Washington, D.C. – Senate Finance Committee Chair Ron Wyden, D-Ore., continued his investigation into Big Pharma’s tax practices, and how loopholes in the tax code have allowed multinational companies to further abuse tax havens and avoid paying U.S. taxes on prescription drug sales. Wyden wrote to Bristol Myers Squibb to request information about their reported use of offshore subsidiaries in Ireland in a manner that may have violated longstanding IRS anti-abuse rules.
“According to public reports, in 2012 Bristol Myers developed a sophisticated tax avoidance strategy where it shifted intellectual property rights for several prescription drugs to a newly created offshore subsidiary to shift untaxed gains and generate amortization deductions. At the time, Bristol Myers’s U.S. operations held patents on several drugs with a fair market value that had already been fully amortized for tax purposes, while an Irish Bristol Myers subsidiary held patents that it had not yet fully amortized and thus would produce tax deductions. Bristol Myers then reportedly formed a new foreign partnership in Ireland by transferring the patent rights from existing U.S. and Irish affiliates to the newly created partnership. Bristol Myers then proceeded to allocate tax deductions from the new partnership structure in a way that would use amortization deductions associated with Irish patents to offset U.S. taxes [while simultaneously shifting untaxed gains of the U.S. affiliates to the foreign affiliate] and substantially lowering its tax rate. This strategy was extraordinarily effective, as Bristol Myers’s effective tax rate declined from 24.7 percent in 2011 to negative 7 percent in 2012,” Wyden wrote.