of 21%. According to Wyden’s announcement, AbbVie’s tax rate was 8.7% in 2018, 8.6% in 2019, and 11.2% in 2020. 

Before the 2017 tax law passage, AbbVie paid effective tax rates of 20 percent in 2016 and 19 percent in 2017, Wyden wrote. The Oregon senator said AbbVie has been able to do this by using offshore loopholes and reporting net losses in the U.S. and net income outside of the U.S. By shifting profits offshore and reporting losses in the U.S., AbbVie avoids paying higher tax rates.

“Despite the United States market being the source of most of AbbVie’s revenues and richest price premiums, it appears that the company has consistently reported net losses in the United States while reporting substantial foreign profits. 

In 2020, AbbVie reported a domestic pretax loss of $4.5 billion while reporting foreign pretax profits of $7.9 billion. Similarly, in 2019 AbbVie reported a domestic pretax loss of $2.8 billion while reporting foreign pretax profits of $11.2 billion. In 2018 AbbVie also reported a domestic loss with regard to pre-tax profits,” Wyden wrote in his letter. 

Wyden said the Illinois-based company is exploiting legal loopholes to benefit its shareholders while still increasing the prices of top-selling drugs covered by Medicare – price hikes that are the subject of ongoing congressional investigations. 

AbbVie isn’t the only company facing legal challenges. Generics giant Mylan, which merged with Pfizer’s UpJohn to form Viatris, is the target of a lawsuit from Sanofi over anticompetitive practices related to the EpiPen. Sanofi, which makes Auvi-Q, is seeking a new trial over its claims that Mylan has a monopoly on the market. 

Last year, the U.S. District Court entered a summary judgment in favor of Mylan, rejecting Sanofi’s claims of unfair marketing practices. Sanofi claimed the company raised prices on the EpiPen, then granted insurance payors large rebates. The French pharma giant said the rebates would only be available if the payors did not cover Auvi-Q. 

Sanofi believes the ruling was incorrect and is appealing for a new trial. A company spokesperson said if the trial went to a jury, it is likely that Mylan will have been found in violation of antitrust laws. 

GlaxoSmithKline is celebrating a win in court related to its anti-nausea drug Zofran. The company was sued over claims that the drug can cause congenital disabilities in women who took the medication during pregnancy and that GSK failed to properly warn about the risks. 

However, a court ruled that because GSK and Novartis, which acquired the rights to Zofran, submitted multiple safety reports to the U.S. Food and Drug Administration over the years and that the regulatory agency opted not to add a warning regarding pregnancy, the claims which were filed under state law were preempted by federal law. 

Another ongoing high-profile legal case involves the Sackler family, which owned Purdue Pharma, the maker of OxyContin. According to NPR, a judge moves forward with a bankruptcy plan that could provide the family with immunity against future opioid-related lawsuits. Purdue’s OxyContin is primarily seen as a catalyst drug for the nation’s ongoing opioid epidemic. 

In October, Purdue filed for Chapter 11 bankruptcy in 2019 and agreed to an $8 billion settlement with the U.S. Department of Justice over its opioid marketing practices. The bankruptcy deal is opposed by multiple state attorneys general who does not want to see the family receive any immunity from future lawsuits.