Mylan, the giant pharmaceutical company, has gotten tons of grief lately for jacking up the price of its lifesaving EpiPen. Millions of American families, including mine, carry Epis to protect against anaphylactic shock, which can seemingly come out of nowhere and kill someone remarkably quickly.
No, this isn’t going to be yet another rant against Mylan for gouging people, governments, insurance companies and employers by raising EpiPen prices in order to enhance its bottom line and provide bigger paydays for its executives.
Instead, I’d like to show you how EpiPen pricing highlights the un-American behavior of Mylan and its fellow corporate deserters, which people more polite than I call “corporate inverters.”
Mylan Inc., based in suburban Pittsburgh, became Netherlands-based Mylan N.V. last year in order to reduce its U.S. income taxes. But when you take a close look at Mylan’s business, you see that the company depends heavily on U.S. government services both to make Epis mega-profitable and to funnel profits out of our country to reduce its income tax bill here.
Here’s the deal:
Less than one percent of Mylan’s stated $600-plus price for Epis is for epinephrine, a generic drug. The other 99 percent-plus is for EpiPens’ injectors, a wonderful delivery system that’s protected by a slew of patents. U.S. patents, that is, made possible under U.S. patent law and enforceable in U.S. courts.
Those patents, which make it very difficult for competitors to come up with rival epinephrine injection systems, are what let Mylan continually raise Epi prices.
Mylan N.V., which declined to comment for this column, is benefiting just as much from the patent system now as it did when it was Mylan Inc. It’s just paying less in taxes — how much less, it’s impossible to say — to support America’s legal system and other infrastructure than it paid before going Dutch in February 2015.
In addition to benefiting from the U.S. patent system, Mylan N.V. is a beneficiary of U.S. tax treaties negotiated with The Netherlands and numerous other countries in order to avoid double taxation.
If there were no tax treaty with The Netherlands — a treaty negotiated and maintained by the government that Mylan doesn’t want to pay for — Mylan would have to send the IRS 30 percent of the interest payments and royalty payments it sends to its Dutch parent company and Dutch affiliates. That would wipe out the tax benefit Mylan derives from having gone Dutch.
Interest and royalty payments, which are tax-deductible, are the primary means by which Mylan and other corporate deserters reduce their taxable U.S. income.
To be fair — three of the most dangerous words in journalism — Mylan is far from alone in deserting our country for tax purposes while continuing to benefit from our patent system, tax treaties, rule of law, great places for employees to live and all the other good stuff that makes America America.
If Botox rather than EpiPens was in the news, I could write this column about Allergan PLC, a corporate deserter that was originally Watson Pharmaceuticals.
Also, to be fair, foreign companies operating in the United States derive the same benefits from the patent laws that faux-foreign firms like Mylan N.V. and Allergan PLC do.
But to me, it’s one thing for a foreign firm that’s never been based in the U.S. to operate here and benefit from being in our country, and a whole other thing for a U.S. company to engage in some legal mumbo-jumbo and declare itself to be foreign.
Mylan’s EpiPen pricing policy is worth getting angry about. But so are the tax games that Mylan and its fellow deserters are playing. Tax games aren’t as obvious and demagogueable as raising EpiPen prices. But those games do plenty of damage to our country. That’s something we should all remember.