Pharmaguy's Insights Into Drug Industry News
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Pharmaguy's Insights Into Drug Industry News
Pharmaguy curates and provides insights into selected drug industry news and issues.
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America's Big Pharma Firms Spend More on Shareholders Than R&D and the New U.S. Tax Laws Won’t Change That

America's Big Pharma Firms Spend More on Shareholders Than R&D and the New U.S. Tax Laws Won’t Change That | Pharmaguy's Insights Into Drug Industry News | Scoop.it

At the J.P. Morgan Healthcare Conference in San Francisco this week, executives of big, U.S.-based pharma and biotech firms spoke approvingly of new U.S. tax laws, saying they will "even the playing field" with foreign competitors, lower effective tax rates and increase financial flexibility.

 

Several companies, including Johnson & Johnson, Merck & Co. and Eli Lilly & Co., said the laws would not fundamentally change their capital-allocation strategies. If we take them at their word, then what does that mean?

 

It means research and development spending will be about the same; dealmaking will be opportunistic and difficult to predict; and a lot of money will go back to shareholders in the form of dividends and buybacks.

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Democratic Lawmakers Introduce Bills Designed to Lower Drug Prices, Increase Transparency & Eliminate Tax Credits for Advertising

Democratic Lawmakers Introduce Bills Designed to Lower Drug Prices, Increase Transparency & Eliminate Tax Credits for Advertising | Pharmaguy's Insights Into Drug Industry News | Scoop.it

Nearly two dozen lawmakers introduced identical bills in the House and Senate Wednesday that take a kitchen sink approach to tackling the rising cost of medicines, from allowing Medicare to negotiate prices to removing tax breaks that drug makers receive for advertising expenses.

 

Dubbed the Improving Access to Affordable Prescription Drugs Act, the legislation comes amid mounting controversy over prescription drug prices, a hot-button issue that has put the pharmaceutical industry on the defensive as a growing number of polls show Americans want the government to take action.

 

Although President Trump has talked tough about high drug prices, his administration has yet to make a concrete proposal. And so, the lawmakers — all of whom are Democrats, but for Senator Bernie Sanders (I-Vt.) — have collected a wish list of ideas, including a few that have appeared in earlier bills.

 

Some of the proposals contained in the legislation:

 

  • Drug makers would be required to disclose R&D, manufacturing, and marketing costs; acquisitions, federal investments; revenues; and other factors that influence prices to the Department of Health and Human Services, which would make it publicly available in a searchable format;
  • The HHS would be allowed to negotiate with drug makers, and prioritize negotiations on specialty and other high-priced drugs.
  • Marketing exclusivity that is awarded by the FDA to brand-name drug makers would be amended. The bill modifies exclusivity for new types of drugs so the FDA can accept a generic application after three years rather than five. And exclusivity for biologics would be cut to seven years from 12 years. Also, exclusivity would be ended for any drug whose maker violates criminal or civil law through a federal or state fraud conviction or settlement in which the manufacturer admits fault;
  • It would be illegal for brand-name and generic drug makers make pay-to-delay deals in which lower-cost generics are delayed from reaching consumers. And the FDA could remove the 180-day generic exclusivity period from any company that enters into such a deal with a brand-name manufacturer;
  • Tax breaks that drug makers receive from the federal government for expenses related to direct-to-consumer advertising would be eliminated;
  • The Federal Trade Commission would have to submit a report to Congress on the economic impact of so-called product hopping, which refers to tweaks made to existing products by drug makers that file new patents that extend their monopolies.

 

[“This is one of the most comprehensive reforms of the pharmaceutical industry ever proposed,” said Peter Maybarduk, director of Public Citizen’s Access to Medicines Program. “Medical treatment rationing is a painful reality for millions of Americans. Americans are splitting pills, skipping pills and making impossible decisions about when we can afford to pay for groceries versus when we can afford to pay for the medical care our families need. The core problem is monopoly power. We can change it and make medicine affordable for all. This legislation is a deep challenge to the corrosive political influence of the pharmaceutical industry.”]

