Gilead Sciences – which controversially charges $1,000 per pill for its hepatitis C medicine – has a plant in Cork...
The Americans for Tax Fairness (ATF) group has suggested that an Irish tax loophole allowed Gilead Sciences to increase its untaxed offshore profits three-fold.
US biopharmaceutical company Gilead has recently garnered huge criticism for charging $1,000 a day for its breakthrough hepatitis C treatment.
Its untaxed offshore profits rose from $8.6bn in 2013 to $28.5bn in 2015, the Irish Independent has reported.
In a submission to the Securities and Exchange Commission (SEC) – the US markets regulator – ATF alleges that Gilead began to shift the economic rights for the US patent on the Sovaldi medicine to Ireland in 2013 and that this "most likely" allowed it to lower its US profits and avoid $10bn in tax as a result.
"The profits are most likely in Ireland, a tax haven."
Gilead has a manufacturing plant in Cork and employs over 200 people here.
No proof, however, was provided that a deal was struck with the Irish government.
An ATF report from July reads:
“Gilead claimed that despite booking two-thirds of its revenues here and charging higher drug prices than anywhere else in the world, it made only about one-third of its profits in the United States.
“How could that be possible? The most likely explanation is transfer pricing.
“This accounting trick involves sending valuable assets – such as the license to use prescription drug patents – to a company’s offshore subsidiaries. Those subsidiaries can then impose large licensing fees on the US parent company for the right to sell the patented medications in America. The fee costs reduce the reported US profits and resulting taxes, while the fee income goes offshore where it is taxed lightly or not at all.”
“In early 2013, Gilead’s chief financial officer announced on a conference call with stock analysts that the formula for Sovaldi had been 'domiciled' in Ireland, a well-known tax haven, which she said would allow the company’s tax rate to 'decline over time'.
“This meant that Gilead had transferred the economic rights to its Sovaldi patent to an Irish subsidiary and created a patent licensing arrangement that would enable it to report lower US profits and, therefore, pay much less in federal taxes."
ATF told the SEC that Gilead could face a tax probe similar to the one that Apple is currently undergoing in the event of a European Commission investigation.
Gilead is the sixth most valuable pharmaceutical company in the world, with a $146 billion market value last year.
Sovaldi hit the US market in late 2013 for $84,000 for a 12-week course. It is estimated to cost $100 to $1,400 per course to produce, with generic and far cheaper versions available in other countries.
The report stated:
“Altogether, America’s public and private sectors spent more money on Sovaldi in 2014 – nearly $8 billion – than on any other prescription drug.”