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Pharma to get billions more from NIH, and their low taxes

Two articles on how the government is pharma friendly in promoting their profits. 

More charity for Pharma which in 2004 their top 5 companies made more profits according to Fortune’s list of the top 500 companies than the other 495 companies.  They get billions in gifts from the NIH through basic research for new molecular entities (innovative drugs).  For an account of how this works see Prof. Marcia Angell’s The Truth About Drug Companies.  See her accounts of Taxol and erythropoietin (Epogen), both developed by NIH and essential given to Bristol-Myers Squibb and Amgen.  In the present case the expenditures of $29.8 billion will be raised to $46.2 over the period from 2014 to 2021.  Most of that budget is spent on research.  Licensing from the NIH is a sham, with nominal payments seldom made, though legislated, along with a clause for reasonable pricing for NIH discovered drugs.  “Under considerable pressure from industry, in 1995, the agency completely abandoned its 1989 policy required ‘a reasonable relationship between pricing of a licensed product, the public investment in that product, and the health and safety needs of the public’.” Angell 70.  And the gift goes further with the broken corporate tax system, the second article below.    For example, “Merck, the second largest pharmaceutical company in the U.S., actually had a negative effective tax rate of 7.5% during the second quarter, which means it got a tax credit.  The article lists their 2nd quarter profits in 2014 at $2.004 billion, at .

Senate bill would set NIH budget floor, raise funding over 7 years

August 1, 2014 | By Emily Mullin

A decade of flat funding compounded by last year's federal sequester cuts has put U.S. biomedical research in a pinch in recent years, but under a new bill the National Institutes of Health would be spared the budget ax.

The legislation, introduced July 24 in the Senate Appropriations Subcommittee on Labor, Health and Human Services and Education by Sen. Tom Harkin (D-IA), would set a minimum budget for NIH. Under the bill, the Senate Appropriations Committee would be required to maintain NIH's current funding level of $29.9 billion. Harkin is the chairman of the subcommittee.

Dubbed the Accelerate Biomedical Research Act, the bill would boost the agency's budget to $46.2 billion over 7 years from 2015 to 2021. The allowance is meant to restore the purchasing power the NIH would have had if funding had kept pace with inflation since 2003, according to a statement by Harkin's office. In 1998, Congress voted to double NIH's budget over the next 5 years until 2003.

The additional funding provides for an initial increase of 10% for each of the first two years, followed by 5% increases for 5 years after that.

Medical advocacy groups like the Alzheimer's Association, American Cancer Society Cancer Action Network, American Diabetes Association, American Heart Association, American Lung Association and United for Medical Research have thrown their support behind the bill, as well as a slew of academic research institutions.

The bill is a timely call to action in light of ongoing financial woes at preeminent research organizations, notably the Scripps Research Institute, which recently ended merger talks with the University of California, San Diego. Scripps has an annual operating budget of $310 million but is reportedly operating this year with a projected $21 million deficit.


Untangling What Companies Pay in Taxes


 MAY 25, 2013 1:18 PM  New York Times

The tax filings of companies, like those of individuals, are confidential. When individual companies want to make the case that they pay large amounts of tax – as many do – they often point to complex calculations from their financial statements that portray the companies in the best light. For an outsider, it can be hard to know how many accounting assumptions go into these calculations and how accurately they reflect the company’s actual tax payments.

But there is one standardized measure of corporate taxes that allows for meaningful comparisons among companies and industries. It is known as Cash Taxes Paid and appears in the public reports that companies are required to file for investors. The category reflects the combined amount of corporate income tax that a company pays in a given year, to foreign governments, the United States government and state and local governments.

This number often varies significantly from year to year, depending on a company’s accounting strategy and on how many tax breaks it qualifies for that year. As a result, a single year’s Cash Taxes Paid number can be misleading. But in a 2008 academic paper, three accounting professors — Scott Dyreng of Duke, Michelle Hanlon of M.I.T. and Edward Maydew of the University of North Carolina — suggested that looking at several years, at least, could offer insight into corporate taxes.

For a column for the Sunday Review this week, I asked S&P Capital IQ, a financial research group, to collect the last six fiscal years of Cash Taxes Paid for the companies in the Standard & Poor’s 500-stock index. Capital IQ then compared these numbers to the companies’ pretax earnings, including unusual items, for the same six years. Together, the two statistics create an effective tax rate for each company, as well for various industries.

The numbers show that oil companies and retailers pay relatively high tax rates, as you can see in this chart. Technology companies, pharmaceutical companies and utilities have lower-than-average tax rates. In all, the average rate for the S&P 500 was 29.1 percent over last six years.

The number helps make clear that despite a relatively high official corporate income-tax rate of 35 percent in the United States, most companies do not pay nearly that much, thanks to loopholes. Remember: the 29.1 percent includes not only federal corporate income taxes but also foreign, state and local [viz. the corporate rate paid at the federal level is much lower because the 29.1% includes state and local taxes.  Moreover, the liberal use of expenses is used to write down profits.] 

Soft-drink companies are among those paying taxes well below average, partly because of their ability to locate the manufacturing plants for soda concentrate in low-tax countries, as I discuss in the column. Coca-Cola paid a combined tax rate of 15.25 percent between 2007 and 2012, while PepsiCo paid 21.31 percent.

The companies chose not to discuss their tax strategies in detail with me, but each did issue a statement in response to my questions.

From Amanda Rosseter, a Coca-Cola spokeswoman:

The Coca-Cola Company is a compliant taxpayer globally, paying all legally required income taxes in the U.S. and every country in which our s2ubsidiaries operate.

As a global company with products sold in more than 200 countries, more than 80% of our unit case volume is sold outside the United States. The fact that our effective tax rate is lower than some other companies in the S.&P. 500 is reflective of the fact that less than 20% of our volume comes from sales in the U.S., which has one of the highest corporate tax rates in the world. [That is an on paper rate, many corporations through the liberal use of deductions such as depreciations, pau little or no taxes. For two articles that expose the sham and at “For example, General Electric — one of the top 10 most profitable companies in the world — got a net tax rebate of $4.7 billion during this period. Meanwhile, it spent $84 million lobbying the federal government.

 From Aurora Gonzalez, a PepsiCo spokeswoman:  “We cannot comment on the tax rates of other companies or industries. PepsiCo’s tax rate is driven by the tax laws and regulations of the approximately 200 countries and territories in which we do business, and we pay all of our tax obligations in full.”

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