Pfizer-Allergan Mega Deal already Drawing Backlash
- Lydia Ramsey
- Nov 23, 2015
- 3 min read
Bernie Sanders, Senator independent Vermot.
Pfizer and Allergan just announced their plans for a $160 billion mega-merger, and it took no time for politicians to find something wrong with it.
The merger allows Pfizer to relocate its headquarters to Ireland, where Allergan is incorporated and the tax rate for corporations is 12.5% — much less than the US corporate tax rate of 39.2%. For Pfizer it means taxes will go as low as 17%, from about 25%.
It's a move called a "tax inversion," and it's been very popular move by drug companies. Perhaps for obvious reasons, it's not always politically popular. Since the deal was announced Monday morning, politicians have begun to take a stance against the deal. The White House said that it didn't have a comment on the deal specifically, but that Congress should act to prevent these types of moves. Pfizer CEO Ian Read, who has made no secret of his desire to lower Pfizer's tax bill, seems to have anticipated this. During a call announcing the merger he said the company had "assessed the legal, regulatory, and political landscape," and had decided that this inversion was the best call.
Then, in an interview with CNBC's Meg Tirrell on Monday, Read said, "This is a great deal for America."
But not everyone agrees. US Sen. Bernie Sanders (I-VT) was quick to condemn the move.
"The Pfizer-Allergan merger would be a disaster for American consumers who already pay the highest prices in the world for prescription drugs," Sanders said in a statement Monday. "It also would allow another major American corporation to hide its profits overseas."
Sanders added that the current government could put a block on the deal: "The Obama administration has the authority to stop this merger, and it should exercise that authority."
The US Treasury Department has done this before. In 2014 it issued a notice on tax inversions that ended a similar deal between pharmaceutical companies AbbVie and Shire. That move put a chill on inversions, which were popular in 2014. And last week, the Treasury outlined more rules on tax inversions. Pfizer's Read, for his part, says the deal is compliant with the regulations.
Clinton pledges fight
Sanders wasn't the only one. Former Secretary of State and ex-US Sen. Hillary Clinton also criticized the deal, saying in a statement: "For too long, powerful corporations have exploited loopholes that allow them to hide earnings abroad to lower their taxes. Now Pfizer is trying to reduce its US tax bill even further. This proposed merger, and so-called 'inversions' by other companies, will leave US taxpayers holding the bag."
Clinton also said that as president, she would fight inversion deals and promised to illustrate steps "to prevent these kinds of transactions," and also called upon regulators to intervene.
Democratic presidential candidate Martin O'Malley also opposed the deal. In an emailed statement Monday, he said "The Pfizer-Allergan merger is fundamentally unfair, and a prime example of how our capitalist economy is not supposed to work. American small businesses and middle-class taxpayers do not have the ability to game the system and avoid paying the taxes they owe – Pfizer should not be able to either."
Pfizer and Allergan hope to finalize the deal in the second half of 2016.
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