Time to End Roundtripping by Big Pharma

Summary

Sometimes a news story makes your case for you. That happened this past week, when the Wall Street Journal published a remarkable story on surging U.S. imports of peptides and protein-based hormones from Ireland. Chelsey Dulaney and Jared Hopkins wrote: “Planes have been jetting from Ireland to the U.S. this year carrying something more valuable than gold: $36 billion worth of hormones for popular obesity and diabetes drugs … The peptide- and protein-based hormones feed into a category of drugs that include wildly popular GLP-1 treatments and newer types of insulin known as analogues. Taken together the shipments weighed just 23,400 pounds, according to U.S. trade data, equivalent to the weight of less than four Tesla Cybertrucks … The shipments have propelled Ireland, a country of only 5.4 million people, to the second-largest goods-trade imbalance with the U.S., trailing only China.” That’s right—the trade deficit with Ireland is now second only to China. Economists and trade policy specialists really do need to spend a bit more time studying how tax avoidance drives a large part of modern global trade. Follow the Money Brad Setser tracks cross-border flows, with a bit of macroeconomics thrown in. The main reason why the U.S. trade deficit soared in the first quarter was that America’s leading pharmaceutical firms raced to build up stockpiles of their most profitable drugs ahead of expected tariffs. Eli Lilly could, of course, make the ingredients for its weight loss drugs (injections, and forthcoming pill) in the United States. Its Danish rival, Novo Nordisk, actually does a fair amount of its manufacturing in the United States. But if Lilly produced its drugs in the U.S., it would have trouble shifting the profit on its drugs abroad—and it would, more or less, pay the headline 21 percent tax rate on its U.S. profits. Fair enough; Novo Nordisk pays the Danish tax rate of 22 percent on its profits. And the 2017 Trump-Ryan corporate tax reform created an easy way f...