Confidential agreements and medicines out of reach for millions. This investigation goes inside Europe’s secret drug pricing system, revealing a world of opaque deals and unequal access.
When doctors removed Miriam Staunton’s tumour from her armpit six years ago, they told the 51-year-old Irish woman that she had a 70 per cent chance of relapse. Yet, in the months following the operation, she was only offered local radiation and regular check-ups, but no drug treatment.
“I remember when I met the oncologist and he said that he wasn’t in a position to offer me anything systemic at that point,” Staunton recalls. “I didn’t really understand exactly what he meant by it at that time.”
What Staunton did not realise is that she would have to wait for her melanoma to return one year later before she could be entitled to effective but expensive medicines. After the cancer had progressed to stage four in February 2019, she started a course of Opdivo combined with Yervoy, breakthrough drugs known as immunotherapy, which were then restricted to the most severe forms of cancer in Ireland due to their high costs.
In other parts of Europe, Staunton could have taken Opdivo alone shortly after her surgery. In July 2018, the European Medicines Agency (EMA) opened the therapy to stage three melanoma patients. France immediately reimbursed it, but Ireland did not. “It’s one thing when there is no cure, but when the treatment exists and people can’t access it, that’s fundamentally wrong,” says Staunton, who is now cancer-free.
Miriam Staunton was unable at first to access the cancer drug she needed because it was not available in Ireland. Maxence Peigné
Meanwhile, the pharmaceutical industry – like many other sectors – hoards eye-watering gains in tax havens. Investigate Europe can reveal that the 15 largest European and US drugmakers, including BMS, publicly disclose over 1,300 subsidiaries in tax havens and low-tax territories.
These jurisdictions offer corporations low taxes or ways to shift profits (sometimes both). In Europe, researchers and activists generally agree that they include Ireland, the Netherlands, Switzerland and Luxembourg. They are among the top five profit-shifting destinations globally, according to this year’s EU Tax Observatory report, an EU-funded think-tank.
The little-known structures in tax-friendly destinations have contributed to the 15 pharmaceutical firms amassing profits of €580 billion in the last five years.
This amount outweighs their research and development (R&D) costs, despite the industry’s frequent claim that high drug prices allow them to innovate and design new drugs. The returns are in keeping with the outsized profits that are synonymous with the wider sector. Some of the groups’ Irish affiliates have racked up hundreds of billions of dollars and still rely on a version of the ‘Double Irish’ tax avoidance scheme, the analysis finds.
“Corporate tax avoidance is not victimless, fewer taxes mean less investment in healthcare in Ireland and also negative impacts for countries in the Global South,” says Aideen Elliott of Oxfam Ireland. “Nothing these companies are doing is illegal. They are taking advantage of corporate tax rules.”
The $580 billion made by the 15 firms in the past five years outweighs what they collectively spent on research and development.Shutterstock
In Ireland, BMS entered negotiations with health authorities with a starting price of €1,311 for a 100 mg dose of Opdivo. This is a stark contrast with academics’ estimates that similar antibodies can be manufactured for between $9.50 (€8.85) and $20 (€18.60) per 100 mg.
In November 2019, the Irish healthcare system stressed the “substantial budget impact” of providing the drug for stage three cancer and noted that talks with the company were ongoing. Opdivo was finally reimbursed in February 2021, two and a half years after France. The final discount remains a trade secret.
“Corporate tax avoidance is not victimless, fewer taxes mean less investment in healthcare in Ireland and also negative impacts for countries in the Global South.”
— Aideen Elliott, Oxfam Ireland
Ironically, BMS makes Opdivo in Dublin, at a facility close to Staunton’s home. While the treatment wasn’t accessible to some Irish patients due to its cost, the supplier was raking in sky-high profits thanks to Ireland’s attractive tax rules.
BMS’s sprawling state-of-the-art campus in the Irish capital belongs to a subsidiary that boasted a $17.2 billion turnover in 2022, more than a third of the manufacturer’s global revenues that year. Yet despite being registered in Ireland, Swords Laboratories is a Swiss entity for tax purposes.
