US Taxpayers Are Subsidizing Mylan’s Profits

August 30, 2016

Citizens for Tax Justice's Richard Phillip: Congress needs to act to close loopholes that allow 'tax inversions' that allow corporations to avoid nearly all federal taxes

Citizens for Tax Justice's Richard Phillip: Congress needs to act to close loopholes that allow 'tax inversions' that allow corporations to avoid nearly all federal taxes



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Story Transcript

JAISAL NOOR, TRNN: Welcome to the Real News Network. I’m Jaisal Noor in Baltimore.

Mylan said Monday it would launch the first generic version of its allergy auto-injector EpiPen for $300, half the price of the branded product. But critics say the move falls far short. Activists delivered 600,000 signatures in Pittsburgh today to demand the company do more. The price of the live-saving injection has increased from $100 in 2008 to $600 today while CEO’s Heather Bresch’s pay has increased 400% during the same period.

Well now joining is to discuss this is Rick Claypool. He’s also a research director for Public Citizen. Just a few hours ago he delivered over 600,000 signatures to Mylan’s HQ. Rick thanks for joining us.  

RICK CLAYPOOL: Thank you. Thanks for having me.

NOOR: So talk about what the demands were you delivered about EpiPen to the company Mylan–over 600,000 signatures. This story has been huge. It’s gone viral. A lot of pressure has been put on Mylan to reduce their prices which they have said they are doing.

CLAYPOOL: That’s right just a few hours ago we actually–the petition number went up to 700,000 by the time we delivered and our call to Mylan is pretty simple. Stop tinkering with these coupons and extra generic things and just actually reduce the price. And we’re calling for Mylan to lower the company back to the 2007 levels. So about $100. Still overpriced but within reason.

NOOR: So it reportedly only cost $1 to make this drug. Mylan has defended EpiPen’s high price, saying it had spent hundreds of millions of dollars to improve the product since acquiring it in 2007. They also say they recoup less than half the list price as pharmacy benefit managers, which often require discounted prices–they’re basically blaming the entire system. They say it’s the healthcare industry. It’s the laws in place that they’re benefiting more and that they have to jack their prices up. How do you respond to that?

CLAYPOOL: It’s funny I wonder if they make that same case about the price being $100 and $200 throughout most of the developed world? In Canada, in the United Kingdom, in France, the rest of Europe, this product cost a fraction of the price. So are they saying that US citizens uniquely must bare these costs? But if you look at the actual differences in the circumstances the on the ground is that these other places have limits on how much a company like Mylan can charge for a device like an EpiPen. Whereas no such limits exist in the United States. That’s part of why one of our calls, when we’re calling for the company to lower its price, we think that the reforms are needed to be in place to make it so that other companies are unable to do this.

Mylan certainly is not an outlier in this kind of activity and so we’re calling for a [windfall] profits tax on these kinds of activities so companies like Mylan can’t jack up the price. The company makes I think it’s a billion dollars off of this product annual. At the same time folks, as the price has gone up to $600 and more, and they have to buy multiple prescriptions of it. They have to have one for home, one for school, maybe one for the grandparent’s house. We’re talking about children. These costs add up hugely and people are–you don’t want to have a situation when people are hesitating to fill a lifesaving prescription because the price has gone up like this.

NOOR: Rick, thanks so much for joining us.

CLAYPOOL: Thank you. Thanks for having me.

Part 2

NOOR: We also wanted to discuss another, lesser known aspect of this story–how US taxpayers are underwriting Mylan’s corporate profits.

Now joining us to discuss this is Richard Phillips. He is a Senior Policy Analyst at Citizens for Tax Justice. Thanks so much for joining us.

RICHARD PHILLIPS: Thanks for having me.

NOOR: So it’s been pointed out that in many cases taxpayers are picking up the tab for Mylan’s profits because many of its users are covered by the government funded Medicaid program. But that only really scratches the surface of this story. Talk about why Mylan moved its corporate headquarters to the Netherlands in 2015. And what this means for how it’s taxed and how much money it pays in corporate profits to the US government.

PHILLIPS: So Mylan is one of the several corporations that have done what’s known as an inversion where a US company basically pretends to be a foreign company for tax purposes. So while they may make all their medicines here, while they may actually operate here, and be managed and controlled here in the United States, for tax purposes they say oh actually we’re controlled in the Netherlands.

So what that allows them to do is never actually pay taxes on the profits that they earn offshore and to boost their profits offshore they often move the intellectual property behind things like the EpiPen or other considerable products to their offshore subsidiaries. They basically make the US subsidiary pay their foreign subsidiary money to use that product in the United States and throughout the world and then they can claim all that profit was actually offshore.

NOOR: Because Mylan does most of its business–it gets most of its profits in the United States. So how is this allowed? How is this permitted in the US for this to happen?

PHILLIPS: The reason its permitted is because congress hasn’t stepped in to take out a couple of these loopholes. So tomorrow if congress wanted it could pass legislation which they gave it a really simple name the Stop Corporate Inversions Act which would stop corporate inversions. And what it would do is it would say that if a company merges with another company, it has to at least be a 50% foreign company in order to be recognized as a foreign company. So we’ve got this situation right now where companies that basically are fully owned by American investors managing control in the United States are actually considered foreign companies by the US tax [inaud.] and that’s just ridiculous. So it could change very simply if congress made that change.

NOOR: Thanks so much for joining us.

PHILLIPS: Alright thank you.

NOOR: And for our full coverage of our EpiPen price hike scandal, go to the RealNews.Com. Thank you so much for joining us.

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