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Agnes Shanley is senior editor of Pharmaceutical Technology.
And so tax benefits doth make Irishmen of us all…
Like so many around the world, I love Irish culture-its poetry and music, and the wit, brilliance, hard work, and endurance of its people. I think of my great grandfather, who emigrated from a tiny town in Leitrim to start a business in New York, gradually convincing all but one of his nine brothers to join him.
Next week in New York City, the St. Patrick’s day parade, and smaller versions of it throughout the Irish diaspora, will celebrate that spirit.
If it runs true to form, though, St. Patrick’s Day 2016 will also bring out the usual cheap stereotypes, the tired plastic shamrocks and leprochauns. You may hear the music of Sean O Riada, the cadences of William Butler Yeats, in your head, and think about Ireland’s new generation of artists and entrepreneurs. But what you’ll often find is streams of green beer and teary drunks singing fake tunes about smiling Irish eyes and colleens.
I thought about this recently when I considered the number of U.S. companies that have recently “moved” to Ireland, not to invest in the country and workforce, but to gain tax relief. And there may soon be a new honorary Irish company: Pfizer, through its planned $160-billion acquisition of Allergan.
Forget about Pfizer’s roots in Brooklyn, in Williamsburg (the old, gritty, pre-hipster fairyland Williamsburg), and its start as the brainchild of two German entrepreneurs. It is now wearing the green, just like Actavis and Perrigo before it.
Stories of corporate inversions and offshore deals always fuel debate about whether communities have the right to feel “entitled” to anything from local employers. Surely, corporations must seek profitability and shareholder value first.
While cheering for new jobs that would be created in Ireland, one must also ask: Must corporate change come at the expense of communities and individuals who have brought the company profits? What exactly are the limits of the social contract connecting corporations, employees and the communities where those employees live? Does such a contract even exist anymore?
It’s especially easy to point the finger at Pfizer, whose restructurings over the years have affected communities that include Ann Arbor, Pearl River, NY, Groton, Connecticut and, yes, even Brooklyn, here in the US, and Sandwich, Kent, in the UK.
Michigan had tried to convince the company to stay after it acquired Pharmacia, and proposed tax breaks back in the early 2000’s.
But this pattern is seen in every industry in the US. According to a December, 2012 article in the New York Times, local US governments pay $9.16 million in benefits every hour trying to get large corporations, particularly those in manufacturing, to stay. They usually don’t.
No one would argue that companies shouldn’t be able to change, but shouldn’t they preserve more of their identities, their heritage, and whatever makes them unique? Isn't their connection to the individual important anymore?
As Mark Kessel wrote in Restoring the Pharmaceutical Industry’s Reputation in October, 2014, in Nature Biotechnology, intangible assets such as reputation can represent up to 60% of a company’s market capitalization. Reputation, in turn depends on the experience and communication that people have had with the company.
So it was interesting to read the Americans for Tax Fairness’ assessment of the Pfizer-Allergan deal. Not that we should expect impartiality from the group, but its February position paper’s title, “Pfizer: Price Gouger, Tax Dodger” says it all.
Citing the company’s 18% profit margin, the group says that Pfizer’s plan to acquire Allergan will squeeze US families and communities twice, first by removing tax revenues that would pay for local services, and then by charging higher prices for pharmaceuticals sold to US consumers. Why not make prices for drugs the same for both US and Irish markets, the paper asks. It also singles out all the ways that the tax savings could be used to fund research, education and social programs, at “home.”
Here are a few statements made in the position paper:
What do you think of Pfizer’s proposed deal, and pharma’s wave of inversions and other overseas deals, in general? Please take our quick poll and let us know.