Pharma Guy's insight:

A veritable smorgasbord of reforms that have been proposed for many, many years but never seen the light of day and probably won't under the Trump administration. Interestingly, allowing importation of drugs from Canada not included. Perhaps that is why Bernie Sanders did not sign on to this bill.

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Gilead Dodges Taxes While Gouging Prices, Says Advocacy Group

Gilead Dodges Taxes While Gouging Prices, Says Advocacy Group | Pharmaguy's Insights Into Drug Industry News | Scoop.it

An advocacy group is urging the US Internal Revenue Service and the US Treasury Department to investigate Gilead Sciences for allegedly shifting billions of dollars of income offshore in order to avoid paying taxes. The request from Americans for Tax Fairness comes one month after the group released a report (https://www.statnews.com/pharmalot/2016/07/13/gilead-hepatitis-c-taxes/) accusing the drug maker of dodging $10 billion in taxes.

 

The move also comes shortly after the federal government went to court to force Facebook to respond to summonses in connection to an investigation into whether the firm shifted certain property rights to an Irish subsidiary. The social media site may owe anywhere from $3 billion to $5 billion in back taxes, and the advocacy group maintained that Gilead is worthy of the same scrutiny.

 

Gilead is using “a similar highly aggressive use of transfer pricing,” a maneuver that involves shifting properties between entities, “to avoid US taxes and benefit from substantially reduced tax rates. We urge the administration to bring the full force of your enforcement capabilities against Gilead to collect the tax dollars that rightfully belong to the American people,” the group wrote the federal agencies in a letter Wednesday.

 

There has been controversy about US companies that exploit loopholes to avoid paying taxes. Drug makers, in particular, have been singled out for attempting to acquire rivals based overseas to enjoy lower tax rates. The Treasury Department recently issued new rules to thwart such deals, known as tax inversions, prompting Pfizer to scuttle a plan to acquire Allergan [for more on that, read: “Obama Knocks Pfizer HQ Out of Ireland Back Into the USA”; http://sco.lt/87fU13 ]

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Lobbyist Argues DTC Ad Tax Deduction is as American as Cheeseburgers

Lobbyist Argues DTC Ad Tax Deduction is as American as Cheeseburgers | Pharmaguy's Insights Into Drug Industry News | Scoop.it

Limiting direct-to-consumer advertising, outright banning it, or eliminating its deduction as a business expense are not new ideas. However, a potential end to the business advertising tax deduction for DTC is more real than ever, Jim Davidson, chair of the the Advertising Tax Coalition, cautioned marketing executives.

Drugmakers can currently write off money they spend on advertising and marketing as a tax deduction. In March, Sen. Al Franken (D-MN) proposed a bill, which is called the “Protecting Americans from Drug Marketing Act,” that would end the tax deduction.

“The tax [deduction] will be one of the hardest things to defend,” Davidson told attendees at the Coalition for Healthcare Communication's Rising Leaders Conference on Healthcare Policy. He noted that tax reform will likely be a focus for the next president's agenda — a process that could begin as soon as 2017 — and added that the DTC advertising tax deduction could be seen as a major revenue offset in negotiations. Democratic candidate Hillary Clinton has said she would end tax breaks for DTC. Donald Trump has also generally expressed support for tax reform.

Colucci quipped that the pharmaceutical industry “has as much right to advertise as alcohol [companies] and McDonald's. I just want to be treated with the same respect as a damn cheeseburger.”

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Senators Beat Hilary to the Punch: Propose Ending #Pharma Advertising Tax Deduction

Senators Beat Hilary to the Punch: Propose Ending #Pharma Advertising Tax Deduction | Pharmaguy's Insights Into Drug Industry News | Scoop.it

Four Democratic senators introduced a bill last week that would end the tax deduction for direct-to-consumer pharmaceutical advertising.

