42 ms·

Mylan's EpiPen profit was 60% higher than what the CEO told Congress

57 points by phonon 10y ago

helloworld 10y ago
The profit CEO Heather Bresch told Congress about was calculated after factoring in the 37.5% U.S. tax rate, according to a filing with the Securities and Exchange Commission first reported by the Wall Street Journal. That tax rate is more than five times the overall tax rate the company actually paid last year and is much higher than its actual U.S. tax rate, which tax specialists have pegged at close to zero. Is Bresch now at risk of prosecution for making false or misleading statements in her Congressional testimony?[1] [1] http://www.cnbc.com/2016/07/07/what-happens-if-you-lie-to-congress.html http://www.cnbc.com/2016/07/07/what-happens-if-you-lie-to-co...
- MrZongle2 10y ago
  I wouldn't hold my breath. Bresch is the daughter of a senator. America's Ruling Class is held to a different standard than you or I.
  - mevile 10y ago
    On the contrary, the FBI would love to prosecute a senator or their family.
    - errantspark 10y ago
      Can you back this claim up with some evidence?
      - cafard 10y ago
        I suspect a hint at the Clintons. I have no evidence for the hint or the desire.
    - MrZongle2 10y ago
      "This is complete bullshit. The FBI would love to prosecute a senator or their family" Citation needed. Do you work for the FBI?
    - dragonwriter 10y ago
      > the FBI would love to prosecute a senator or their family. The FBI doesn't prosecute anybody. US Attorneys do that.
  - Animats 10y ago
    There have been only six successful prosecutions for lying to Congress in the 60 years up to 2006.[1] One from the Red Scare, two from Watergate, two federal employees who lied about dealings with suppliers, and one involving the CEO of an insurer who filed false financial statements. Congress can do this if it wants to, but seldom bothers. [1] https://www.qu.edu/prebuilt/pdf/SchoolLaw/LawReviewLibrary/24_25QLR547(2006-2007).pdf https://www.qu.edu/prebuilt/pdf/SchoolLaw/LawReviewLibrary/2...
    - rayiner 10y ago
      Don't lie to Congress. That said, I'm not too torn up about the lack of prosecution. Congressional hearings are just a circus when they involve highly political issues. Most of the time, the "questioning" is editorialization, and Congress-critters use hearings as an opportunity to generate soundbites and score political points. Nobody is interested in the truth. I don't see any reason to dignify such hearings by treating them like court proceedings.
      - jacobolus 10y ago
        Can we stop using the term “Congress-critters” in serious discussion? It’s a distraction which cheapens whatever point you were otherwise making.
        rayiner 10y ago
        It's my way of protesting the lack of a gender-neutral way of referring to a group of Senators and Representatives.
        vamin 10y ago
        Congresspeople? https://www.google.com/search?q=congresspeople&ie=utf-8&oe=utf-8 https://www.google.com/search?q=congresspeople&ie=utf-8&oe=u...
        mikeash 10y ago
        Congresspeople? Members of congress? Persons what are elected to work in that big domey building?
j2kun 10y ago
Why does everyone (including the director of the NSA) get away with lying to Congress?
- bitJericho 10y ago
  Because America is completely corrupt.
  - RodericDay 10y ago
    I wish people who downvoted you gave an explanation. I don't understand how this statement is controversial. edit: The pedantry below is incredible. I hope you guys are at least consistent in it.
    - hyperliner 10y ago
      "Completely"? Not sure how that added anything to the conversation.
      - bitJericho 10y ago
        It answered the question. Every facet of the government I've dealt with is corrupt. Full stop. Period.
    - duaneb 10y ago
      Because calling a government completely corrupt is hyperbole. Find me a government, I'll find you an honest bureaucrat that manages to help people in spite of being a government employee.
      - duderific 10y ago
