STOCK MARKET WATCH -- Wednesday, 25 November 2015

[Demeter]

3. Opinion: How to stop Pfizer’s faux-Irish tax ripoff

http://www.marketwatch.com/story/how-to-stop-pfizers-faux-irish-tax-ripoff-2015-11-23?siteid=YAHOOB

The U.S. Treasury is going after inversions, but drug companies’ vulnerability is Medicare...

Pfizer and Allergan’s $160 billion merger is funded, in no small part, by the American taxpayer...After all, the estimated 17%-18% effective tax rate the merged company will pay in global taxes saves about $1 billion a year on just the Pfizer Inc. side of the business. The U.S. Treasury is leading the government’s effort to rein in inversions through tax rules, but their proposed rule won’t cover this deal, and the effort doesn’t attack the inversion deal makers where it will hurt them most.

What will stop the biggest inversion deals cold is a regulation steering Medicare and Medicaid’s purchases of drugs and medical devices elsewhere. If you want to sell to government plans, your tax residence has to match where the operating headquarters is, among other tests. It’s a small price to pay for that passage in Pfizer’s annual 10-K report noting the U.S. is the only major world government that doesn’t negotiate on prices for drugs it buys.

Let’s face it: The tax-inversion problem is concentrated in the drug and medical-device industry, which is responsible for more faux Irishness than anything this side of St. Patrick’s Day and Notre Dame football. Three of the six most valuable companies incorporated in Ireland now are device-maker Medtronic, Allergan, and drugmaker Perrigo Co. Along with Alkermes and Jazz Pharmaceuticals which are among the top 20 Irish companies — and, remarkably, are headquartered in the very same Dublin building — all are run from the U.S. This is easy to establish because most of their CEOs have listed home phone numbers here.

There’s not a drug or device company on the planet that can make a go of things without selling into Medicare and Medicaid: Medicare alone buys more than $100 billion of the pharmaceuticals sold in the U.S. each year. While Pfizer doesn’t disclose the percentage of sales it gets from the U.S. government, a look at its list of top drugs tells the story plainly enough: Enbrel (for arthritis), Celebrex (also for arthritis), Lipitor (cholesterol) and Viagra (erectile dysfunction) are in the top six, accounting for about $10 billion of 2014 revenue. Telling Pfizer to pay taxes or else (for now) would not be any disaster for patients. There are plenty of competitors for Lipitor, which Costco Wholesale Corp. sells for as little as $17 a month. No one who watches football is unfamiliar with the bathtub full of Viagra competitors, and Indianapolis-based Eli Lilly & Co. will sell Medicare enough Cialis to, well, write your own naughty jokes. As for Allergan, its top products are Botox, whose biggest uses are cosmetic, and Restasis, which treats dry eyes at a cost 25 times higher than over-the-counter remedies that critics say are just as effective.

To be sure, this form of highly-lawyered tax evasion is mostly specific to one already subsidized industry. The public benefit in New Jersey-based Michael Pearson pretending to run Valeant Pharmaceuticals International Inc. from Quebec, to pay lower taxes on profits generated by Valeant’s $8,900 remedy for toenail fungus, is fairly minimal. Ditto for letting Parsippany, N.J.-based Allergan, whose CEO is in the phone book in nearby Far Hills, pretend to be Irish so it can pay less tax on profits from Restasis and wrinkle-fighting...So the right thing for a lame-duck President Obama to do is issue rules preserving the status quo for his successor. If Restasis’ owners pay more taxes for a year or two, there won’t be a wet eye in the house.

THEREFORE, I PREDICT, OBAMA WILL DO NOTHING....ABSOLUTELY NOTHING....IT'S MONEY IN THE BANK! (HIS BANK, HIS MONEY, EARNED BY SCREWING US ALL)