Tax Breaks Will Offset $26 Billion Opioid Settlement, Drug Firms Say : NPR

RACHEL MARTIN, HOST:

Johnson & Johnson has gotten a lot of praise for its single-dose COVID-19 vaccine approved by the FDA last weekend. But as it works to end the pandemic, Johnson & Johnson is also among four of America’s biggest health care companies that are negotiating a settlement for their role in the nation’s deadly opioid crisis. Tens of billions of dollars are at stake, but the companies are also planning to use corporate tax breaks, including a new one created during the pandemic, to offset those opioid payouts. Some members of Congress are furious about this.

NPR addiction correspondent Brian Mann joins us now. Brian, so we mentioned Johnson & Johnson, but there are other companies in this situation, right?

BRIAN MANN, BYLINE: Yeah, that’s right, Rachel. So Johnson & Johnson’s obviously the name brand company here. These other three, Cardinal Health, AmerisourceBergen and McKesson worked more behind the scenes. They’re these really big corporations that earned huge profits distributing highly addictive opioid medications, and now they face this wave of lawsuits tied to that business. We know from financial filings that the companies are close to a settlement that would resolve all that. Here’s Cardinal Health CEO Michael Kaufmann speaking to investors last month.

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MICHAEL KAUFMANN: I’ll just cover the opioids quickly. You know, as I’ve said in the past, it continues to be, as you know, complex negotiations, a lot of moving parts. But we’re continuing to make progress there.

MANN: Under the tentative terms of this deal, Cardinal Health and these other three companies aren’t expected to admit any wrongdoing. But as much as $26 billion would be paid out to help communities slammed by the opioid crisis.

MARTIN: But now these companies have revealed plans to write off a portion of those opioid payments on their taxes. How’s that supposed to work?

MANN: Yeah, this is really controversial. In financial filings, the firms say they plan to declare these opioid payments as losses, which is a deduction, right? It’s similar to one anybody might use to pay less in federal taxes. So if they pay $26 billion in opioid settlements, they could recoup as much as 4 billion in tax benefits. And that really angers some lawmakers, including Congressman Jimmy Gomez. He’s a Democrat from California. He says these communities need that money.

JIMMY GOMEZ: If they get away with it, that means less money going into the Treasury. That means less money for programs that will help deal with the fallout of the opioid crisis.

MANN: The companies, meanwhile, say, you know, they’re just following federal tax law, and that appears to be the case.

MARTIN: One of the companies, Cardinal Health, says it plans to use a new tax break created last year under the CARES Act. This was a law signed by former President Trump meant to help companies that were struggling because of the pandemic. Is Cardinal Health a struggling company?

MANN: No. And this, again, is why this is so controversial. These health care and drug companies have done really well financially over the last year. But Cardinal Health has confirmed it still plans to use that pandemic tax benefit to recoup as much as $420 million in taxes already paid out. The company sent a statement to NPR, saying their tax plan is, quote, “permissible under federal law.” But Congressman Gomez described this use of the CARES Act as outrageous and wrong. His committee, the House Oversight and Reform Committee, sent letters to all of these companies asking for more information about their tax strategies. We expect to hear some answers to those questions by next week.

MARTIN: NPR addiction correspondent Brian Mann, thank you.

MANN: Thank you.

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