An Uphill PR Battle for Pfizer and Allergan
December 10, 2015
December 10, 2015
‘Tis the season of giving, and pharmaceutical companies Pfizer and Allergan certainly gave people in the health care space a lot to talk about in recent weeks. The $150 billion blockbuster deal between the two companies caps off a banner year for mergers and acquisitions, yet the details of the agreement raised much criticism and debate over the nature of the merger.
Although Pfizer is a much larger company with a market value of $199 billion compared to Allergan’s $123 billion, Allergan will absorb the drug giant so that the makers of Viagra can move their headquarters to Ireland. Known as a tax inversion, this type of deal aims to relieve Pfizer of its responsibility to pay its 35 percent tax rate as an American company by moving abroad where the rate is 12.5 percent.
Unsurprisingly, the announcement drew negative comments from politicians, journalists and members of the pharmaceutical industry. In a scathing piece, the New York Times Editorial Board writes that the deal “does not appear to be illegal. But it should be. This merger is a tax-dodging maneuver that enriches shareholders and executives while shortchanging the public and robbing the Treasury of money that would pay for a host of government programs.”
Proponents of the deal claim that Pfizer CEO Ian Read was merely doing his job to run an effective business amidst a government with tax codes that make it nearly impossible to compete with foreign competitors. Repeatedly, Read and elected officials from both parties have appealed for a revision of tax laws to address this issue. In phone calls to Washington last week, Read informed lawmakers that cutting “Pfizer’s tax bill [would] give it more cash that it could invest in the United States and ultimately add jobs.”
Despite the challenges that executives face in a competitive global market, the Pfizer-Allergan deal fits into the overarching narrative facing the pharmaceutical industry: That it attempts to increase profits and play to corporate interests, which burdens patients and the economy. As one veteran lobbyist for a major drug maker said to The New York Times, “We’re on the wane. There’s just too much obvious greed.” Although Pfizer may have found a solution to its tax problem, the company faces an uphill battle in improving its public perception as part of an industry in which it very difficult to do so.