By Khadija Sharife
This is the second of a two-part series examining the methods by which multinational drug corporations inflate their expenses and justify their pricing strategies. The first part revealed how, far from costing the reported (and widely accepted) $1bn to bring a drug to market, actual costs may be less than a fifth of that, thanks to accounting tactics and corporate tax breaks.
Of course, the US government is very conscious of moves designed to “avoid” taxation. But little effective action has been taken to tighten the tax net. In 2005, Congress extended a”tax holiday” to pharmaceutical corporations, allowing companies to repatriate hidden profits at just 5.2 per cent of the corporate tax rate. At the time, Pfizer had untaxed profits at $38bn; Merck $18bn; Johnson & Johnson $14.8bn – at least, those were the profits they were willing to declare.
Generally, a considerable portion (upwards of 12 per cent) of big pharma’s research and development (R&D) costs is Phase IV or “post-marketing” trials of drugs already commercially sold to consumers, in an attempt to expand sales. The figure was estimated at 75 per cent of R&D costs by the Tufts Center, said Harvard Medical School’s Marcia Angell.
“Since the majority of Phase IV studies will never be submitted to the FDA, they may be totally unregulated. Few of them are published. In fact, like all industry-sponsored trials, they are not likely to be published at all unless they show something favourable to the sponsor’s drug. If they are published, it is often in marginal journals, because the quality of the research is so poor,” she said.