AbbVie recently announced intentions to acquire Shire Pharmaceuticals, and shifting their HQ to Ireland. Obama had some strong words about the practice, known as “Tax Inversion.”
When a company acquires another that has business in Ireland, it is possible for that company to shift their HQ from the United States to their newly acquired assets across the Atlantic. This comes with the benefit of a 12.5% corporate tax on international earnings, rather than 35% in the US. There have been indications that AbbVie is looking to reincorporate overseas to take advantage, and Obama and Congress have begun to take notice.
While Obama didn’t explicitly mention the Shire-Abbvie deal, the timing seems to be impeccable – only a few days after announcement of a potential deal, he has begun to rail against this “cheating the system”, calling out Ireland in particular.
Obama had this to say: “If you simply acquire a company in Ireland or some other country to take advantage of the low tax rate, you start saying we are now magically an Irish company despite the fact that you may only have a hundred employees there and you’ve got 10,000 in the United States; you are just gaming the system. You are an American company, you continue to benefit in all kinds of ways from being an American company.”
The deal is likely to be a hot topic of discussion moving forward, if not only for its Tax Inversion implications. Shire has long been a major pharmaceutical in the Orphan Drug space – and with Orphan drugs increasingly an avenue for revenue, AbbVie is excited to have that portfolio joining their team. Shareholers and Regulators still have to approve the deal.
Mergers and Acquisitions, specifically considering the Shire-Abbvie deal, will likely be discussed at this year’s upcoming World Orphan Drug Congress USA, an annual meeting of industry, regulators, patients and payers to discuss the future of rare disease treatments.[Image: Obama – Flickr]