[Pages S1885-S1890]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

Pharmaceutical Companies

Mr. WYDEN. Mr. President, 4 years ago, I kicked off an investigation
of Big Pharma's tax practices, the dodges and tricks these hugely
profitable, multinational companies use to winnow down their tax bills.
This was not very long after Trump's first tax breaks for corporations
went into effect. My Democratic colleagues on the Finance Committee and
I wanted to know exactly how sweet a deal Trump gave the biggest drug
companies and what changes needed to be made to ensure these
corporations paid a fair share.
So far, in the course of my investigation, I have released
information on the tax practices of five major drug companies: AbbVie,
Abbott Laboratories, Amgen, Bristol Myers Squibb, and Merck. The
questions that I asked these companies were not very complicated.
Essentially, what I asked came down to questions like: How big were
your sales? Where did you make them? Where did you report your profits?
Where did you stick your intellectual property? Did you actually pay
taxes?
Last year, I expanded my investigation with an inquiry to the company
Pfizer. Pfizer initially resisted, but my staff and I were not going to
let up. Finally, the company provided some answers to our questions.
We are going to get into those issues now, and I ask unanimous
consent to enter into the Record a memorandum outlining records of my
investigation relating to Pfizer's tax-avoidance schemes, which will
also be available immediately on the Finance Committee's website.
Mr. President, I ask unanimous consent to have the report printed
into the Record now.
There being no objections, the material was ordered to be printed in
the Record, as follows:

Memorandum

Fr: Ron Wyden, Ranking Member, Senate Committee on Finance
Re: Pfizer used ``round-tripping'' scheme to book $0 in U.S.
income on 2019 tax returns

Executive Summary

An investigation by the Democratic staff of the Senate
Finance Committee (``the Committee'') uncovered that after
passage of the 2017 Republican tax law, Pfizer carried out
potentially the largest tax-avoidance structure in the
history of big pharma. Even though Pfizer sold $20 billion in
drugs to U.S. customers in 2019, it reported $0 in taxable
U.S. profits on its 2019 tax returns by claiming to the IRS
that 100 percent of its income was earned offshore. This
offshore tax dodge allowed Pfizer to avoid paying billions of
dollars in federal income taxes on U.S. drug sales. Pfizer
even signed nondisclosure agreements with the governments of
Singapore and Puerto Rico on special tax deals arranged with
those jurisdictions, to keep the details of how Pfizer avoids
billions in taxes hidden from the U.S. Congress.
Pfizer's 2019 cross-border tax avoidance structure is
larger than those previously discovered by Senator Wyden's
staff investigation, including AbbVie, Amgen and Merck.
Pfizer joins a growing list of massively-profitable
pharmaceutical corporations that show little-to-zero U.S.
profits on tax returns, even though the U.S. is big pharma's
largest customer market.\1\ Senator Wyden's ongoing
investigation fully exposes how big pharma abuses ``round-
tripping'' schemes to skirt income taxes on U.S. drug sales
as it charges U.S. customers higher drug prices than any
other country in the world.

Background

The Democratic staff of the Committee is conducting an
investigation into the tax practices of large pharmaceutical
corporations. This investigation examines how U.S. drug
companies use subsidiaries in jurisdictions treated as
foreign for tax purposes to avoid paying the 21 percent
corporate income tax rate on profits from drug sales to U.S.
patients.
As part of this investigation, the Democratic staff of the
Committee obtained tax return information from Pfizer, Inc.
(``Pfizer'') regarding how much of the company's income was
booked in foreign subsidiaries for tax purposes, generally
referred to as ``controlled foreign corporations'' (CFCs) in
tax parlance.\2\ Knowing how much of a company's income is
reported by CFCs provides a window into how much of a
company's income is reported offshore on tax returns. The
data provided by Pfizer exposes the extraordinary extent to
which Pfizer shifted taxable income out of the U.S., despite
making most of its profits by looting the pocketbooks of U.S.
customers.
The 2017 Republican tax law created a new incentive to
maximize how much income a U.S. company shifts offshore.
After slashing the corporate tax rate by nearly 40 percent,
from 35 percent to 21 percent, Republicans went even further
to help boost offshore tax avoidance by large corporations.
The Republican controlled Congress and first Trump
administration created the global intangible low-taxed income
(GILTI) system, which cut the tax rate on foreign income down
to just 10.5 percent. Thanks to this policy, every dollar
that big pharma can shift out of the U.S. gets its tax rate
cut in half. In addition to cutting the rate in half, the
GILTI system includes other designs--such as the use of
``global blending''--to help large multinationals further
minimize their U.S. taxes. These design flaws were detailed
by the Committee in 2018 and again in 2021.\3\

