Bitter pill that comes with having large drugs sector


ANALYSIS: The pharmaceutical industry’s lobbying of the Government demonstrates how multinationals play governments off each other and limit political choices

The nature of the lobbying of Taoiseach Enda Kenny by the pharmaceutical industry, as disclosed in this newspaper during the week, illustrates the power of the industry, and of the multinational sector generally.

The series of letters from senior figures in the world’s largest pharmaceutical companies appeared co-ordinated and included references to meetings the writers had had with the Taoiseach to discuss their concerns.

They also referred to Ireland’s upcoming presidency of the European Union and topics of interest in that regard, including the pricing of drugs in countries that are the subject of troika programmes.

The conflation in the letters of the sector’s commercial objectives with its importance to the Irish economy illustrated how Ireland’s success in attracting multinational investment can affect the role it plays in the globalised world.

Because globalisation has raced ahead of political control, multinationals play countries off each other, seeking concessions everywhere they go. Governments, unless they can agree regional or global measures that reassert their power, are hugely exposed.

In his letter of February 23rd, 2012, to the Taoiseach, Miles D White, chairman and chief executive of Abbott Laboratories in Illinois, directly linked inward investment and the price his company gets paid by the State for the drugs it supplies.

“In common with other pharmaceutical multinational organisations, we find it difficult to reconcile a policy of pursuing inward manufacturing investment with an attempt to drive medicine prices to among the lowest in the European Union,” he wrote.

The price paid by a government for pharmaceuticals is referenced according to the prices paid by other governments, with the system being organised into “baskets” of countries whose prices are linked.

White’s concern was not so much with his company’s profits from sales here as with the effect any drop in Irish prices would have in other, larger markets.

“International price-referencing results in pricing in Ireland having a knock-on effect on the pricing of medicines in 11 other European countries and up to an additional 37 countries worldwide,” he wrote.

“Driving down the price of medicines across such a large number of export markets for the Irish-based pharmaceutical industry could directly jeopardise jobs in Ireland as it will create substantial pressure to cut manufacturing jobs.”

The Irish pharmaceutical sector employs up to 25,000 people directly, and the same number indirectly, and is a major contributor to Irish exports. The pharmaceutical firms that wrote to Enda Kenny warned that Government decisions aimed at reducing its drugs bill could have “unintended consequences”.

It is a strange thing to have a sector lobbying the Taoiseach to help it combat reductions in the price of its products, not just in this country but in 11 others in Europe, and up to 37 worldwide, and while doing so to suggest that a failure to deliver might affect inward investment into Ireland.

Price paid

Ireland’s drug prices are among the highest in the world, with a recent survey finding that costs here are up to 45 per cent higher than they are in Sweden.

As this newspaper’s health correspondent, Paul Cullen, has observed, it is hard to avoid the conclusion that the high cost of drugs in Ireland is part of the price we pay for having a large pharmaceutical sector.

In fact, given the basket arrangement, citizens in 11 other European countries, and 37 worldwide, may be paying the price. It is important to remember that what is at issue is the price paid by governments for pharmaceutical products.

Yet, despite the importance to them of sales funded by government revenues, pharmaceutical companies, as with almost all multinationals, organise their affairs so they direct profits to low-tax jurisdictions.

White’s company, Abbott, is in the process of creating a sister group, Abbvie, which will focus on research-based pharmaceuticals. This year two Irish Abbvie subsidiaries were established, with registered addresses at the offices of Matheson solicitors in Dublin. Also established was Abbvie Ireland NL BV, a Dutch company with an address in Sligo.

The structure looks like one designed to reduce Abbvie’s future tax bills in much the same way that Google, Microsoft, and other multinationals have used Ireland to save themselves fortunes in global corporation tax. A request for a comment from Abbvie on this point yesterday met with no response.

Just this week Bloomberg reported that Google avoided $2 billion in corporation tax in 2011 by way of its international tax structure. That tax structure is centred in Dublin, where two of Google’s key companies are based at the Matheson offices, and use a Dutch company as part of their tax avoidance policies (the so-called Dutch sandwich scheme).

Earlier this year a report for the Senate Permanent Subcommittee on Investigations in Washington disclosed that Microsoft reduced its US corporation tax bill by €1.87 billion in 2011. The saving was achieved mostly through the avoidance of tax on royalty payments between three companies with their registered addresses at the Matheson offices. One of them, Round Island One, is a Bermuda company, despite having its registered office here.

The structure channels non-US profits from around the globe (including Africa) to Bermuda, which does not charge corporation tax.

Revenues lost

About 60 per cent of world trade occurs within multinational companies. An enormous amount of the profit from that trade is ending up in low-tax and offshore jurisdictions. The revenues lost to governments as a result has to be replaced by targeting other sources, including individuals and businesses that do not trade internationally.

