Big Pharma’s Elaborate Shell Game

You may have seen it: people standing on city street corners, trying to entice unwitting passersby to play a shell game for a handful of dollars. A game they cannot possibly win. We call these people conmen, but when Big Pharma plays the same shell game with billions of dollars we instead call them businessmen.

Oxfam International has just released the results of a thorough investigation they made of Big Pharma. They found that these companies often engage in elaborate tax-dodging schemes that directly lead to the underfunding of governments. The same governments that support the healthcare systems that Big Pharma profits from.

Oxfam investigated the financial data of the following pharmaceutical companies:

  • Johnson & Johnson
  • Pfizer
  • Merck Sharp & Dohme
  • Abbott

They discovered that — between 2013 and 2015 — these companies underpaid their taxes by nearly $4 billion to the following developed countries:

  • Australia
  • Denmark
  • France
  • Germany
  • Italy
  • New Zealand
  • Spain
  • The United Kingdom
  • The United States

More than half of these underpayments were to the U.S. government alone.

Technically, Big Pharma broke no laws in underpaying their taxes. This is because of a major part of the shell game are the corporate tax laws that let large corporations avoid paying their fair share of taxes.

Some may argue that avoiding taxes is a victimless crime. But according to Oxfam, there were in fact victims. They say that if the 4 companies in their investigation had paid the full amount of taxes in the United States, lives could have been saved. They insist that the U.S. government could have used the money to vaccinate millions of girls against Human Papilloma Virus, which can lead to cervical cancer. They could have also provided a million U.S. children with health insurance as well.

But Oxfam found that it was not only in rich countries that Big Pharma was dodging taxes. They also discovered that the 4 companies underpaid the following developing nations by more than a $100 million:

  • Thailand
  • India
  • Ecuador
  • Colombia
  • Pakistan
  • Peru
  • Chile

This is money that could have been used for a whole host of medical programs for the poor, such as vaccinations and other treatments.

A majority of the underpayments to developing nations were diverted from India, which is a country that is struggling to provide even basic health care to its people. Oxfam says that the Indian government could have used the money kept from it to vaccinate children against Japanese encephalitis, which is a virus that kills many children every year in the country. They insist that the money could have protected every single child in the country against the virus.

But tax dodging is just one aspect of the shell game Big Pharma is employing. They are also overpricing their drugs. Oxfam believes that pharmaceutical companies are marking up the price of certain cancer drugs by 100 times the cost of producing them.

The question is: do countries and their governments get anything in return for participating in this shell game?

Not much, according to Oxfam. While the companies insist that they are investing in the local countries they are operating in, it is not apparent the amount of profiteering is anything close to equal with the contributions they are making to local economies.

Oxfam believes that transparency is the key to rectifying these problems. They think that if governments force corporations to properly report their finances that this will lead to not only regulation but also changes to the tax code that will force companies to pay a fair amount of taxes.

At the moment, the tax code in many countries considerably favor these companies. Oxfam pointed out that this was particularly the case in the United States, where recent tax reform legislation has benefited Big Pharma to a great extent. By allowing companies to repatriate their profits at a significantly reduced tax rate, many large pharmaceutical companies have reaped huge profits. They say Pfizer alone saved more than $25 billion because of the legislation, and Merck and Johnson & Johnson saved $13 billion and $9 billion, respectively, from the legislation.

What’s more, Oxfam insists that these profits have not by reinvested by the companies into the local economies. Instead, they have been funneled into things such as stock buyouts and dividends. At the same time, Americans are facing ever-increasing problems. Not only are their wages not rising, but their healthcare also is not improving. The only thing that seems to be rising is the cost of medical care.

The situation begs a question that itself is begging for an answer: what would happen if the shell game was dismantled and if the money collected from it went instead directly into the healthcare system?

I think we all know the answer to that one.