Pharmaceutical Giants Under Fire for Tax Practices Amid Legislative Changes

As the landscape of U.S. tax policy evolves, two prominent Democratic lawmakers, Senator Elizabeth Warren (D-Mass.) and Representative Jan Schakowsky (D-Ill.), have put a spotlight on the nation’s leading pharmaceutical companies regarding their minimal tax contributions. In letters addressed to Pfizer, Merck, Johnson & Johnson, AbbVie, and Amgen, the lawmakers questioned the integrity of these corporations’ tax practices, particularly as Congress considers extending significant tax cuts under a new Republican reconciliation bill.

A Closer Look at Tax Avoidance Strategies

The crux of Warren and Schakowsky’s allegations rests on the assertion that these pharmaceutical giants are exploiting tax loopholes facilitated by the Tax Cuts and Jobs Act of 2017. This legislation, intended to limit corporate tax evasion, inadvertently provided incentives for U.S. multinationals to shift profits to low-tax jurisdictions such as Ireland and Bermuda. Despite earning tens of billions in annual profits, the companies have reportedly paid little to nothing in federal taxes for 2024 and past years, demonstrating a stark disparity between their earnings and tax obligations.

The lawmakers highlighted that this pattern not only showcases a systemic bias in the U.S. tax code favoring large pharmaceutical companies but also raises ethical questions about pricing strategies that see Americans charged some of the highest drug prices globally. They pressed these companies on whether their lobbying efforts in Congress aimed to preserve these lucrative tax loopholes amid ongoing discussions around the GOP’s “One Big Beautiful Bill Act.” Notably, Johnson & Johnson alone spent over $150,000 in lobbying on international tax issues in late 2024, underlining the intense political maneuvering surrounding this issue.

The implications of this legislation are far-reaching. If enacted as it currently stands, the multitrillion-dollar package would both solidify provisions from the 2017 tax act and cut crucial funding for programs benefitting low-income Americans, including Medicaid. As the bill moves to the Senate, where Republicans hold a majority, efforts by Democrats to amend or repeal the offshore tax loophole face significant challenges.

Public Backlash and Corporate Accountability

Both parties have long targeted pharmaceutical companies for their tax practices. Warren articulated the Democratic stance clearly: “It’d be a slap in the face for Congress to expand tax loopholes for Big Pharma companies that are making billions in profit while overcharging Americans. These companies need to be held accountable for prioritizing their profits over people.”

According to a March analysis by the Council on Foreign Relations, reforming these offshore tax loopholes could generate at least $100 billion over the next decade. The lawmakers’ letters included inquiries about each company’s involvement in lobbying for tax breaks and their expected federal tax liabilities, with responses requested by July 1.

In response to the scrutiny, a Johnson & Johnson spokesperson expressed eagerness to clarify the company’s substantial U.S. tax contributions. However, the responses from Pfizer, Merck, AbbVie, and Amgen remain pending at the time of writing.

This recent scrutiny of tax practices for pharmaceutical companies isn’t without precedent. Earlier this year, a report accused Pfizer of participating in what Democratic Senator Ron Wyden referred to as “the largest tax-dodging scheme” in the pharmaceutical industry, involving tactics like “round-tripping” to escape U.S. taxes on substantial domestic sales.

As the Trump administration weighs the imposition of tariffs on pharmaceuticals, in an attempt to reshore manufacturing, the ongoing debate surrounding corporate taxation in the pharmaceutical industry remains a flashpoint of contention in American politics.