Pfizer, Merck, J&J, others face scrutiny over tax loophole extension

Two Democratic lawmakers on Tuesday pressed five of the nation’s largest pharmaceutical corporations about their low tax bills and whether or not they support extending massive tax cuts for the industry within the GOP reconciliation bill.

Sen. Elizabeth Warren, D-Mass., and Rep. Jan Schakowsky, D-Ailing., accuse Pfizer, Merck, Johnson & Johnson, AbbVie and Amgen of paying little to no federal taxes for profit earned in 2024 and years prior, despite generating tens of billions of dollars annually from their drugs.

In separate letters to every company on Tuesday, the lawmakers allege that the pharmaceutical corporations all avoided paying U.S. tax bills by shifting their profits to offshore subsidiaries in jurisdictions with much lower tax rates, similar to Ireland and Bermuda. That practice was enabled by a provision in President Donald Trump’s 2017 Tax Cuts and Jobs Act, which aimed to curb corporate tax avoidance but as an alternative created recent incentives for U.S. multinational corporations to maneuver profits and operations overseas. 

Within the letters, Warren and Schakowsky said the practice illustrates “just one in all the ways during which our tax code has been skewed to profit wealthy pharmaceutical corporations, enabling them to profit off Americans, charging them the very best drug prices on the planet, without paying their justifiable share of taxes.”

They pressed drugmakers about whether the 1000’s of dollars they’ve spent lobbying Congress went toward efforts to take care of that tax loophole in Trump’s “One Big Beautiful Bill Act,” which the Republican-led House passed in late May. J&J, for instance, spent greater than $150,000 lobbying on international tax issues within the fourth quarter of 2024 alone, in response to the letter to the corporate, which cites data compiled by OpenSecrets. 

If enacted as currently written, the multitrillion-dollar tax and spending package would make many provisions in Trump’s 2017 tax act everlasting. The present iteration also comprises historic spending cuts to programs for low-income Americans, including Medicaid health coverage. 

The bill now sits within the Senate, where Republicans could decide to drop or revise lots of the provisions pushed by hard-line House Republicans who sought to slash spending in tandem with the tax cuts. But any Democratic push to eliminate the offshore tax loophole could be an uphill battle, as Republicans hold a majority within the upper chamber. 

Even so, Democrats have tried to construct public opposition to parts of the laws because the GOP attempts to balance competing party interests to pass it. Each parties have targeted pharmaceutical corporations for years.

“It would be a slap within the face for Congress to expand tax loopholes for Big Pharma corporations which might be making billions in profit while overcharging Americans,” Warren said in a press release to CNBC. “These corporations have to be held accountable for prioritizing their profits over people.

The letters to drugmakers cited a March evaluation by the Council on Foreign Relations – an independent, nonpartisan think tank – suggesting that reforming the offshore tax loophole would raise at the least $100 billion over 10 years. 

The letters also include questions on each company’s role in lobbying for an extension of the tax breaks and their estimated federal tax liabilities. The lawmakers asked each drugmaker to reply by July 1.

In a press release, a J&J spokesperson said the corporate looks forward to “clarifying” its “significant U.S. tax contributions and cooperatively responding to Senator Warren and Representative Schakowsky’s letter.”

Spokespeople for Pfizer, Merck, J&J, AbbVie and Amgen didn’t immediately reply to requests for comment on the letters. 

It isn’t the primary time lawmakers have scrutinized pharmaceutical corporations for his or her tax practices. 

A March report accused Pfizer of pulling off what Democratic Sen. Ron Wyden, D-Ore., called “the biggest tax-dodging scheme” in pharmaceutical industry history. The report accused the corporate of using a tactic called “round-tripping” to avoid paying any U.S. income tax on $20 billion in domestic drug sales in 2019.

An investigation by Democratic staff of the Senate Finance Committee concluded that Pfizer used the tax loophole to funnel profits through offshore subsidiaries in tax havens like Ireland and Puerto Rico, despite selling to U.S. patients. But the corporate said it paid $12.8 billion in U.S. taxes over 4 years, and says documents to back that up have been filed with the Securities and Exchange Commission.

The letters on Tuesday come because the Trump administration considers imposing tariffs on pharmaceuticals into the U.S. in a bid to reshore manufacturing. Trump has complained that Ireland has successfully convinced drugmakers to open manufacturing operations there by offering low tax rates.