Gilead Used Legal Loopholes to Avoid Paying $10 Billion in Taxes Last Year

July 14, 2016
By Alex Keown, BioSpace.com Breaking News Staff

FOSTER CITY, Calif. – Two hepatitis C drugs generated more than $20 billion in revenue for Gilead Sciences in 2015, but the company was able to avoid paying billions in taxes thanks to loopholes in the law, StatNews reported late Wednesday.

The company was able to avoid paying the taxes due to the ability to transfer key assets to Ireland and take advantage of lower tax rates, StatNews said. A report by the progressive advocacy organization Americans for Tax Fairness said Gilead avoided paying nearly $10 billion in taxes last year. The organization said Gilead is avoiding paying its “fair share” of taxes on revenues generated by drugs developed in part through tax dollars. The group said the patents held for Harvoni and Sovaldi, Gilead’s two blockbuster hepatitis C drugs, have been shifted to subsidiaries in “tax havens” such as Ireland, where the company pays a much lower rate. However, Americans for Tax Fairness said the vast majority of the California-based company’s profits off the two drugs were made in the United States.

The organization said Gilead’s accumulated offshore profits, “on which it is able to defer paying U.S. taxes, climbed to $28.5 billion in 2015—more than triple the $8.6 billion it held offshore in 2013.” That allowed the company to defer paying $9.7 billion in taxes, Americans for Tax Fairness said. The organization said the company has been able to “dodge” paying taxes to the U.S. government by shifting patents to subsidiaries located.

“Taxpayers subsidized the development of Gilead’s HCV drugs, yet now pay sky-high prices for them through Medicare, Medicaid, the Department of Veterans Affairs, private insurance and from their own pockets. The Food and Drug Administration assures Gilead’s products are safe, and the American patent and legal systems ensure that the corporation’s huge profits are protected. But despite all the benefits Gilead has received from taxpayers, Congress maintains a loophole-ridden tax system that has allowed the company to dodge taxes that pay for those benefits, leaving other taxpayers to pick up its tab,” Americans for Tax Fairness said in a report released earlier this week.

While highly effective, Harvoni and Sovaldi, Gilead’s two hepatitis C drugs, have been criticized for their price points, which can reach $95,000 for a 12-week regimen. A U.S. Senate report said the high cost of the drugs has also been damaging to Medicaid programs. According to the investigation, Medicaid programs spent $1.3 billion before rebates for the hepatitis C drugs to treat fewer than 2.4 percent of enrollees diagnosed with the liver disease. More than 700,000 hepatitis C patients on state Medicaid programs are still waiting to receive their medications.

“Gilead is making a fortune selling essential drugs to the very government and taxpayers that helped pay to develop them, and then dodging taxes on the resulting profits. Congress should stop this assault on the American people’s health and pocketbooks by curbing the company’s flagrant drug-price gouging and tax dodging,”

In its report, the ATF said in 2015 American corporations held $2.4 trillion in offshore profits, deferring payment of approximately $700 billion in U.S. taxes. Pharmaceutical companies are the second biggest industry using this tax loophole, holding an estimated 20 percent of profits offshore.

Gilead did not comment on the story, but StatNews said the company has maintained in the past its offshore profits are “permanently and indefinitely reinvested.”