Its direct parent, Bristol-Myers Squibb Holdings Ireland, enjoys a similar double residency and owns patents for several BMS therapies. In 2022, the holding valued the assets at more than $1 billion and pocketed $4.5 billion in royalties linked to drugs produced by Swords Laboratories, such as Eliquis, a bestselling blood thinner. In addition, the holding received almost $9 billion in dividends from the Dublin plant in just two years.
BMS has operations across the world. The firm turns over billions in revenue each year.Shutterstock
The arrangement resembles an infamous tax avoidance loophole that Ireland vowed to close. Dubbed “the Double Irish”, it has been a common tool for tech and pharma groups to slash their effective tax bill below Ireland’s current 12.5 per cent corporate tax rate. The technique involved setting up two Irish companies: one for operational purposes and the other to hold intellectual property (IP). The first would pay royalties to the second, which would be a tax resident offshore, like in Bermuda.
“Ireland made changes to its corporate tax residence rules in Finance Act 2014 that are specifically designed to prevent such structures as the so-called ‘Double Irish’,” a Department of Finance spokesperson said. “These rules ensure that it is not possible for companies to exploit mismatches in tax residency rules.”
However, Dr James Stewart, adjunct professor in finance at Trinity College Dublin, says the structures can continue to exist because Ireland has a double taxation treaty with Switzerland. “These firms have very large assets and flows of funds, generally have no employees and are very profitable. They are likely to be a source of profit extraction,” he adds.
““Ireland made changes to its corporate tax residence rules in Finance Act 2014 that are specificIreland made changes to its corporate tax residence rules in Finance Act 2014 that are specifically designed to prevent such structures as the so-called ‘Double Irish’.”
— Irish Department of Finance spokesperson
BMS Holdings Ireland’s main direct shareholder is also an Irish outfit with Swiss tax residency. The two holdings and Swords Laboratories don’t only funnel gains outside of Ireland, they also park them in their coffers. By the end of 2022, the trio had accumulated over $30 billion of equity.
Harbouring IP in tax havens is a common practice at BMS. Its patents on Opdivo and Yervoy sit in Delaware, an American state that levies no tax on royalties. The two drugs amounted to a quarter of the group’s $45 billion revenue in 2023. That year, BMS listed 135 subsidiaries in tax havens: 81 in Delaware, 15 in Switzerland, 13 in Ireland and 12 in the Netherlands.
The structures helped the company reach an effective corporate tax rate of 4.7 per cent, far below the US statutory rate of 21 per cent. Part of it was due to a favourable tax ruling, but the largest reduction resulted from different fiscal treatments in Ireland, Switzerland and Puerto Rico, according to BMS’s annual report.
The company did not reply to requests for comments.
15 of the world’s biggest drugmakers operate more than 1,300 subsidiaries in tax-friendly jurisdictions, such as the US state of Delaware.Shutterstock
BMS is hardly a unique case. Investigate Europe analysed the last five years of accounts filed by the 15 largest American and European pharmaceutical groups. Together, they declared 1,300 subsidiaries in tax havens, as of 2023. The true number is likely higher, as reporting rules only force multinationals to list those undertakings they consider “significant”.
Delaware took the top spot with 700 entities. The Netherlands came second with almost 170. Switzerland and Ireland were next, with nearly 120 each. Like BMS, US giant Merck established a network of Irish subsidiaries with Swiss tax residency which held at least $44 billion of equity as of 2022.
Not all drugmakers rely on a Double Irish scheme. According to Investigate Europe estimates, many of their affiliates had amassed considerable equity in Ireland by 2022’s close: $308 billion for Abbvie, over $102 billion for Johnson & Johnson, $20 billion for AstraZeneca and $17 billion for Gilead.
In the Netherlands, Pfizer booked three-quarters of its $100 billion global revenues with a Dutch holding at the helm of a myriad of subsidiaries. CPPI CV, a limited partnership, is “fiscally transparent”, meaning its shareholders can draw profits untaxed. In the two years to the end of 2023, CPPI sent $35 billion to its parent companies in Delaware. Follow the Money, an investigative outlet, published several articles on Pfizer’s Dutch affairs and described how the partnership became the most profitable company in the Netherlands. Pfizer did not respond to requests for comment.
