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Pharmaceutical Companies Pfizer, Allergan To Merge In $160 Billion Deal


One of the largest mergers of the year may turn out to be the most controversial. It's being criticized as a huge corporate tax dodge. New York-based Pfizer announced today that it is buying Allergan, which is based in Dublin, Ireland. The deal is valued at a $160 billion. NPR's John Ydstie reports.

JOHN YDSTIE, BYLINE: There's no doubt this merger will reduce Pfizer's U.S. tax bill significantly, says international tax expert Tim Larson.

TIM LARSON: Suffice it to say, it would at least be cut in half.

YDSTIE: Larson, who is a partner at Marcum LLP, an international accounting and advisory firm, says that could easily mean annual tax savings for Pfizer of more than $100 million. That's because under the deal, Pfizer would move its corporate citizenship from the U.S. to Ireland and its lower tax rates. Under the deal, the company's operational headquarters would remain in New York City, but its principal executive offices would be in Ireland.

LARSON: Basically pushing a large portion of its non-U.S. revenues outside the existing U.S. tax net.

YDSTIE: And, Larson says, that can be done without any significant change in Pfizer's current operations. Larson says research and production could remain in the U.S., and the company's executives could even continue to live and work in the New York area at the company's current headquarters.

LARSON: You've just pinpointed why Treasury and the IRS really want to put a halt to these altogether because there's tax benefits to be gained without meaningful and substantial business operational change.

YDSTIE: The U.S. Treasury is trying to stop these kinds of mergers which Wall Street calls corporate inversions. The administration says they're costing the U.S. billions of dollars in tax revenue. President Obama has called the inversions, which have become popular in recent years, unpatriotic. Treasury has tried to stop the flood of inversions by issuing new interpretations of tax rules. Larson says they may slow them down, but only legislation from Congress will stop them. Pfizer's CEO, Ian Read, has argued the current U.S. tax system, which officially taxes corporate profits at 35 percent, makes U.S. firms compete globally with the one hand tied behind their backs. Of course, many large U.S. firms pay far less in corporate taxes due to tax breaks and loopholes. In announcing the deal today, Pfizer's CEO deflected the criticisms by touting other benefits of combining Pfizer and Allergan.


IAN READ: Together, we'll be even better positioned to make more medicines and more therapies available to more people around the world.

YDSTIE: The merger will add Allergan's Botox to Pfizer's large, popular drugs like Viagra. And merging with Allergan provides other benefits for Pfizer.


READ: Allergan expands our leadership position by bringing very strong franchises in aesthetics, dermatology, eye care, GI, women's health, urology and anti-infectives.

YDSTIE: And the two firms say the deal will achieve more than $2 billion in annual cost savings. John Ydstie, NPR News, Washington. Transcript provided by NPR, Copyright NPR.

John Ydstie has covered the economy, Wall Street, and the Federal Reserve at NPR for nearly three decades. Over the years, NPR has also employed Ydstie's reporting skills to cover major stories like the aftermath of Sept. 11, Hurricane Katrina, the Jack Abramoff lobbying scandal, and the implementation of the Affordable Care Act. He was a lead reporter in NPR's coverage of the global financial crisis and the Great Recession, as well as the network's coverage of President Trump's economic policies. Ydstie has also been a guest host on the NPR news programs Morning Edition, All Things Considered, and Weekend Edition. Ydstie stepped back from full-time reporting in late 2018, but plans to continue to contribute to NPR through part-time assignments and work on special projects.