U.S. Drug Giant Pfizer To Buy Ireland-Based Allergan
STEVE INSKEEP, HOST:
This is one of the biggest health care mergers in history. Pfizer, the giant American drug maker, says today it has clinched its deal to buy Ireland's Allergan, a deal that is said to be worth $160 billion. This deal is controversial because Pfizer also says it plans to move its headquarters to Dublin, Ireland and avoid paying U.S. tax rates. NPR's John Ydstie has been covering this deal. John, good morning.
JOHN YDSTIE, BYLINE: Hi, Steve.
INSKEEP: OK, so I gave a number there. But how big is big in this case?
YDSTIE: Well, Pfizer is one of the biggest drug companies in the U.S. and one of the oldest as well. It made painkillers during the Civil War and made penicillin during the Second World War. Right now, it makes blockbuster drugs, like Viagra and Lipitor. And in purchasing Allergan, it will also add Botox to its stable of drugs. Allergan itself is the product of a number of mergers. And though it’s based in Ireland, most of its operations are in New Jersey. The deal is one of a wave of mergers in the health care industry this year. The merger mania is partly driven by companies rearranging to be more competitive in the Obamacare era. Another reason is that interest rates are so low. And companies can borrow very cheaply to do these deals.
INSKEEP: Well, what does this mean for Pfizer's tax rates?
YDSTIE: Well, it means Pfizer's tax rates would go down. If you look at 2014, Pfizer paid a rate of about 25 percent in U.S. taxes. And Allergan paid a rate of about 5 percent in Ireland. So you can see the company's motivation. Now, Pfizer tries to play this down, but the company's CEO, Ian Read, has said the high U.S. tax rate is making his company uncompetitive globally. He's also said the company's being forced to compete with one arm tied behind its back.
INSKEEP: Could the United States shoot down this merger for that reason?
YDSTIE: Well, you know, at this point, analysts say it's not likely. The administration has tried to write rules to curb the practice. And it announced a second set of rules late last week. These kinds of mergers, called inversions, are costing the U.S. Treasury billions of dollars a year in lost tax revenue. And President Obama has said they are unpatriotic. There's also a lot of criticism from lawmakers on Capitol Hill. But the Treasury Department is very limited in what it can do. The administration has been calling on Congress to do something. But given the dysfunction in Washington, I think that seems unlikely to happen any time soon.
INSKEEP: NPR's John Ydstie, thanks very much.
YDSTIE: You're welcome, Steve.
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