        Going pretty OT here, but I would argue that a much bigger problem than corruptness in government agencies is good old fashioned incompetence. It is damn near impossible to fire someone for poor performance in the federal government. My father was a federal bureaucrat for over 25 years. He related stories of some employees he had to deal with who had major personality disorders, were incompetent, abusive etc., and yet it took years to get them dismissed, even though everyone from top to bottom knew they were nothing but a liability to the agency.
asdfologist 10y ago
"It also is important to note that use of a statutory tax rate for the jurisdiction being analyzed (in this instance, the U.S.) is standard." Is this true?
- zippy 10y ago
  "The amount we don't pay justifies the amount a consumer does pay"
- monochromatic 10y ago
  That's the big question on my mind. If it is standard, then I don't see anything wrong here.
gizmo 10y ago
The LA Times article didn't refer to CEO Bresch's testimony, so I'm including the relevant pieces here. Apologies for all caps, I'm copying as-is. Rep Coleman asking questions to Bresch. https://www.c-span.org/video/?415549-1/mylan-inc-ceo-heather-bresch-testifies-epipen-price-increases https://www.c-span.org/video/?415549-1/mylan-inc-ceo-heather... WE KNOW YOU PROFITED FROM INCREASING THE PRICE OF EPIPEN. HE OF -- THE COMPANY HAS ALSO INCREASED PROFITS BY TAKING ADVANTAGE OF THE TAX LOOPHOLE. THE TEXAN VERSION WHICH INVOLVES A COMPANY MOVING ITS OFFICIAL HEADQUARTERS ABROAD TO A LOWER -- TO LOWER THE TAXES PAID. IN 2014, MYLAN MOVED TO THE NETHERLANDS. >> THAT IS TRUE. YOU WRITE TO SHAREHOLDERS ABOUT THE TEXAN VERSION AND I QUOTE, THE TRANSACTION ALSO IS EXPECTED TO LOWER MY LINK TAX RATE -- MYLAN'S TAX RATE. LOWER TO 20-20 1% IN THE FIRST FULL YEAR AFTER THE CONSUMMATION OF THE TRANSACTION. WHAT WAS THE COMPANYWIDE EXPECTED TAX RATE IN 2014? >> I BELIEVE IT WAS IN THE MID-20'S BEFORE WE INVERTED. WHAT IS IT TODAY? >> BETWEEN 15-17% ... DO YOU THINK IT IS FAIR THAT YOU DON'T HAVE TO PAY THE TAXES AS A U.S. COMPANY? >> WE DO PAY TAXES HERE IN THE UNITED STATES FOR ALL OF THE SALES AND REVENUE THAT WE RECEIVE IN THE UNITED STATES. WE ARE PAYING OUR TAXES. FOR EVERYTHING WE SELL. ... DID YOU LOWER THE COST OF THE EPIPEN EXPENSE THEY WOULD BE SAVING BY THIS MOVE? >> 15-17% IS OUR GLOBAL TAX RATE. THAT IS AFTER AVERAGING EVERYTHING UP. IN THE UNITED STATES, WE ARE PAYING HIGHER TAXES ON EVERYTHING THAT WE SELL. I can only conclude her testimony is directly contradicted by the LA times article.
- vijayk 10y ago
  I believe "Texan Version" should be "Tax Inversion" :)
  - gizmo 10y ago
    Stenography is wickedly hard. All is forgiven.
Normal_gaussian 10y ago
So do they pay tax on those units sold in the US?
- charlesdm 10y ago
  They pay tax on the profit left, after all expenses have been deducted. Given there's a myriad of "loopholes" one can use (i.e. earning stripping through loans, certain consulting or production fees that flow to lower tax foreign entities, etc), that's probably not much.
  - gnicholas 10y ago
    The largest line-item is likely IP licensing or co-development fees. The US entity will pay large licensing fees to foreign entities for the right to sell EpiPens in the US. Despite being located elsewhere, the foreign entity will own these rights. As pointed out elsewhere, these "earnings stripping" techniques can substantially reduce the income of the domestic affiliate. It has to maintain "routine returns" for its contributions, but this is nothing compared to the IP profits that flow elsewhere. There are laws explicitly blessing these sort of arrangements (IRC § 482), but the IRS and corporate taxpayers argue endlessly about precisely how much value should flow where.
rayiner 10y ago
The Wall Street Journal article has substantially more details about what happened and how the numbers were calculated: http://www.wsj.com/articles/mylan-clarifies-epipen-profit-figures-it-provided-to-congress-last-week-1474902801 http://www.wsj.com/articles/mylan-clarifies-epipen-profit-fi....

