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Many Americans reading this are likely paying more in taxes than drug companies in America, who make billions in profits. That many drug companies are now having problems, due to misleading and false claims about their products and a lack of real innovation, doesn’t change the fact that they have benefitted tremendously from lax tax policy that makes them among the most profitable companies in the United States. A new law this year takes bad tax policy and makes it worse. The tax break this year to “repatriate” profits declared to result from “overseas sales” back to America, ostensibly to spur job creation, will create huge profits while the drug industry continues to shed American jobs. It’s bad policy, it’s morally wrong and it’s unpatriotic.

Who is benefitting?

While a number of companies stand to benefit, drug companies are particularly situated to do well. Five of the larger drug companies, Pfizer, Johnson & Johnson, Merck, Bristol-Myers Squibb, Wyeth and Eli Lilly pay less than 15% in federal taxes on their worldwide profits - sometimes a lot less. They do this by claiming to make almost no profit in the United States, where they charge more for drugs than any other place in the world and make larger sales. They also claim most of their profit is made overseas, where they have fewer sales and charge less for drugs. It doesn’t make sense - but it does make billions of dollars.

Drug companies have been cutting their U.S. workforces - adding insult to injury as they take American taxpayers for all they’re worth by avoiding paying their fair share. According to outplacement firm Challenger, Gray & Christmas, Merck’s recent job cuts increase job losses in the drug industry this year by 150% to at least 24,396 jobs.

Here are a few examples of profits and losses for drug companies:

Eli Lilly

-> Profit: Eli Lilly “reported that it had about $200 million in profits from United States sales in 2004, compared with $2.8 billion in profits from sales everywhere else.”

-> Loss: Last year, fourth quarter Eli Lilly announced 1,000 job cuts - analysts believe more will come.

Merck

-> Profit: Despite not finding many new drugs to replace those who are timing out of their patents, and its problems with Vioxx, Merck still has over a “70% gross profit [margin]” according to one analyst.

-> Loss: Merck announced job cuts today that will likely amount to 3,500 U.S. employees. [The count is updated from this story.] It is Merck’s third major job cut since October 2003.

Pfizer

-> Profit: “Pfizer, the world’s largest drug company, said that in 2004 it had only $4.4 billion in pretax profits in the United States, compared with $9.6 billion internationally, though most of its sales came in the United States. The company says that its profit margins on international sales were almost three times as high as on American sales.”

-> Loss: One day we have big profits and the next day we have job losses. Analysts expect more job cuts to come.

In the end the Bush Administration “repatriation” tax break could cost American taxpayers over $20 billion this year for the five drug companies mentioned above - companies that are cutting American jobs. Drug companies, like all companies, have to consider business conditions when they hire people and, when it’s necessary, lay them off. But American taxpayers shouldn’t pay companies extra money to cut American jobs. It’s time to make America work again - and that means taxpayer money for job creation should benefit hard working Americans, not line the pockets of companies dodging our taxes and cutting our jobs. America works when companies pay their fair share of taxes. America works when Americans work.