Drugmakers can currently write off money they spend on advertising and marketing as a tax deduction.

The bill, “Protecting Americans from Drug Marketing Act,” would forbid that deduction. It was introduced by Senators Al Franken (D-MN), Sheldon Whitehouse (D-RI), Sherrod Brown (D-OH), and Tom Udall (D-NM). The proposed legislation defines DTC as any advertisement that is “primarily targeted to the general public,” and specified the following mediums: print, radio, television, telephone communication systems, and social media.

John Kamp, executive director of the Coalition for Healthcare Communication, which advocates on behalf of healthcare advertising and communications companies, said that laws “that ban truthful messages are a violation of the First Amendment and an insult to patients seeking information to enrich their discussions with their doctors and empower their medical decisions.”

This is not Sen. Franken's first attempt to discourage the use of DTC. In October 2009 he proposed legislation of the same name that would also end tax breaks for DTC advertising and marketing to healthcare providers. That bill was referred to the Senate Finance Committee, but no further actions were taken.

Pharma Guy's insight:

Also read: "Ad Industry Association Says Tax on DTC Ads Would Violate 1st Amendment"; http://sco.lt/8QdtJJ 

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Big Pharma's Effective Tax Rate is Lower Than Yours!

Big Pharma's Effective Tax Rate is Lower Than Yours! | Pharmaguy's Insights Into Drug Industry News | Scoop.it

Pharma has had a rocky relationship with President Trump since inauguration, but the two agree on at least one thing: Corporate taxes are too high.

 

And yet the nation’s biggest drug makers aren’t paying anywhere near the top corporate tax rate Trump, and congressional Republicans, hope to slash.

 

Over the past three years, the 10 largest U.S. drug companies paid an average tax rate of about 20 percent. That’s well below the top rate, which is 35 percent. And it falls short of the 26 percent rate paid the average American worker over the same period, according to OECD data.

 

Furthermore, Big Pharma’s 20 percent tab likely overstates what drug makers are paying the U.S.

 

Further Reading:

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Mylan CEO Bresch, aka "Pharma Sis," Defends Price Gouging, Tax Evasion as Job Savers

Mylan CEO Bresch, aka "Pharma Sis," Defends Price Gouging, Tax Evasion as Job Savers | Pharmaguy's Insights Into Drug Industry News | Scoop.it

Drug company CEO Heather Bresch affectionately describes the humble EpiPen as her “baby,” a once-middling product that she turned into a blockbuster.

 

With aggressive advertising — and even more aggressive price hikes — Bresch has fostered the EpiPen into a bestseller that brings in more than $1 billion a year in revenue for Mylan Pharmaceuticals (read “Pharma Sis, Mylan CEO, Hits Her EpiPen Marketing Target: Moms! Price Gouging Followed”; http://sco.lt/5Iy70b) .

 

But the growing furor over drug pricing threatens to turn Mylan’s biggest asset into a liability. And it has forced Bresch into an unwelcome spotlight, as anxiety over the rising cost of medicine has drug industry critics seeking out the next Martin Shkreli.

 

In the past week, Mylan has faced public scorn, investor skepticism, and castigation from a group of senators calling for an investigation into why EpiPen’s cost has soared fivefold under Bresch’s watch. Even Shkreli, widely perceived as a paragon of greed after hiking a drug price by 5,000 percent, decried Mylan as a group of “vultures.”

 

[Bresch is] one of the drug industry’s highest-paid CEOs, pocketing more than $18 million in cash and stock last year, and sitting at the head of a $26 billion enterprise.

 

 

Pharma Guy's insight:

How Bresch defended herself to her dad: “I said, ‘You know, Dad, we have 5,000 employees in Morgantown, W.Va. — we’re one of the largest employers in West Virginia,’” she told an audience at Fortune’s Most Powerful Women Summit in 2015. “I can guarantee you, if we don’t protect ourselves, no one’s going to protect those jobs.”