57 points by phonon 10y ago

The profit CEO Heather Bresch told Congress about was calculated after factoring in the 37.5% U.S. tax rate, according to a filing with the Securities and Exchange Commission first reported by the Wall Street Journal. That tax rate is more than five times the overall tax rate the company actually paid last year and is much higher than its actual U.S. tax rate, which tax specialists have pegged at close to zero. Is Bresch now at risk of prosecution for making false or misleading statements in her Congressional testimony?[1] [1] http://www.cnbc.com/2016/07/07/what-happens-if-you-lie-to-congress.html http://www.cnbc.com/2016/07/07/what-happens-if-you-lie-to-co...

MrZongle2 10y ago
I wouldn't hold my breath. Bresch is the daughter of a senator. America's Ruling Class is held to a different standard than you or I.
- mevile 10y ago
  On the contrary, the FBI would love to prosecute a senator or their family.
  - errantspark 10y ago
    Can you back this claim up with some evidence?
    - cafard 10y ago
      I suspect a hint at the Clintons. I have no evidence for the hint or the desire.
  - MrZongle2 10y ago
    "This is complete bullshit. The FBI would love to prosecute a senator or their family" Citation needed. Do you work for the FBI?
  - dragonwriter 10y ago
    > the FBI would love to prosecute a senator or their family. The FBI doesn't prosecute anybody. US Attorneys do that.
- Animats 10y ago
  There have been only six successful prosecutions for lying to Congress in the 60 years up to 2006.[1] One from the Red Scare, two from Watergate, two federal employees who lied about dealings with suppliers, and one involving the CEO of an insurer who filed false financial statements. Congress can do this if it wants to, but seldom bothers. [1] https://www.qu.edu/prebuilt/pdf/SchoolLaw/LawReviewLibrary/24_25QLR547(2006-2007).pdf https://www.qu.edu/prebuilt/pdf/SchoolLaw/LawReviewLibrary/2...
  - rayiner 10y ago
    Don't lie to Congress. That said, I'm not too torn up about the lack of prosecution. Congressional hearings are just a circus when they involve highly political issues. Most of the time, the "questioning" is editorialization, and Congress-critters use hearings as an opportunity to generate soundbites and score political points. Nobody is interested in the truth. I don't see any reason to dignify such hearings by treating them like court proceedings.
    - jacobolus 10y ago
      Can we stop using the term “Congress-critters” in serious discussion? It’s a distraction which cheapens whatever point you were otherwise making.
      - rayiner 10y ago
        It's my way of protesting the lack of a gender-neutral way of referring to a group of Senators and Representatives.
        vamin 10y ago
        Congresspeople? https://www.google.com/search?q=congresspeople&ie=utf-8&oe=utf-8 https://www.google.com/search?q=congresspeople&ie=utf-8&oe=u...
        mikeash 10y ago
        Congresspeople? Members of congress? Persons what are elected to work in that big domey building?

j2kun 10y ago

Why does everyone (including the director of the NSA) get away with lying to Congress?

bitJericho 10y ago
Because America is completely corrupt.
- RodericDay 10y ago
  I wish people who downvoted you gave an explanation. I don't understand how this statement is controversial. edit: The pedantry below is incredible. I hope you guys are at least consistent in it.
  - hyperliner 10y ago
    "Completely"? Not sure how that added anything to the conversation.
    - bitJericho 10y ago
      It answered the question. Every facet of the government I've dealt with is corrupt. Full stop. Period.
  - duaneb 10y ago
    Because calling a government completely corrupt is hyperbole. Find me a government, I'll find you an honest bureaucrat that manages to help people in spite of being a government employee.
    - duderific 10y ago
      Going pretty OT here, but I would argue that a much bigger problem than corruptness in government agencies is good old fashioned incompetence. It is damn near impossible to fire someone for poor performance in the federal government. My father was a federal bureaucrat for over 25 years. He related stories of some employees he had to deal with who had major personality disorders, were incompetent, abusive etc., and yet it took years to get them dismissed, even though everyone from top to bottom knew they were nothing but a liability to the agency.

