FORIMMEDIATERELEASE:April3,2017
Drug-PriceGougingGileadSciencesStillDodgingItsTaxes
OffshoreProfitsJumpedbyOne-ThirdLastYear,toNearly$38Billion,Allowing
thePharmaceuticalFirmtoAvoid$13BillioninU.S.Taxes
WASHINGTON,D.C.—PharmaceuticalgiantGileadSciences’offshoreprofitsjumpedbynearly
32%in2016,from$28.5billionin2015toalmost$38billion,accordingtothecompany’slatest
filingswiththeSecuritiesandExchangeCommission(SEC).
Gileadreportsthatin2016itowed$13.1billioninU.S.corporateincometaxesonthose
offshoreprofits(whichareknownas“permanentlyreinvestedearnings”).Thattranslatesintoa
taxrateof34.8%.SinceAmericancorporationsreceiveadollar-for-dollarcreditfortaxthey
havepaidtoforeigngovernmentsagainstthe35%taxtheyowetheU.S.,thismeansGileadpaid
aminiscule0.2%inforeigntaxesonthoseoffshoreprofits.Therefore,it’sclearthatvirtuallyall
thecompany’soffshoreearningsareintaxhavens.
PresidentTrump’staxproposalduringthecampaignincludedamandatorytaxoncorporations’
accumulatedforeignearnings(what’sknownasa“deemedrepatriation”).Buthewouldsharply
cutthetaxrateonoffshoreprofitsfrom35%toonly10%.ForGilead,thiswouldreduceitsU.S.
taxbillfrom$13.1billiontoaround$3.7billion—anearly$10billiontaxcut.
“Gileadshouldpaythetaxesitowes,notgetahugetaxgiveawayfromPresidentTrump,”said
FrankClemente,executivedirectorofAmericansforTaxFairness.“That$10billioncouldmore
thanfullyfundforayearthetwolargestprogramsoftheNationalInstitutesofHealth(p.23):
theinstitutesbattlingcancerandinfectiousdiseases.”
Gilead's Offshore Profits and U.S. Taxes Owed
(in Billions)
$37.6
$40
$35
$28.5
$30
$25
$20
$15
$10
$5
$0
$9.7
$8.5
$5.8
$13.1
$3.0
$2.1
2011
2012
2013
2014
Permanently Reinvested Earnings (PRE)
2015
2016
Tax Owed on PRE
Source: Institute on Taxation and Economic Policy and ATF analysis of Gilead Sciences’ 10K filings with the SEC
AloopholeinfederallawallowsGileadandothermultinationalcorporationstodeferpaying
U.S.taxesonprofitstheydeclaretobe“permanentlyreinvested”inforeigncountriesuntilthey
areremittedtotheU.S.parentcompany.Corporationsoftenstockpiletheseprofitsyearafter
yearandavoidpayingtheirU.S.taxesindefinitely.Altogether,U.S.Fortune500corporations
hold$2.6trillioninoffshoreprofits,onwhichtheyoweupto$767billioninU.S.taxes,
accordingtotheInstituteonTaxationandEconomicPolicy.
Lastyear,AmericansforTaxFairnessreportedhowGileadScienceshadboosteditsprofitsby
overchargingconsumersandgovernmenthealthprogramsforhepatitisCdrugsdevelopedwith
taxpayerdollarsandthenshiftedtheprofitsintoIrelandtoavoidU.S.taxes.Gilead’stopselling
hepatitisCmedications,HarvoniandSovaldi,represented47%ofthecompany’stotalrevenues
in2016,accordingtoitsSECfilings.
That’snotsurprising,sinceseveralyearsafterbothdrugswerereleased,theirpricesremain
astronomical.Harvoni’sretailpriceonGoodRxtodayisabout$32,000fora28-pill,four-week
supply,or$96,000forthestandard12-weektreatment.Sovaldicosts$86,000forthe12-week
treatment.Ineachcase,thepriceworksouttomorethanathousanddollarsapill.
Thelistpricesforthesamedrugsboughtthroughpublichealthsystemshavebeennocheaper
inrecentyears.In2015(thelatestyear’sdataavailable),bothMedicaidandMedicarereported
thegrosspricespaidbytheprogramsforbothSovaldiandHarvoniwasalsoaboutathousand
dollarsapill.Medicarereportedspending,beforerebates,about$90,000ayearperpatientfor
eachdrug.
