Pharmaceutical company Mylan—you may recognize them as the maker of the EpiPen—is now correcting the data it gave to Congress, saying that it had originally understated the profit it derives from the emergency intervention. And this “understatement” could be by as much as 60 percent.
In essence, the EpiPen maker said that, before taxes, the product’s profit is $160 for a two pack; and the company sold roughly 4 million of these two-packs, annually.
This is important, of course, because Mylan had initially reduced its effective tax rate through an inversion when it relocated its headquarters in the Netherlands. Overall, the company’s tax rate is now far below the standard US tax rate, reported to be 7 percent, in 2015, according to Mylan’s filing with the SEC. However, the company’s taxes have somehow been pushed down even further in the United States.
In fact, Mylan’s US tax rate has fallen to a very low rate—close to zero—as reported by independent tax expert Robert Willens.
In light of this, University of Southern California Gould School of Law professor of law and business, Edward Kleinbard, notes, “It is intellectually dishonest to include tax provisions for U.S. taxes that aren’t due, and that the company does not in fact anticipate ever having to pay.”
Mylan, of course, defended the way it reports its profits; at the hearing.
Mylan spokeswoman Nina Devlin explains: “Tax is typically included in a standard profitability analysis, and the information provided to Congress has made clear that tax was part of the EpiPen Auto-Injector profitability analysis. It also is important to note that use of a statutory tax rate for the jurisdiction being analyzed (in this instance, the U.S.) is standard.”
Furthermore, she comments on the importance of using the statutory tax rate for the specific jurisdiction under analysis, as the standard. In this case, that jurisdiction under analysis is the United States. Devlin continues, “Just as we did not use a blended global tax rate, we also did not allocate corporate expenses associated with running the business, which would have further reduced its profitability. We believe it is most appropriate, and conservative, to focus entirely on EpiPen Auto-Injector specific costs and associated taxes.”