Pfizer reported $0 in U.S. income on its 2019 tax return

The Democratic Committee staff investigation obtained tax
return information from Pfizer revealing that Pfizer booked
100 percent of its income in offshore subsidiaries on its
2019 federal tax filings.\4\ That year Pfizer recorded over
$21 billion in global income, yet not a single dollar was
reported as income earned in the United States for tax
purposes.\5\
Pfizer's tax returns expose a massive discrepancy between
where Pfizer has its customer base and where the profits from
those sales are taxed. Pfizer in 2019 sold more than $20
billion worth of prescription drugs in the United States,
accounting for a majority of the company's global sales
revenue.\6\ The United States is Pfizer's largest customer
market, yet Pfizer was able to book every single dollar of
the profits from those U.S. sales in foreign subsidiaries.
This was not a one off for Pfizer. Pfizer also reported no
taxable income in the U.S. in 2018 or 2020.\7\ That means
that for the three years immediately following the passage of
the 2017 Republican tax law, Pfizer did not treat a single
dollar of profit as earned in the U.S. for tax purposes.
That Pfizer was able to send all of the profits from U.S.
drug sales to subsidiaries in foreign tax jurisdictions
exposes the need to end the abuse of ``round-tripping''
strategies by big pharma and other large multinational
corporations.
Pfizer's round-tripping scheme is designed to exploit the
flawed GILTI system created by the 2017 Republican tax law.
By booking 100 percent of its taxable income in foreign
subsidiaries, none of Pfizer's income was subject to the U.S.
corporate tax rate of 21 percent, but instead the much lower
GILTI rate on foreign profits of 10.5 percent created by the
Republican tax law. Pfizer could lower its tax rate even
further through the use of

[[Page S1886]]

generous tax incentive agreements with the governments of
low-or-zero tax jurisdictions, including Puerto Rico and
Singapore, and utilization of flaws in GILTI's design, such
as global blending. Pfizer also appears to book large amounts
of profits in subsidiaries in Ireland, joining a trend of
large multinational U.S. corporations that are exploiting
subsidiaries in Ireland to capitalize on heavily favorable
tax treatment.\8\
The result of these arrangements is that Pfizer has paid
tax rates that are unacceptably low. In 2019 Pfizer paid a
tax rate of just 5.4 percent, followed by rates of 5.3
percent, 7.6 percent and 9.6 percent between 2020-2022.\9\ In
fact, Pfizer pays a lower tax rate than millions of working
American families.\10\

Pfizer hides sweetheart tax deals with NDAs

Disturbingly, it appears that Pfizer has signed non-
disclosure agreements (NDAs) regarding the terms of its
sweetheart tax deals to exempt it from income taxes in
Singapore and Puerto Rico.\11\ In response to this inquiry,
Pfizer stated that it could not provide Senator Wyden with
information about its tax agreement with the government of
Singapore because the ``agreements with the government of
Singapore contain non-disclosure agreements that prevent
Pfizer from disclosing specific information about such
agreement.'' \12\ Pfizer also stated that the ``confidential
nature'' of its tax incentives with Puerto Rico and Singapore
must be ``protected''.\13\
Senator Wyden does not believe that sweetheart deals
between giant pharmaceutical corporations and foreign
governments to send tax revenue offshore instead of to the
U.S. should be concealed. The U.S. Congress must not be kept
in the dark regarding the extent to which U.S. territories
are being used to execute multi-billion-dollar corporate tax
shelters. As the U.S. Congress debates major changes to the
international tax system, the terms of these tax incentive
agreements are essential information.

Pfizer uses ``round-tripping'' strategy that is widespread in
pharmaceutical industry

Pfizer is using an egregious tax gimmick known as ``round-
tripping.''In a round-tripping strategy, a U.S. company makes
sales to U.S. customers, but manages to have the income from
those sales treated as foreign for tax purposes. Instead of
being subject to the 21 percent corporate tax rate, the
income only is subject to the lower 10.5 percent GILTI tax
rate, and any resulting tax liability can also be offset by
taxes paid to foreign jurisdictions. A round-tripping
strategy can be achieved in a multitude of ways, including
the use of offshore manufacturing, shifting intellectual
property rights to tax havens, aggressive transfer pricing,
complex partnership arrangements, and others. Regardless of
the specific design, the end result is the same--less income
in the U.S. where customers are, more income sent offshore to
tax havens.
Pfizer is hardly alone when it comes to exploiting the use
of round-tripping to avoid paying taxes by sending profits
from U.S. drug sales to overseas subsidiaries. Senator
Wyden's investigation has already uncovered several examples
of round-tripping by big pharma.
For example, a 2022 report published by Senator Wyden
exposed how pharma giant AbbVie booked 99 percent of its
taxable income offshore to avoid paying billions of dollars
in taxes on U.S. prescription drug sales.\14\ Despite being
headquartered in the U.S. and generating 75 percent of its
sales from U.S. patients, only 1 percent of AbbVie's taxable
income was subject to the U.S. corporate income tax rate of
21 percent.\15\ As a result of this round-tripping
structure using subsidiaries in Bermuda, Puerto Rico and
elsewhere, virtually all of AbbVie's profits were taxed at
the substantially lower GILTI rate of 10.5 percent.
Senator Wyden's investigation also uncovered how Merck used
a round-tripping structure to ensure that all of the profits
from U.S. sales of blockbuster cancer drug Keytruda would be
taxed at the GILTI rate of 10.5 percent.\16\ Between 2019 and
2022 Merck sold an astounding $37.1 billion worth of Keytruda
in the United States, yet none of the profits generated by
those sales were treated as earned in the U.S.\17\
Senator Wyden's investigation also obtained information
from Merck indicating that this is because the intellectual
property rights for Keytruda are exclusively located in the
Netherlands and the drug is manufactured in Ireland. In a
response to the Committee, Merck stated that with respect to
Keytruda, ``. . . because its patents have always been owned
outside the United States, Merck's operating profit
attributable to Keytruda IP rights is taxed in jurisdictions
outside the United States.'' \18\ Merck also added that as
Keytruda sales increased by 55 percent from 2019 to 2021,
Keytruda ``became an even larger portion of Merck's overall
profits and [Keytruda's] expansion increased the portion of
Merck's overall income subject to tax outside the United
States.'' \19\
The 2017 Republican tax law makes it very easy to
successfully avoid taxes in round-tripping, and shutting off
this spigot of abuse is not complex. Policies to help shut
down aggressive round-tripping strategies were included in
the Wyden-Brown-Warner international tax reform framework
released in 2021, and international tax reform policies
included in the Build Back Better Act passed by the House in
2021. Republicans are well aware the prevalence of the use of
round-tripping by big pharma to avoid billions in U.S. taxes
and have expressed an interest in legislative action to curb
the abuse of round-tripping--at the time of the writing of
this report, it is unknown if big pharma lobbying will
prevent such key reforms from being included in any
Republican tax plan.\20\ Early versions of Republican
international tax plans prior to 2017 also included language
that would have limited big pharma's ability to use round-
tripping, but this language was abandoned during the back-
room, lobbyist-influenced process of drafting the 2017
Republican tax law.\21\