Medicare’sestimatednetprice(thepricenegotiatedbetweenGileadandMedicarePartD,
includingrebates)waslower:forastandard12-weektreatmentin2015,$50,400forHarvoni
and$44,520forSovaldi.Buteventhesediscountedpricesrepresentexorbitantcostsfor
consumersandpublichealthinsuranceprograms,especiallygiventhatactualmanufacturing
costsfora12-weekcourseofSovaldihasbeenestimatedbyitsdevelopertobenomorethan
$1,400,andpeggedaslowas$68byoutsideresearchers.BothMedicareandMedicaidpaid
moreforHarvonithananyotherdrugin2015—morethan$7billionforMedicareandnearly
$2.2billionforMedicaid.
Afterthereleaseofthesehigh-costdrugsin2013and2014,Gilead’sworldwideprofitsmore
thanquadrupled,from$4.2billionin2013toover$17billionin2016.Overthesametime,the
company’soffshore“permanentlyreinvested”earningsjumpedfrom$8.5billionto$37.6
billion.Theselargeincreasesoccurredafterthecompanytransferredthepatentrightsforat
leastoneofthedrugs,Sovaldi,toIreland.(HarvoniisasuccessordrugtoSovaldiandrelieson
itskeyingredient,sofosbuvir,soitisprobablethatHarvoni’spatentrightsarealsoinIreland.)
ThisstrategyallowsGileadtoshiftprofitsearnedintheU.S.toitsIrishsubsidiaries.Gilead’sSEC
filingsidentify13subsidiariesintax-havenjurisdictions,includingseveninIreland.
Yet,GileadappearstobedodgingtaxesinIreland,aswell.Thebillionsinworldwideprofitsthat
GileadisbookinginitsIrishsubsidiariesaredefinedas“tax-resident”intheBahamas,according
toaninvestigativereportinIreland.TheBahamasisataxhavenwithnocorporateincometax.
Gileadisachievingthisthroughaso-called“DoubleIrish”taxloophole.Thatmeansthe
companyisnotpayingtaxestoanycountryonitsprimarilyU.S.profits.
AnothersignthatGileadisshiftingitsU.S.profitsabroadisthatwhile64%its2016revenues
weregeneratedintheU.S.,only45%ofitsworldwideprofitswerereportedhere.Incontrast,in
2013,82%ofitsprofitswerereportedintheU.S.
Gilead's U.S. Share of Revenue vs. Income
90%
80%
70%
82%
67%
64%
60%
50%
40%
60%
51%
45%
30%
20%
10%
0%
2007
2008
2009
2010
2011
U.S. share of revenues
2012
2013
2014
2015
2016
U.S. share of profits
Source: Institute on Taxation and Economic Policy and ATF analysis of Gilead Sciences’ 10K filings with the SEC
“GileadSciencescontinuestorip-offtheAmericanpublicwithitslethalcombinationofprice
gougingandtaxdodging,”addedClemente.“AggressivetaxdodgerslikeGileadshouldnotbe
rewardedwiththehugenewtaxbreakonoffshoreprofitsthatPresidentTrumpispromising.
PatientsandtaxpayersarepayingtheexorbitantpricesGileaddemands.Gileadshouldpaythe
$13billionintaxesitowes.Soshouldtheother50U.S.multinationalcorporationsthatholdthe
vastmajorityofthe$2.6trillioninuntaxedprofitsoffshore.”
###
AmericansforTaxFairnessisadiversecoalitionof425nationalandstateendorsing
organizationsthatcollectivelyrepresenttensofmillionsofmembers.Theorganizationwas
formedonthebeliefthatthecountryneedscomprehensive,progressivetaxreformthatresults
ingreaterrevenuetomeetourgrowingneeds.ATFisplayingacentralroleinWashingtonand
inthestatesonfederaltax-reformissues.
MEDIACONTACT
RonEckstein,CommunicationsDirector,AmericansforTaxFairness
[email protected]
(917)921-1212(m)
th
110117 Street,NW•Suite301•Washington,D.C.20036•(202)506-3264
www.AmericansForTaxFairness.org • @4TaxFairness