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Drug Companies Plan Tax Breaks To Offset $26 Billion Opioid Settlement

Mar 9, 2021
Originally published on March 9, 2021 9:30 am

Four of America's biggest healthcare companies are close to a $26 billion settlement for their role making and distributing highly addictive opioid medications.

But critics in Congress say corporate tax breaks could slash the value of the deal by more than $4 billion.

"If they get away with it, that means less money going into the treasury, less money for programs that would help deal with the fallout for the opioid crisis," said Rep. Jimmy Gomez (D-CA).

Public filings by AmerisourceBergen, Cardinal Health, Johnson & Johnson, and McKesson show they all plan to write off future opioid payouts as operating losses, meaning they would pay far less in corporate income taxes.

At least one of the firms said it will also use a new corporate tax break created last year as part of the CARES Act meant to help companies struggling during the pandemic.

During a call with investors, Cardinal Health chief financial officer Jason Hollar estimated the provision would allow the firm to recoup roughly $420 million in taxes paid as far back as 2015.

In an email statement to NPR, a Cardinal spokesman said the plan to make use of the CARES Act tax provision complies with "current federal law" which allows the firm to "recover previously paid federal taxes."

Some lawmakers are outraged by the strategy. A letter sent to Cardinal Health last week by the House Committee on Oversight and Reform said the company doesn't appear to need financial relief.

"Cardinal Health is seeking to exploit the CARES Act provision despite being fiscally healthy during the pandemic," lawmakers wrote.

Rep. Gomez told NPR he feared the CARES Act tax break would be misused by some corporations, but did not foresee it being used to offset opioid payouts.

"I never thought it would get to the point where they would try to skirt their responsibility to pay...for an opioid crisis that they caused," he said.

The committee sent letters to all four companies ordering them to answer questions about their opioid-related tax strategies by March 18.

Lawmakers estimated opioid settlements could produce corporate tax benefits on a massive scale, with AmerisourceBergen recouping $1.1 billion, Cardinal health $974 million, Johnson & Johnson $1.1 billion and McKesson $1.4 billion.

It's unclear whether anger over corporate tax breaks will complicate already sensitive opioid settlement talks with counties and cities which continue behind closed doors.

Speaking last month, Cardinal Health CEO Mike Kaufman described efforts to reach a deal as "complex negotiations with a lot of moving parts" but said "we're continuing to make progress there."

If the deal is finalized, the four companies are not expected to admit wrongdoing. This comes at a moment when many of America's largest corporations face legal, financial and public relations peril for their role in the opioid industry.

According to the Centers for Disease Control and Prevention, nearly 450,000 people have died since the opioid epidemic began, with many of those deaths linked to prescription medications.

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