Pfizer, Merck, J&J, others face scrutiny over tax loophole extension

Two Democratic lawmakers on Tuesday pressed five of the nation’s largest pharmaceutical companies about their low tax bills and whether they support extending massive tax cuts for the industry in the GOP reconciliation bill.

Sen. Elizabeth Warren, D-Mass., and Rep. Jan Schakowsky, D-Ill., accuse Pfizer, Merck, Johnson & Johnson, AbbVie and Amgen of paying little to no federal taxes for profit earned in 2024 and years prior, despite generating tens of billions of dollars annually from their drugs.

In separate letters to each company on Tuesday, the lawmakers allege that the pharmaceutical companies all avoided paying U.S. tax bills by shifting their profits to offshore subsidiaries in jurisdictions with much lower tax rates, such as Ireland and Bermuda. That practice was enabled by a provision in President Donald Trump‘s 2017 Tax Cuts and Jobs Act, which aimed to curb corporate tax avoidance but instead created new incentives for U.S. multinational companies to move profits and operations overseas. 

In the letters, Warren and Schakowsky said the practice illustrates “just one of the ways in which our tax code has been skewed to benefit wealthy pharmaceutical corporations, enabling them to profit off Americans, charging them the highest drug prices in the world, without paying their fair share of taxes.”

They pressed drugmakers about whether the thousands of dollars they have spent lobbying Congress went toward efforts to maintain that tax loophole in Trump’s “One Big Beautiful Bill Act,” which the Republican-led House passed in late May. J&J, for example, spent more than $150,000 lobbying on international tax issues in the fourth quarter of 2024 alone, according to the letter to the company, which cites data compiled by OpenSecrets. 

If enacted as currently written, the multitrillion-dollar tax and spending package would make many provisions in Trump’s 2017 tax act permanent. The current iteration also contains historic spending cuts to programs for low-income Americans, including Medicaid health coverage. 

The bill now sits in the Senate, where Republicans could choose to drop or revise many of the provisions pushed by hard-line House Republicans who sought to slash spending in tandem with the tax cuts. But any Democratic push to eliminate the offshore tax loophole would be an uphill battle, as Republicans hold a majority in the upper chamber. 

Even so, Democrats have tried to build public opposition to parts of the legislation as the GOP attempts to balance competing party interests to pass it. Both parties have targeted pharmaceutical companies for years.

“It’d be a slap in the face for Congress to expand tax loopholes for Big Pharma companies that are making billions in profit while overcharging Americans,” Warren said in a statement to CNBC. “These companies need to be held accountable for prioritizing their profits over people.

The letters to drugmakers cited a March analysis by the Council on Foreign Relations – an independent, nonpartisan think tank – suggesting that reforming the offshore tax loophole would raise at least $100 billion over 10 years. 

The letters also include questions about each company’s role in lobbying for an extension of the tax breaks and their estimated federal tax liabilities. The lawmakers asked each drugmaker to respond by July 1.

In a statement, a J&J spokesperson said the company looks forward to “clarifying” its “significant U.S. tax contributions and cooperatively responding to Senator Warren and Representative Schakowsky’s letter.”

Spokespeople for Pfizer, Merck, J&J, AbbVie and Amgen did not immediately respond to requests for comment on the letters. 

It’s not the first time lawmakers have scrutinized pharmaceutical companies for their tax practices. 

A March report accused Pfizer of pulling off what Democratic Sen. Ron Wyden, D-Ore., called “the largest tax-dodging scheme” in pharmaceutical industry history. The report accused the company of using a tactic called “round-tripping” to avoid paying any U.S. income tax on $20 billion in domestic drug sales in 2019.

An investigation by Democratic staff of the Senate Finance Committee concluded that Pfizer used the tax loophole to funnel profits through offshore subsidiaries in tax havens like Ireland and Puerto Rico, despite selling to U.S. patients. But the company said it paid $12.8 billion in U.S. taxes over four years, and says documents to back that up have been filed with the Securities and Exchange Commission.

The letters on Tuesday come as the Trump administration considers imposing tariffs on pharmaceuticals into the U.S. in a bid to reshore manufacturing. Trump has complained that Ireland has successfully convinced drugmakers to open manufacturing operations there by offering low tax rates.