In recent Bloomberg interviews, the CEOs of both Merck and Mylan indicated that they didn't want to leave the US yet to gain foreign tax advantages. Merck's Ken Frazier was more firm in saying he didn't want to leave US shores but rather wished to work with the Congress to reform the US tax code to make it more of a "level playing field" against foreign competitors. He did indicate that he was at a current tax disadvantage as many Big Pharma are fleeing for better rates in places like Ireland, UK or Switzerland.
Mylan's CEO, Heather Bresch, was less definitive. She indicated that Mylan didn't want to go now but that she has thought about it. She feels she is at a competitive disadvantage to bigger competitors like Actavis (recently relocated to Ireland), Teva or Sandoz. She'd like to see a lower US tax rate. She also expressed fears that the US Congress might make it harder for a US company to relocate in the future. In that instance, she says she will not only be penalized by a higher rate but that competitors who left early will benefit further in not having to pay penalites for leaving like her company would if it left post-legislation.
I suspect the Pfizer deal, if it goes through, will be the trigger to change the US code but it may indeed be a case of too little too late. Unless of course, incentives are offered for coming back. Let's Make a Deal.
Posted by Bruce Lehr May 13th 2014.