pfizer's tax avoidance structure may be the largest in the
pharmaceutical industry

Pfizer's 2019 cross-border tax avoidance structure may be
the largest in the pharmaceutical industry, and certainly the
largest discovered during Senator Wyden's investigation. The
previous largest round-tripping scheme exposed by the
Committee's investigation was that used by AbbVie in 2020, in
which AbbVie booked 99 percent of its $9.5 billion in income
in CFCs offshore. Pfizer's 2019 structure dwarfs that: 100
percent of profits show up offshore (the U.S. share was
actually a loss, so more than 100 percent of profits went
offshore), and offshore profits are more than double what
AbbVie earned in the same year.

Endnotes

1. Interim Report: Big Pharma Tax Avoidance, Senate Finance
Committee Chair Ron Wyden, July 2022, available online at
<a href='https://www.finance.senate.gov/imo/media/doc/
Pharma%20Tax%20Report.pdf'>https://www.finance.senate.gov/imo/media/doc/
Pharma%20Tax%20Report.pdf</a>; American Patients, American
Companies, Offshore Profits, Senate Finance Committee
Democratic Staff Memorandum, May 11, 2023, available online
at <a href='https://www.finance.senate.gov/imo/media/doc/pharma_public
_release_final_51123.pdf'>https://www.finance.senate.gov/imo/media/doc/pharma_public
_release_final_51123.pdf</a>.
2. A Controlled Foreign Corporation (CFC) is a foreign
corporation that is majority owned by U.S. shareholders that
own at least 10 percent of the foreign corporation.
3. Trump's Tax law and International Tax: More Complexity,
Loopholes and Incentives to Ship Jobs Overseas, Senate
Committee on Finance, July 18, 2018, available online at
<a href='https://www.finance.senate.gov/imo/media/doc/
Wyden%20Report%20-%20Trumps%20Tax'>https://www.finance.senate.gov/imo/media/doc/
Wyden%20Report%20-%20Trumps%20Tax</a>
%20Law%20and%20International %20Tax%20071818.pdf. Overhauling
International Taxation, Senate Finance Committee Chair
Senator Ron Wyden, Senator Sherrod Brown, Senator Mark
Warner, April 2021, available online at <a href='https://
www.finance.senate.gov/imo/media/doc/
040121%20Overhauling%20International'>https://
www.finance.senate.gov/imo/media/doc/
040121%20Overhauling%20International</a> %20Taxation.pdf.
4. Letter from Pfizer, Inc. to Senator Ron Wyden, Chairman,
Senate Committee on finance, Oct. 21, 2024 (At pg. 3,
According to 2019 federal income tax return information
provided by Pfizer, Pfizer's ``U.S. taxable income excluding
income from controlled foreign corporations'' was a loss of
$1.29 billion.''). The committee notes that this means that
100% of Pfizer's taxable income was reported by Pfizer's
controlled foreign corporations in jurisdictions treated as
foreign for tax purposes.
5. Id. at pg. 3, According to 2019 federal income tax
return information provided by Pfizer, Pfizer reported $16.94
billion in GILTI Income (line 17 of Form 1120, Schedule C),
$1.12 billion Subpart F Income (line 16a, b, and c on Form
1120, Schedule C), $2.65 billion Section 78 Gross Up (line 18
of Form 1120, Schedule C) and $0.57 billion in foreign income
exempt from tax (form 8892, Part II, line 4).
6. Pfizer, Inc., 2019 form 10-K, available online at
<a href='https://s28.q4cdn.com/781576035/files/doc_financials/2019/AR/
Pfizer-2019-Financial-Report.pdf'>https://s28.q4cdn.com/781576035/files/doc_financials/2019/AR/
Pfizer-2019-Financial-Report.pdf</a>.
7. Letter from Pfizer, Inc. to Senator Ron Wyden, Chairman,
Senate Committee on finance, Oct. 21, 2024 (At pg. 3, Pfizer
reported losses of $7.97 billion, $1.29 billion and $0.62
billion in the U.S. on its 2018, 2019, and 2020 federal
income tax returns, respectively). The Committee notes that
this means that 100% of Pfizer's taxable income was reported
by Pfizer's controlled foreign corporations in jurisdictions
treated as foreign for tax purposes those years.
8. This Country Won the Global Tax Game, and is Swimming in
Money, Ireland is setting a sovereign wealth fund filled with
tax revenue from U.S. tech and pharma companies, The Wall
Street Journal, Oct. 10, 2023, available online at <a href='https://
www.wsj.com/economy/global/this-country-won-the-global-tax-
game-and-is-swimming-in-money-57c3c70'>https://
www.wsj.com/economy/global/this-country-won-the-global-tax-
game-and-is-swimming-in-money-57c3c70</a>.
9. Pfizer, Inc., 2022 form 10-K, available online at
<a href='https://www.sec.gov/Archives/edgar/data/78003/
000007800323000024/pfe-20221231.htm'>https://www.sec.gov/Archives/edgar/data/78003/
000007800323000024/pfe-20221231.htm</a> (at pg. 35 discussion on
effective tax rates); Pfizer, Inc., 2020 form 10-K, available
online at <a href='https://www.sec.gov/Archives/edgar/data/78003/
000007800321000038/pfe-20201231.htm'>https://www.sec.gov/Archives/edgar/data/78003/
000007800321000038/pfe-20201231.htm</a> (at pg. 38 discussion on
effective tax rates).
10. IRS 2023 marginal tax rates for individuals, 22% for
incomes between $44,726 to $95,375 ($89,451 to $190,750 for
married couples filing jointly) available online at <a href='https://
www.irs.gov/filing/federalincome-tax-rates-and-brackets'>https://
www.irs.gov/filing/federalincome-tax-rates-and-brackets</a>.
11. Pfizer, Inc., 2022 form 10-K, available online at
<a href='https://www.sec.gov/Archives/edgar/data/78003/
000007800323000024/pfe-20221231.htm'>https://www.sec.gov/Archives/edgar/data/78003/
000007800323000024/pfe-20221231.htm</a> (At. pg. 69: ``We benefit
from Puerto Rican tax incentives pursuant to a grant that
expires during 2053. Under such grant, we are partially
exempt from income, property and

