Countries' tax policies with respect to how they affect Big pharma have been in the news a lot lately. Puerto Rico, Ireland and now the UK have either made tax policy changes or are debating changes that could have a large impact on this industry.
Puerto Rico recently drew the ire of Big Pharma when it raised the taxes it will charge to multi-nationals exporting drugs from the island who have revenues exceeding $75 M. Pharma groups were particularly upset that the legislation came without prior public discussion and said it will kill growth and innovation on the island.
Ireland officials , in the midst of a banking crisis and bailout, are trying to hold fast to keep the corporate tax rate at a low 12.5% and are actively trying to avoid conflicts with Big Pharma. They hope to maintain a competitive advantage over a territory like Puerto Rico.
Now, the UK appears to have hit a home run with Big Pharma with the introduction of its so-called patent box tax policy. This will lower the tax rate on drugs patented and manufactured in the UK from the normal 28% corporate rate to a low 10% rate. Big Pharma is cheering as one. Yesterday, Glaxo announced it would invest £500m in its first new manufacturing plants on the isalnd in more than 25 years. AstraZeneca was also publicly enthusiastic about the new government policy.
Glaxo's CEO Andrew Witty said, that the patent box has the potential to "transform the way in which the UK is viewed by companies such as GSK as a location for new investment in high added-value R&D and manufacturing." He predicted the patent box would go a long way toward reversing a trend of offshoring in the UK.
Posted by Bruce Lehr November 30th 2010.