asdfologist 10y ago

"It also is important to note that use of a statutory tax rate for the jurisdiction being analyzed (in this instance, the U.S.) is standard." Is this true?

zippy 10y ago
"The amount we don't pay justifies the amount a consumer does pay"
monochromatic 10y ago
That's the big question on my mind. If it is standard, then I don't see anything wrong here.

gizmo 10y ago

The LA Times article didn't refer to CEO Bresch's testimony, so I'm including the relevant pieces here. Apologies for all caps, I'm copying as-is. Rep Coleman asking questions to Bresch. https://www.c-span.org/video/?415549-1/mylan-inc-ceo-heather-bresch-testifies-epipen-price-increases https://www.c-span.org/video/?415549-1/mylan-inc-ceo-heather... WE KNOW YOU PROFITED FROM INCREASING THE PRICE OF EPIPEN. HE OF -- THE COMPANY HAS ALSO INCREASED PROFITS BY TAKING ADVANTAGE OF THE TAX LOOPHOLE. THE TEXAN VERSION WHICH INVOLVES A COMPANY MOVING ITS OFFICIAL HEADQUARTERS ABROAD TO A LOWER -- TO LOWER THE TAXES PAID. IN 2014, MYLAN MOVED TO THE NETHERLANDS. >> THAT IS TRUE. YOU WRITE TO SHAREHOLDERS ABOUT THE TEXAN VERSION AND I QUOTE, THE TRANSACTION ALSO IS EXPECTED TO LOWER MY LINK TAX RATE -- MYLAN'S TAX RATE. LOWER TO 20-20 1% IN THE FIRST FULL YEAR AFTER THE CONSUMMATION OF THE TRANSACTION. WHAT WAS THE COMPANYWIDE EXPECTED TAX RATE IN 2014? >> I BELIEVE IT WAS IN THE MID-20'S BEFORE WE INVERTED. WHAT IS IT TODAY? >> BETWEEN 15-17% ... DO YOU THINK IT IS FAIR THAT YOU DON'T HAVE TO PAY THE TAXES AS A U.S. COMPANY? >> WE DO PAY TAXES HERE IN THE UNITED STATES FOR ALL OF THE SALES AND REVENUE THAT WE RECEIVE IN THE UNITED STATES. WE ARE PAYING OUR TAXES. FOR EVERYTHING WE SELL. ... DID YOU LOWER THE COST OF THE EPIPEN EXPENSE THEY WOULD BE SAVING BY THIS MOVE? >> 15-17% IS OUR GLOBAL TAX RATE. THAT IS AFTER AVERAGING EVERYTHING UP. IN THE UNITED STATES, WE ARE PAYING HIGHER TAXES ON EVERYTHING THAT WE SELL. I can only conclude her testimony is directly contradicted by the LA times article.

vijayk 10y ago
I believe "Texan Version" should be "Tax Inversion" :)
- gizmo 10y ago
  Stenography is wickedly hard. All is forgiven.

Normal_gaussian 10y ago

So do they pay tax on those units sold in the US?

charlesdm 10y ago
They pay tax on the profit left, after all expenses have been deducted. Given there's a myriad of "loopholes" one can use (i.e. earning stripping through loans, certain consulting or production fees that flow to lower tax foreign entities, etc), that's probably not much.
- gnicholas 10y ago
  The largest line-item is likely IP licensing or co-development fees. The US entity will pay large licensing fees to foreign entities for the right to sell EpiPens in the US. Despite being located elsewhere, the foreign entity will own these rights. As pointed out elsewhere, these "earnings stripping" techniques can substantially reduce the income of the domestic affiliate. It has to maintain "routine returns" for its contributions, but this is nothing compared to the IP profits that flow elsewhere. There are laws explicitly blessing these sort of arrangements (IRC § 482), but the IRS and corporate taxpayers argue endlessly about precisely how much value should flow where.

rayiner 10y ago

The Wall Street Journal article has substantially more details about what happened and how the numbers were calculated: http://www.wsj.com/articles/mylan-clarifies-epipen-profit-figures-it-provided-to-congress-last-week-1474902801 http://www.wsj.com/articles/mylan-clarifies-epipen-profit-fi....