In an environment where so many western countries are raising extra taxes and cutting services in an effort to narrow government deficits, the aggressive avoidance measures operated by multinationals are becoming a political issue.

This month the head of the UK’s public accounts committee, Margaret Hodge, described the tax policies of Google, Amazon and Starbucks as “outrageous and an insult to British businesses and individuals who pay their fair share”. Starbucks, stung by reputational damage, offered to voluntarily pay £20 million to the British exchequer.

On the other hand, Google executive chairman Eric Schmidt responded by saying he was “proud” of his company’s tax structures.

Calls for reform of how multinationals are taxed are entering mainstream debate. The issue featured at last month’s meeting of G20 finance ministers in Mexico.

But Ireland, because of its dependence on foreign direct investment, finds itself on the side of the status quo. Likewise, in relation to financial services, the Irish Financial Services Centre complicates Irish policy on banking regulation and the implementation of a financial transaction tax.

A number of the letters sent to Enda Kenny by the pharmaceutical companies quoted his stated ambition to “make Ireland the best small country in the world in which to do business in 2016”.

That ambition is all very well, but having a disposition towards siding with multinational companies as they play countries off one another carries with it the probability of ongoing erosion of the scope to make political decisions.

It is not true that everything comes with a price. But a lot does.

via Bitter pill that comes with having large drugs sector – The Irish Times – Sat, Dec 15, 2012.

via Bitter pill that comes with having large drugs sector – The Irish Times – Sat, Dec 15, 2012.

About Old Boy

Love the past and the future but live in the present

Posted on December 16, 2012, in buisiness, drugs, Government, Health, International affairs, Ireland and tagged , , , , , , , , , , . Bookmark the permalink. 1 Comment.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

MovieBabble

The Casual Way to Discuss Movies

OLD HOLLYWOOD IN COLOR

...because it was never black & white

LEANNE COLE

Art and Practice

CURNBLOG

Movies, thoughts, thoughts about movies.

FilmBunker

Saving you from one cinematic disaster at a time.

From 1 Blogger 2 Another

Sharing Great Blog Posts

Wonders in the Dark

Cinema, music, opera, books, television, theater

Just Reviews

Just another WordPress.com site

Mark David Welsh

Watching the strangest movies - so you don't have to...

conradbrunstrom

Things I never thunk before.

News from the San Diego Becks

The life and times of Erik, Veronica and Thomas

The Silent Film Quarterly

The Only Magazine Dedicated To Silent Cinema

Leaden Circles

First a warning, musical; then the hour, irrevocable. The leaden circles dissolved in the air.

My Archives

because the internet is not forever

CineSocialUK

Up to the minute, fair, balanced, informed film reviews.

PUZZLED PAGAN PRESENTS

A Shrine to Pop Culture Obsessiveness. With Lots of Spoilers

Thrilling Days of Yesteryear

“Nostalgia isn’t what it used to be” – Peter DeVries

thedullwoodexperiment

Viewing movies in a different light

Twenty Four Frames

Notes on Film by John Greco

Suzanne's Mom's Blog

Arts, Nature, Family, Good Works, Luna & Stella Birthstone Jewelry

It Doesn't Have To Be Right...

... it just has to sound plausible

NJ Corporate Portrait Photographer Blog

The life of a corporate portrait photographer who likes to shoot just about anything.

arwenaragornstar

A French girl's musings...

Jordan and Eddie (The Movie Guys)

Australian movie blog - like Margaret and David, just a little younger

Octopus Films

A place for new perspectives on films, TV, media and entertainment.

scifist 2.0

A sci-fi movie history in reviews

The Reviewer's Corner

The Sometimes Serious Corner of the Internet for Anime, Manga, and Comic Reviews

First Impressions

Notes on Films and Culture

1,001 Movies Reviewed Before You Die

Where I Review One of the 1,001 Movies You Should Watch Before you Die Every Day

Movies Galore of Milwaukee

Movie Galore takes a look at Silent films on up to current in development projects and gives their own opinion on what really does happen in film!

The Catwing Has Landed

A Writer's Blog About Life and Random Things

mibih.wordpress.com/

Anime - Movies - Wrestling

Gabriel Diego Valdez

Movies and how they change you.

The Horror Incorporated Project

Lurking among the corpses are the body snatchers....plotting their next venture into the graveyard....the blood in your veins will run cold, your spine tingle, as you look into the terror of death in tonight's feature....come along with me into the chamber of horrors, for an excursion through.... Horror Incorporated!

Relatos desde mi ventana

Sentimientos, emociones y reflexiones

Teri again

Finding Me; A site about my life before and after a divorce

unveiled rhythms

Life In Verses

Gareth Roberts

Unorthodox Marketing & Strategy

leeg schrift

Taalarmen

100 Films in a Year

12 months. 100 films. Hopefully.

%d bloggers like this: