This from the PharmaTech Talk blog. It questions whether PhRMA is credible in its lobbying for making the research and development tax credit in pharma permanent. Recently, the Senate voted it down in a surprising move to some observers. Both PhRMA and BIO have been advocating this bill as a means of stimulating investment in R&D and job growth.
The PharmaTech piece then goes on to recount the 2005 tax break given to big pharma to allow it to repatriate foreign profits - presumably with the idea that these would be reinvested to stimulate growth in the US (although I'm not sure why latter part follows logically) - with the result that the industry soon began laying off workers in US and increased outsourcing, often, to foreing markets. I'm not sure I see any cause and effect here - but I can see a perception issue among those voting for the tax cut.
Again, according to the post, some legislators are not in favor of granting further tax cuts to an industry they perceive as not paying its fair share so to speak. An example cited involves a Big Pharma member setting up tax-shelters, for activities like R&D or patenting, overseas to avoid taxes. The IRS eventually caught up with some of these practices - but damage done again. The author's conclusion is that pharma may not have used past tax credits in a constructive manner so don't give them this one either -- and come up with alternative stimulus for investment.
However, I think this line of argument ignores the effects of R&D tax cuts. It seems to me that these are very targetted and go to promote investment into R&D in an indsutry that the US can still claim leadership in. Wouldn't it make sense for our government to support policies that would tend to drive further investment into the sector and raise additional barriers to protect that leadership position? Especially in an industry that most agree is innovation driven and R&D intense. I think it makes sense. I think the examples cited above are irrelevant to this policy - but they may cause unnecessary perception problems for some Senators. That's too bad, but shouldn't derail a good policy decision.
Posted by Bruce Lehr October 4th 2010.