What Big Pharma Is Not Telling US Investors About Taxes

Hotter than a stolen script at an FDA hearing, Trump’s May 12 executive order lit a fire under the pharma industry. The order? Drugmakers must slash U.S. prices to match the cheapest ones in developed countries—or else. With threats ranging from tariffs to FTC investigations, the “most-favored-nation” pricing mandate aims to tackle the U.S.’s chronic overpayment problem, where Americans shell out up to three times more than their global peers for the same meds. But here’s the kicker: while Washington waves the pricing hammer, there’s another leak draining billions from taxpayers—Big Pharma’s global tax dodges. Without tax transparency, the prescription price drop could just be sleight of hand, one fee cut, two more tucked away in a Cayman file drawer.

Rewind the Tape

Let’s throw it back to how this all started. For the past two decades, Big Pharma’s playbook has been more tax shuffle than scientific hustle. Global giants set up over 1,300 subsidiaries in low-tax zones, think Ireland, the Netherlands, Switzerland, and Delaware. They stash the crown jewels, intellectual property, in those havens, bill U.S. sales through them, and voilà: profits go offshore while the U.S. taxpayer picks up the R&D tab. Take Merck. From 2016 to today, it reported over $10 billion in domestic tax losses, despite Keytruda becoming the world’s top-selling cancer drug, and the U.S. being its biggest market. Yet internationally? Merck pulled in nearly $96 billion in profit, mostly routed through countries with tax regimes softer than a marshmallow.

Not alone in this play, Bristol-Myers Squibb pushed billions through its Dublin plant, technically Swiss for tax purposes. It booked $9 billion in dividends from that setup in just two years. All while Irish patients were forced to wait almost three years to access the very drug, Opdivo, made down the street due to pricing disputes. Talk about a policy facepalm.

Shareholders Smell Smoke

Pharma execs might be dodging reporters, but they can’t dodge the heat from their shareholders. Merck’s Proposal 5—slated for a vote this May, demands public country-by-country tax reporting under the Global Reporting Initiative’s (GRI) tax standard, already in use across the EU and Australia. Why the buzz? The Senate Finance Committee has its magnifying glass on companies like Merck, probing how foreign subsidiaries are used to cut U.S. tax bills. Investors aren’t blind either. Amgen lost billions in market value when its $10.7 billion IRS tax spat went public, followed by a class action suit for failing to disclose the risk. Merck’s board says detailed tax reporting would spill trade secrets. The U.S. Board of Directors opposes the call for public country-by-country reporting, arguing that it’s “not market practice” and could expose competitive secrets. But here’s the truth bomb: Merck already filed that info confidentially—to the IRS. The ask isn’t about capability. It’s about courage.

Europe’s Playing Hardball

In 2024, the EU required multinationals to report profits, taxes paid, and headcounts by country. Australia followed suit. Even energy titan Shell releases these figures publicly. And guess what? No sky fell, no stock crashed. Meanwhile, U.S. firms like Pfizer, Abbvie, and J&J still spend more on dividends and stock buybacks than R&D—putting the kibosh on the “innovation needs high prices” excuse. And let’s not forget: most of these companies are heavily funded by public programs like Medicare and the NIH. It’s no longer just a European idea. The OECD and the UN are pushing frameworks to tighten global tax rules. If we don’t keep pace, U.S. investors will be flying blind while the rest of the world gets the full X-ray.

Source: Investigate Europe

Bottom Line

Trump’s executive order proves one thing: Americans are done getting fleeced at the pharmacy. But solving high prices without fixing tax secrecy is like patching a tire with duct tape. Unless we demand full transparency—who pays what, and where—we’ll keep footing the bill in other ways: underfunded healthcare, jacked-up premiums, and a shrinking middle class. Backing Proposal 5 and codifying public tax disclosures isn’t radical. It’s rational. With the GRI Tax Standard already supported by investors controlling over $10 trillion, the train has left the station. The U.S. just needs to hop on board. Because let’s face it—paying three times for the same pill is bad. But paying for that pill, a Swiss tax loophole, and a yacht named “Deductible” parked in Bermuda? That’s just plain disrespectful. Want smarter Insights? Subscribe to MYCPE ONE Insights for weekly breakdowns on market movers and shake-ups.