“American companies have historically hoarded cash in low-tax jurisdictions to avoid taxes they would normally pay if they repatriated profits to the US,” explains Reuven Avi-Yonah, a law professor at the University of Michigan. “In 2018, a US reform sought to change this with a 10.5 per cent tax on foreign income, but it actually encouraged big pharma to keep even more profits offshore, as they would be subject to this attractive rate rather than the US statutory rate of 21 per cent.”
Pharmaceutical executives often cite expensive R&D costs as a major reason why medicine prices are high.Shutterstock
Patents are filed by corporations or inventors on new products to prevent competition. In exchange for sharing their discovery with the public, patent holders are granted exclusive rights to manufacture and market the drug for a certain period, usually 20 years.
Generics are typically up to 85 per cent cheaper once rolled out, but as long as their monopolies last, drugmakers can impose high prices on governments and insurers. Pharmaceutical executives often cite expensive R&D costs to justify this.
However, data compiled by Investigate Europe shows that the industry, when analysed collectively, reaps more profits from the sales of existing drugs, than it invests in developing new ones.
Over the five years analysed, the 15 multinationals made €580 billion after tax, while dedicating €572 billion to R&D. The gains were mostly allotted to shareholders in dividends and stock buybacks for a total €558 billion.
As a result, the following groups shelled out more on rewarding investors than on R&D: Abbvie, Johnson & Johnson, Novartis, BMS, Pfizer, Novo Nordisk and Amgen. Other firms, including AstraZeneca, Merck and Bayer, did invest more in R&D than they made profits or paid shareholders.
Big pharma’s fortune amassed in European tax havens contrasts with access inequality and struggling healthcare budgets locally. As much as Ireland lures drugmakers with its fiscal perks, Irish patients can often wait longer than their western European peers to get innovative drugs.
“Pharma companies make it clear that bigger markets are more important to them and that they wouldn’t want to give us a discount as a small member,” says a former Irish health official speaking on condition of anonymity. “A lot of the companies take their own sweet time in even applying for market authorisation in Ireland. Some have sometimes literally told me that Ireland is so insignificant that their bosses don’t really care whether their drugs are here or not.”
In its 2024 budget, the Irish government announced that there would be no fresh funds for new drugs before it made a U-turn and set aside €20 million for innovative medicines.
In the tax-friendly Netherlands too, the picture is contrasted. State auditors have suggested the government should negotiate bigger discounts to safeguard its budget, highlighting that not all therapies approved are cost-effective.
Dutch courts are poised to become a battleground between one drugmaker and its detractors. In 2023, the Pharmaceutical Accountability Foundation (PAF), a public interest group, filed a lawsuit against US firm Abbvie for abuse of dominant position. PAF alleges that the company made excessive profits of €1.2 billion over 14 years on its Dutch sales of Humira, the world’s best-selling drug treating an array of ills.
Humira is the world’s best-selling drug.Shutterstock
“We reject the unfounded allegations of the Pharmaceutical Accountability Foundation, which, as indicated to the court, calls into question the pricing system for all medicines, potentially hindering future innovation,” an AbbVie spokesperson said.
Before critics emerged in the Netherlands, the company was already under acute scrutiny in its home country. In 2022, a US Senate committee found that Abbvie dodged billions of dollars of tax by keeping its intellectual property in Bermuda and manufacturing its products in Ireland and Puerto Rico.
The same year, I-Mak, an advocacy organisation, revealed that the group filed 94 per cent of its 166 American patents on Humira after the medicine was already on the market. The ruse kept competitors at bay and delayed cheaper generics.
“I don’t think I hold [pharmaceutical companies] responsible. Do you hold the lion responsible for eating the zebra? No.”
— Paul Fehlner
Fehlner, now the CEO of a biotech that repurposes existing medicines, is more nuanced: “There is a definite interest in companies in maintaining the profitability of drugs as long as possible. They’re incentivised to do that.”
For the former Novartis director, it is up to governments to impose conditions that curtail prices and support competition when signing contracts with pharma groups. “Should the companies themselves do certain things? I don’t know, they’re organised to maximise their profit,” he says. “So I don’t think I hold them responsible. Do you hold the lion responsible for eating the zebra? No.”
Full company responses can be read here.
Contributor: Catrien Spijkerman
Editor: Chris Matthews