Amgen Pressed for 'Voluntary Compliance' in Senate Pharma Tax Avoidance Probe

Lawmakers are examining strategies drugmakers use to shield billions of dollars in profits from U.S. corporate taxes.

Senate Finance Committee Chair Ron Wyden this week made a final request to Amgen Inc. to "voluntarily" provide information about the drugmaker's tax-avoidance schemes that funneled $24 billion in U.S. sales to offshore havens in Puerto Rico and elsewhere.

The Oregon Democrat, in a Dec. 8 letter to Amgen CEO Robert Bradway, says "there appears to be a substantial discrepancy between where Amgen generates the vast majority of its prescription drug sales and where Amgen books profits from those drug sales for tax purposes."

Wyden says the Thousand Oaks, CA-based company, in its Sept. 16 response to the committee's August query, "declined to provide any specific information related to Amgen's pre-tax earnings, profit margins and tax paid in the United States."

"The response also failed to answer questions regarding where Amgen reports income for tax purposes, including how much of Amgen's taxable income is reported by offshore subsidiaries," Wyden says, adding that Amgen also refused to provide specific information related to pre-tax earnings, profit margins, and taxes paid in the United States.

The Senate Finance Committee is examining strategies Amgen and other drugmakers use to avoid billions of dollars in taxes generated by sales in the United States, including Amgen's pricy arthritis drug Enbrel, for which the drug maker charges about $8,700 a month.

Wyden says Amgen uses the global intangible low-tax income (GILTI) schedule to declare income from Enbrel and other drugs that "are overwhelmingly booked in jurisdiction treated as foreign for tax purposes, including Puerto Rico." 

Under GILTI, foreign income is either fully exempt from taxes, or taxed at 10.5%, compared with the U.S. corporate tax rate of 21%.

Internal Revenue Service filings show that U.S. sales accounted for $18.2 billion of Amgen's sales in 2021, about 70% of its total sales, but reported only $1.85 billion in pre-tax income in the United States. In that same year, Amgen reported international pre-tax income of more than $4.8 billion on $7.7 billion in international sales. The IRS also claims that Amgen shifted nearly $24 billion in income to subsidiaries in Puerto Rico to avoid paying billions of dollars in federal taxes on U.S. prescription drug sales.

Wyden says in his letter that he was denied "country-specific information related to Amgen's pre-tax earnings, profit margins, employee headcount and tax paid for tax years 2018 - 2021."

"This included copies of Amgen's IRS form 8975, an annual country-by-country tax reporting required for large corporations with over $850 million in annual income. I also requested information related to Amgen's taxable income for years 2018 – 2021, including how much of Amgen's taxable income was reported by controlled foreign corporations," Wyden says in the letter.

"Unfortunately, Amgen declined to provide the committee this information, choosing to keep secret how much of its profits are reported by offshore subsidiaries that are treated as foreign for tax purposes."

"It is critical to understand how Amgen, a multinational pharmaceutical corporation based in the U.S. with annual sales of $26 billion primarily made to U.S. customers, paid a lower tax rate than a postal service worker or a preschool teacher."

Amgen did not immediately respond to requests for comment Thursday from HealthLeaders.