[[Page S1887]]

municipal taxes. In Singapore, we benefit from incentive tax
rates effective through 2048 on income from manufacturing and
other operations.'').
12. Letter from Pfizer, Inc. to Senator Ron Wyden,
Chairman, Senate Committee on finance, Oct. 21, 2024 (At. pg.
6, ``Pfizer understands the Committee's request for
information on the specific tax relationship between Pfizer
and the governments of Puerto Rico and Singapore in Questions
7 and 8 of your letter, however, the requests implicate
confidential arrangements between Pfizer and each
jurisdiction, and the applicable agreements contain
commercially sensitive information. In particular, the
agreements with the government of Singapore contain certain
nondisclosure agreements that prevent Pfizer from disclosing
specific information about such agreement.''
13. Letter from Pfizer, Inc. to Ron Wyden, Chairman, Senate
Committee on Finance, Jun. 17, 2024 (``Pfizer understands the
Committee's request for information on the tax relationship
between the Company and the governments of Puerto Rico and
Singapore; however, the requests implicate confidential
arrangements between Pfizer and each jurisdiction. Just as we
are concerned about maintaining positive engagement with the
Committee, we are also concerned about maintaining positive
relationships with the U.S. states and territories in which
we operate, including Puerto Rico. To those ends, it is
important that the confidential nature of Pfizer's tax
incentive arrangements with the governments of Puerto Rico
and Singapore are protected.'')
14. Senate Finance Committee Investigation Reveals Extent
to Which Pharma Giant AbbVie Exploits Offshore Subsidiaries
to Avoid Paying Taxes on U.S. Drug Sales, U.S. Senate
Committee on Finance, July 2022, available online at <a href='https://
www.finance.senate.gov/imo/media/doc/
Pharma%20Tax%20Report.pdf'>https://
www.finance.senate.gov/imo/media/doc/
Pharma%20Tax%20Report.pdf</a>.
15. Id.
16. American Companies, Offshore Profits, Senate Finance
Committee Democratic Staff Memorandum, May 11, 2023,
available online at <a href='https://www.finance.senate.gov/imo/media/
doc/pharma_public_release_final_51123.pdf'>https://www.finance.senate.gov/imo/media/
doc/pharma_public_release_final_51123.pdf</a>.
17. Merck sales of Keytruda in the U.S. according to 10-K
filings with the SEC: $6.3 billion in 2019, $8.4 billion in
2020, $9.8 billion in 2021 and $12.7 billion in 2022.
18. Letter from Robert Filippone, Vice President, U.S.
Policy and Government Relations, Merck to Ron Wyden,
Chairman, Senate Committee on Finance, Apr. 15, 2022 at pg.
3: ``With respect to Keytruda, however, because it was
discovered outside the United States and its patents have
always been owned outside the United States, Merck's
operating profit attributable to Keytruda-related
intellectual property rights is taxed in jurisdictions
outside the United States.''
19. Id at pg. 4: ``As illustrated on page 53 of Merck's
2021 Form 10-K, Keytruda sales increased 55% from 2019 to
2021. This increase was substantially greater than Merck's
overall revenue growth of 24% over the same period.
Consequently, Keytruda became an even larger portion
ofMerck's overall income subject to tax outside of the United
States.''
20. Tax Writers eyeing international tax break used by
Pharma, Politico Pro, available online at <a href='https://
subscriber.politicopro.com/article/2024/11/tax-writers-
eyeing-international-tax-break-used-by-pharma-00189546'>https://
subscriber.politicopro.com/article/2024/11/tax-writers-
eyeing-international-tax-break-used-by-pharma-00189546</a>.
21. H.R. 1, introduced by then-Ways and Means Committee
chairman Camp in 2014, included the pre-cursor to GILTI and
the corollary policy of foreign-derived intangible income
(FDII). In this 2014 version, CFC income would have only
benefitted from the lower rate if that income was ``foreign-
derived,'' i.e., it was ``sold for use, consumption, or
disposition outside the United States, or services provided
with respect to persons or property located outside the
United States.'' Under this definition, big pharma's sales to
U.S. customers would not be able to access the lower rate
that they are now able to access under GILTI as passed by
Republicans in 2017. See sec. 4211 of H.R. 1, the Tax Reform
Act of 2014, introduced Dec. 12, 2014. Available online at
<a href='https://www.congress.gov/bill/113th-congress/house-bill/1/
'>https://www.congress.gov/bill/113th-congress/house-bill/1/
</a> text.

Mr. WYDEN. Mr. President, I am going to take a few minutes to walk
through these findings and discuss why they are so important. I am very
pleased to be joined by several of my colleagues who are also outraged
about this tax-dodging.
Here is the upshot. My investigation has found that Pfizer carried
out what could be the largest tax-dodging scheme in the history of Big
Pharma.
The United States is the largest market for Pfizer's products. In
2019, the company sold $20 billion worth of drugs to American patients.
If you are following along on this discussion, you might be hoping to
hear that Pfizer paid a reasonable rate of tax on those profits. I have
got bad news for you and the American people.
In that same year, Pfizer reported zero--not one red cent--in taxable
U.S. profits. Through various tricks and games, Pfizer was able to
shift 100 percent of its U.S. profits to foreign tax havens. This means
that Pfizer dodged billions of dollars in Federal income tax on its
U.S. drug sales. There is every reason to believe it continues to do
so.
Thanks to the tax law Trump and Republicans passed in 2017, Pfizer
doesn't need to keep the money stashed overseas. Pfizer can take this
cash and pocket it with tax-dodging schemes and turn it into stock
buybacks, dividends, executive compensation--the list goes on.
There is an additional matter that is so disturbing. The company
appears to be keeping some of its tax schemes hidden from view with
what has been described to me as a confidential arrangement with the
Governments of Puerto Rico and Singapore. It is enough to leave you
slack-jawed.
So this is a Senate investigation that will have a direct impact on
tax legislation, and Pfizer is hiding relevant tax information behind
nondisclosure agreements.
So colleagues, this is the sixth Big Pharma company where my
investigation has found a staggering level of tax dodging. And these
rip-offs don't happen by osmosis; they happen because Republicans have
allowed them to happen. With the tax law they passed back in 2017,
Republicans delivered to Big Pharma a tax break of more than 40
percent. From 2014 to 2016, the industry paid 19.6 percent, on average.
In 2019 and 2020, it paid 11.6 percent.
Now, reasonable people watching at home might be thinking about how
Republicans always claim to be worried about deficits and debt. Surely
those Republicans would dial back what they did in 2017 and ask these
huge, profitable corporations to pay a little bit more to ease our
fiscal challenges. If you think that is the case--wrong.
So I want to bring my colleagues into this discussion momentarily,
and I will close by looking at the big picture as Congress moves
forward with this debate on taxes, health, child hunger, and more.
Republicans are in control of the Congress and the White House, and
they have locked Democrats out of the discussion. Somewhere here on
Capitol Hill, there is a group of Republicans meeting right now, behind
closed doors, quietly planning the outline of their gigantic bill.
Nobody in that room is talking about how to protect people who work for
a living or how to get more fairness in the economy. The discussion
they are having comes down to how big the handouts are going to be for
billionaires and multinational corporations, how many tens of millions
of Americans they are going to kick off Medicaid to pay for it, how
many millions of kids are going to go hungry, how many hundreds of
thousands of workers are going to lose their jobs.
Republicans are doubling down on a broken system. And if you want to
see that system in action, read our report, because you couldn't find a
better example than Big Pharma's tax dodging. These are huge
corporations that rake in enormous profits in U.S. sales because they
charge astronomical prices in America, and then their stables of
lawyers and accountants get to work on a whole bunch of fancy financial
wizardry, taking advantage of loopholes and rip-offs planted by
Republican lawmakers.
Suddenly, the record profits get shipped overseas. Often, the
factories get shipped overseas, the jobs get shipped overseas, and the
companies aren't paying anything close to a fair share of taxes.
Typical Americans who pay taxes out of every paycheck get ripped off.
Republicans are not going to fix this broken, unfair system. In fact,
they are gearing up to give tax-dodging corporations like these and
their billionaire shareholders even bigger handouts. It is a scam. It
is a rip-off on a national scale. The American people see it for what
it is.
Senate Democrats are going to keep calling it out, because this must
not stand.
So I am very appreciative that my colleagues are joining me here on
the floor. We have a very important member of the Senate Finance
Committee to start, Senator Whitehouse, and I want to send this over to
him.
The PRESIDING OFFICER. The Senator from Rhode Island.
Mr. WHITEHOUSE. Mr. President, I thank Chairman Wyden. This is a
really important investigation, and it bears very exactly on the
Republican

[[Page S1888]]

tax scam that is being cooked up right now here in this Congress,
because one of the keys to the Republican tax scam that is being cooked
up right here in this Congress is giving big corporations the ability
to move their profits--and even their jobs--offshore, away from
America, and get a tax break for doing that. And the total value of
this tax break--the award to big corporations from Republicans for
moving American jobs and profits offshore--is running at about $140
billion that other taxpayers are going to have to make up.
Big Pharma is the big winner in this offshore tax scam. If you look
at Big Pharma's numbers, most sales are to U.S. patients. They sell
their pharmaceutical products to Americans. But when you look at their
financial reporting, 75 percent of their profits are declared as coming
from outside of the United States. So you have some funky math going on
here because we know that Americans are charged more for Big Pharma's
drugs than people are overseas.
They overcharge Americans, Americans pay the highest prices, and most
of the sales are going to Americans who are paying the highest prices.
So how is it that, when most of their sales are going to Americans, who
are paying the highest prices, that is not where the profits are
reported? The profits are reported from overseas, where they have fewer
patients paying lower prices. How does that work? That works S-C-A-M,
scam. And that is what the Republicans in Congress are trying to push
forward into the future.
Thanks to the terrific work of our chairman, we have some specific
examples. The Republican tax scam went into effect in 2017. So they had
to move pretty quickly. So we are looking at now 2019. How quickly did
pharma enjoy the benefit of this tax scam at Americans' expense?
Well, AbbVie is one company. In 2019, it declared three-quarters of
its sales to American customers and essentially all of its profits
offshore. As pharma does, they charged Americans the highest prices,
and they sold 75 percent, nearly, of their drugs to those highly priced
American customers, and yet they claimed that all of their money came
from the small fraction of their sales that they made at lower prices
offshore. Again, S-C-A-M.
Who gets hurt? Well, who gets hurt is American workers because, very
often, the jobs go offshore along with the profits. So an American
worker loses his job so that an American company can move that job
offshore and pay some foreign person for the work that should be here
and gets rewarded by Republicans in Congress for a tax break for doing
that.
Who else gets hurt? Small businesses get hurt because, if you are
running a small business, you can't set up this elaborate tax scam. You
don't have the accountants. You don't have the lawyers. You may not
even have the nasty motive to try to cheat your own government this
way. So small businesses take it in the neck against the big businesses
that can dodge their taxes through this complicated scam.
And even some big American domestic companies, like Rhode Island-
based CVS, which are all-American companies, which don't fake their
profits to be coming from Bermuda or the Cayman Islands or Singapore or
wherever else, they suffer too because they are in competition with the
big multinationals that are playing shell-and-pea games with their
profits to hide it from the IRS.
So here is the racket: One, you overcharge Americans. Two, you use
the money that you earn from overcharging Americans to come to Congress
and buy massive amounts of influence and get the Republican Party to do
exactly what you want. And what you want is stage 3, the tax scam that
lets you pretend you are making money offshore when you are really not,
and then you save money by not having to pay taxes. And then you keep
overcharging Americans, you keep buying Congress, and you keep the tax
scam going. It is rinse and repeat, and the big losers are Americans.
Where it comes home is where the chairman did his outstanding work
for Pfizer. And $20 billion is what Pfizer sold in drugs in America;
$20 billion is what Pfizer sold in drugs overseas. They charged more to
Americans because pharma charges more to Americans. We know that. And
yet Pfizer told the IRS that all--all--of its profits came from
offshore--all of it--and, as a result, they got a huge, huge tax dodge.
So whether it is AbbVie or whether it is Pfizer or whether it is the
industry as a whole, we need to shut down this tax racket. It is not
serving anyone. It costs American jobs, it is unfair to small
businesses, and it cheats the regular taxpayers who pay their taxes
honestly and can't pretend that the revenue they made off American
customers is somehow magically appearing out of the Cayman Islands or
some other foreign hideaway.
I thank Chairman Wyden for his amazing work.
Mr. WYDEN. Well said, Senator Whitehouse.
And I want to get my colleagues into this. Next in order of
appearance is Senator Van Hollen.
Once again, I want everybody to understand that the four of us are
going to continue to go after this colossal tax avoidance until it gets
fixed, because the American people are getting ripped off.
Senator Van Hollen.
The PRESIDING OFFICER. The Senator from Maryland.
Mr. VAN HOLLEN. Mr. President, I want to thank Senator Wyden for
bringing us together to shine a spotlight on one of the biggest tax
heists in American history: the huge 2017 Trump tax giveaway to the
very rich and the biggest corporations that came at the expense of
everybody else in America because everybody else in America has to pick
up the tab for that giveaway to big corporations and the very rich. And
that tax heist played out right here on the Senate floor.
So why are we gathered here today to talk about something that
happened here 8 years ago? The answer is because it is about to happen
all over again. In fact, this time, it may be on steroids. And the
American people need to know what will go down right here on the Senate
floor in a matter of months if we don't stop it.
So let's take a look at what Donald Trump and Republicans in Congress
promised 8 years ago when they passed their big tax giveaway for the
rich and then look at what actually happened. They promised that tax
cuts to the very rich would trickle down and somehow benefit everybody
else in the country. It didn't happen. They promised that it would
generate so much new economic activity that it would pay for itself,
but that didn't happen. It added $1.5 trillion to our national debt,
and if you extend that out another 10 years, that will be another $5.5
trillion on the debt.
They promised that if they gave these benefits to big corporations,
like Pfizer and others in the pharmaceutical industry, they would use
their tax savings to provide raises of $4,000, on average, to all of
their workers. It didn't happen.
I will tell you who did get big bonuses. It was the CEOs and the
executives.
And they promised that they would use their savings--that the
corporations would use another part of their savings--to reinvest in
plants and equipment and, therefore, help the whole economy. It didn't
happen. What those big corporations did was use a lot of their tax
savings for stock buybacks to jack up the price of their own stock.
This plan that they passed--the Trump tax plan passed 8 years ago--
did something else. It provided that mechanism to help some of the
biggest corporations in America duck their tax obligations to the
American people by shipping their profits overseas and engaging in all
sorts of scams, and today we have even more evidence of that fact.
I want to again thank Senator Wyden and his team on the Senate
Finance Committee staff for the report he is presenting today because
it is one of several reports he has done to expose how Big Pharma
exploits the tax provisions of the 2017 Trump tax giveaway to magically
make their profits from selling drugs here in the United States
disappear. Somehow, all of those profits made here disappear when it
comes time to pay taxes, and that is how they miraculously reduce the
amount of taxes they have to pay.
And this report that Senator Wyden and his team put together shows
that this round-tripping scheme is how they do it--``round-tripping''
meaning you make your revenues here in the United

[[Page S1889]]

States, at least 50 percent of the revenues in the case of Pfizer
sales, but somehow, when it comes time to pay your taxes, you have
taken those profits and filtered them through all sorts of overseas
schemes and entities to reduce that tax liability dramatically.
What the report shows is that while 50 percent of Pfizer's revenues
are generated here in the United States, when it comes to booking its
income for tax purposes, they show zero profit on their U.S. operations
and, by playing that game, dramatically reduce their overall tax
liability.
This was facilitated by the 2017 Trump tax cuts, and it has allowed
Pfizer to reduce its tax obligations by billions of dollars, cut its
taxes by a whopping 40 percent--a whopping 40 percent--since that Trump
tax scam was passed.
And while big corporations win, everyone else loses. You know,
American families, they can't use this round-tripping scheme. You can't
somehow erase the taxes you owe on the earnings you make by running
your earnings through various offshore schemes.
Small businesses in America can't erase their American-based tax
profits by using these round-tripping schemes, but the Donald Trump tax
scam allows big corporations like Pfizer to do exactly that. By doing
that, they have reduced their overall effective tax in the
pharmaceutical industry to about 11 percent, far less than the rates
paid by most middle-class families in America.
When Big Pharma and big corporations shortchange America on the taxes
they pay, they shortchange every citizen of this country. It means they
are contributing less to modernize our infrastructure, less for public
schools, less for our common defense. They become free riders on
everybody else.
So that is why we are here on the floor to blow the whistle. I will
just close with this: I have said this before, but I am going to say it
again because we are heading toward our big debate here on this issue.
And that is, when on Inauguration Day, just down the hall here,
President Trump was sworn in, he talked about a new golden age for
America. Come to find out that when he is talking about a golden age,
he is talking about a golden age for the people who were sitting right
behind him on that platform when he was sworn in: Elon Musk and the
billionaires. There are more billionaires in the Trump Cabinet than at
any time in American history by far.
And so on the campaign trail, Donald Trump says he wants to go after
the elites. On the campaign trail, he says: I am going to look out for
the forgotten Americans. Well, I will tell you what: He has forgotten
Americans unless they happen to be a big corporation or the head of a
big corporation.
This is the big betrayal in action, and we are going to witness this
big betrayal in action even more in the coming months here on the
Senate floor if we don't stop it.
I want to thank Senator Wyden and his team for exposing exactly what
will happen if we don't stop it.
I yield the floor.
Mr. WYDEN. Mr. President, I thank my colleague. Once again, you can
hear his expertise in the Ways and Means Committee and the body on
these issues, and I thank him for his leadership.
A new member of the Finance Committee, Senator Welch, is here and he
will have some remarks and then I will wrap up.
Senator Welch.
The PRESIDING OFFICER. The Senator from Vermont.
Mr. WELCH. Thank you, Senator Wyden.
Mr. President, when I talk to Vermonters, as I am sure when you talk
to Tennesseeans, everyday, hard-working people at the end of the month
are struggling to pay their bills. It is expensive.
And people are working really hard, but the cost of things is going
up. Taxes are eating into their paychecks, and they don't understand
how it is they can work so hard--many families, it is two people
working--and they still can't pay their bills.
There is a suspicion among a lot of folks I talk to that there is
something wrong, and it is kind of a rigged situation. What we are
talking about today proves that the suspicion that Vermonters have
about things being rigged, they are right.
The second point I want to make at the outset is this issue, this
specific example, provides such clarity that some of the worst things
that cause the most suffering and the most economic insecurity are
totally legal--totally wrong, by the way, but legal.
What did we find out with the Wyden report? We found that a major
U.S. pharmaceutical company was able to make sales of $20 billion of
its product in 2019 and report zero income--zero in profits here in
this country.
What that ultimately means is that what Pfizer paid for taxes--
despite this extraordinary profit, they paid less than the mailroom
clerk pays in Social Security. They paid less than the pharmacist at
the drugstore who dispenses the prescriptions. They paid less than the
delivery drivers who may have brought these prescriptions to a person's
home. They paid less than the employees of Pfizer, whether it was a lab
technician or a clerk or anyone at that company.