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AMA May Propose Eliminating Drug Marketing Cost as Tax Writeoff

AMA May Propose Eliminating Drug Marketing Cost as Tax Writeoff | Pharmaguy's Insights Into Drug Industry News | Scoop.it

The American Medical Association thinks it may have found a backdoor way to discourage pharmaceutical companies from mounting direct-to-consumer ad campaigns: eliminating their marketing costs as a federal tax deduction.

 

At today’s AMA annual meeting in Chicago, IL, delegates discussed a California delegation’s scheme to thwart DTC advertising: eliminate pharma’s ability write off the costs of these campaigns.

 

“We can’t prevent DTC ads undere the First Amendment, but we could eliminate companies’ ability to write off DTC advertising [expense] said a Massachusetts delegate in support of the resolution.

 

Those supporting the resolution expressed longstanding frustration with pharma’s DTC campaigns, charging that most are for “me-too” drugs that duplicate other products but usually have a higher price. The cost of marketing adds to healthcare costs, they note.

 

The AMA has already stated its blanket opposition to DTC advertising, saying it causes headaches for physicians who must constantly debate patients’ who are convinced a drug is right for them because they have seen it advertised (see here: http://sco.lt/4iRfrF).

 

Another issue to be tackled is whether, if such restrictions were enacted, they would apply to all health care advertising, including that of medical device makers, hospitals and healthcare systems, and even physicians themselves.

 

A delegate from Florida said “We appreciate the concerns and we don’t like DTC advertising either, but we oppose the resolution as a no-win situation that would have negative fallout for the AMA.”

Pharma Guy's insight:

69% of respondents to the Pharma Marketing News Future of DTC Survey said "yes" (39%) or "maybe, it depends" (30%) when asked if the DTC business tax deduction should be eliminated (see chart).

 

You can take this survey here and give you opinion about this and other issues that will have an imppact on the future of DTC. Afterward, you can view a summary of the latest, de-identified results.

 

Also read “Lobbyist Argues DTC Ad Tax Deduction is as American as Cheeseburgers”; http://sco.lt/6FPZzd and "Ad Industry Association Says Tax on DTC Ads Would Violate 1st Amendment"; http://sco.lt/8QdtJJ 

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Should the Tax Deduction for DTC Advertising Expenses be Eliminated?

Should the Tax Deduction for DTC Advertising Expenses be Eliminated? | Pharmaguy's Insights Into Drug Industry News | Scoop.it

69% of respondents to the Pharma Marketing News Future of DTC Survey said "yes" (39%) or "maybe, it depends" (30%) when asked if the DTC business tax deduction should be eliminated (see chart).

 

You can take this survey here and give you opinion about this and other issues that will have an imppact on the future of DTC. Afterward, you can view a summary of the latest, de-identified results.

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Allergan Buys Pfizer! Who'da Thought It? The U.S. Treasury, That's Who!

Allergan Buys Pfizer! Who'da Thought It? The U.S. Treasury, That's Who! | Pharmaguy's Insights Into Drug Industry News | Scoop.it
Allergan will wed Pfizer in the largest corporate wedding involving pharmaceutical companies after the boards of the two companies approved the deal on Sunday. The reverse merger is worth more than $150 billion.


The takeover would enable New York-based Pfizer to move overseas and benefit from lower corporate tax rates, reports The Wall Street Journal. Allergan is the smaller of the two companies and based in Dublin.

Pfizer, which has a 25 percent tax rate, tried in 2014 to buy AstraZeneca, but the Britain-based drug giant rejected the offer. With the Allergan merger, Pfizer's tax rate is expected to go down to 20 percent. Allergan's tax rate of 15 percent tax rate is also the result of an inversion deal after Actavis bought Allergan and kept the latter as the corporate name for the merged company.

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