Bosses Of Big Pharma Companies Unable To Deny Australia Being Ripped Off On Drug Costs

Here on Techdirt, we often write about the bad behavior of Big Pharma, particularly in terms of how it is one of the main driving forces behind far-reaching international agreements like TPP. As a recent leak underlines, drug manufacturers hope to use TPP to extend the monopolies that allow them to charge high prices for their products. Confirmation that drug pricing has little to do with actual costs in at least one part of the world comes from a surprising source — the heads of Big Pharma companies, as this report in the Canberra Times reveals:

Multinational pharmaceutical companies are unable to assure Australians they are not being “ripped off” on the price of medicines as a result of their complex global supply chains.

The Australian heads of nine of the biggest global drug suppliers were forced into the embarrassing admission on Tuesday after backing themselves into a corner by insisting they have no idea what their own sister companies in other countries pay to import the same medicines.

This interesting confession was made during an Australian Senate inquiry into corporate tax avoidance. Apparently, Pfizer paid just AU$21 million (about US$16 million) in company tax in 2014, even though its Australian sales were AU$1.4 billion (about US$1 billion). The company claimed that was because its “cost of sales” in Australia were more than three-and-a-half times higher than those in the US. However, when pressed on those figures:

Pfizer managing director David Gallagher said he didn’t know what any other Pfizer subsidiary paid for drugs manufactured by the company in Ireland and declined repeated requests to explain the “arm’s length” process that determined intra-company transactions, known as “transfer pricing”.

Understandably surprised by this, the Senate Committee chairman asked the heads of Pfizer, AstraZeneca and GlaxoSmithKline to confirm what they seemed to be saying:

“As the CEOs of three of Australia’s biggest pharmaceutical companies, you have no idea what drugs cost in other jurisdictions? You can’t tell us whether we’re getting ripped off?”

As the Canberra Times reported:

All three agreed they could not.

It seems unlikely that TPP will do much to improve the situation.

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