So Vermonters asked me: Wait a minute. How is this $20 billion in
sales, extraordinarily profitable company--yet under the legal use of
the Tax Code, they are able to report zero? Well, this is where, as
much as I condemn Pfizer for manipulating and taking advantage of these
legal loopholes, I say the U.S. Senate and the U.S. Congress bears
enormous responsibility for allowing this legal loophole to be used.
Pfizer and every profitable company should pay their fair share of
taxes. That is all we are talking about. So when Vermonters, at the end
of the month, are trying to look at how they are going to pay their
bills if their checkbook balance won't cover it, and they think the
system is rigged, they are right.
One of the ways for us to unrig it is to attack this legal use of the
Tax Code that was passed by this Congress.
Now, this is worse than just the Tax Code because other provisions
have made Pfizer so profitable courtesy of the taxpayer. One of their
major drugs, Eliquis, $791 million of taxpayer money was used in the
research and development of it. Pfizer has that, been immensely
profitable, and by the way, it is a good drug. It helps with strokes,
but it is a wicked price.
So here in the United States, if you are buying that drug, that costs
$7,100. In Canada, it is 900 bucks. In Japan, it is $940; the United
Kingdom, $760; in France, $650.
So Vermonters ask me: Wait a minute. Our taxpayer dollars went into
helping Pfizer develop that drug, $791 million, and we have to pay six,
seven, eight times here in the United States than Pfizer sells it in
other countries that are our peers? They think that is wrong, and so do
I.
Then you think about the protection that this Congress gives to
intellectual property, and rightly so, where that pricing power that
goes along with getting a patent is so abused in this country that it
inflicts enormous economic hardship on individuals who have to buy it
directly, on taxpayers who fund it through Medicare and Medicaid, and
on our employers who really care about their employees and they want to
provide employer-sponsored healthcare, but those premiums keep going up
and up and up because of the pharma prices, and it means the raises are
flat. That is not right.
Then you have the fact that for pharma, we have created, as we
should, publicly financed healthcare--Medicare, Medicaid--and employer-
sponsored. So you have a situation for the pharmaceutical industry, and
we are talking specifically now about Pfizer, where they get a
guaranteed market: Medicare, Medicaid, employer-sponsored. They get a
patent and then abuse the pricing power that goes along with it and
stick it to Americans, despite the fact that American taxpayers funded
so much of the basic research that went into developing this product
they put out on the market. Then they end up with a tax code, courtesy
of the U.S. Congress, that allows them to do what no corner drugstore
could ever do; basically say that the sales they made weren't really
made at the corner in Burlington, VT, they were made at the corner in
Singapore.
Oh, and by the way, Pfizer worked out a deal with Singapore to get
preferential tax treatment. And when they were asked, What was that
agreement, they had a nondisclosure agreement

[[Page S1890]]

with Singapore to conceal from legitimate investigation about their tax
liability, what that deal was.
So this is really shocking. But if any of us wonder why everyday
folks who are showing up to do their job in all of their places of
employment in your State and mine and then at the end of the month,
despite all their hard work, are having trouble paying their utility
bill and they just wonder, Is this system rigged, they are right.
Exhibit A is what has been exposed in this report by the Senate Finance
Committee and Senator Wyden.
Mr. WYDEN. Senator Welch, thank you for your leadership. It is great
to have you on this committee.
Mr. President, to wrap up, our investigation has found that Pfizer
has carried out what could be the largest tax-dodging scheme in the
history of Big Pharma. This Big Pharma rip-off is exactly what
Republican Senators should be rooting out in their upcoming tax bill.
Instead, it looks like Senate Republicans may lock this outrage in
permanently. All Americans who believe in tax fairness should join us
in fighting any extension of this tax boondoggle.
I yield the floor.
The PRESIDING OFFICER. The Senator from Tennessee.