UK a tax haven for Big Pharma

Sophie Williams,  a medical student at Imperial College London, discusses how low tax rates in the UK make buying out AstraZeneca an attractive deal for US pharmaceutical giant Pfizer


US-based pharmaceutical giant Pfizer has begun a bid to buy-out the UK-registered AstraZeneca. Both companies are the in top-ten most profitable pharmaceutical industries, generating a combined $78 billion in revenue last year (that’s the same as the GDP of Bulgaria). The buy-out will, in their words “[enhance] the company’s ability to meet patients’ needs”, but evidence suggest to the contrary.

One driving-factor for this take-over is tax evasion. The merger would allow Pfizer to evade the 40% rate of US Corporate tax by declaring the company’s profits within the UK.

Recent changes in UK intellectual property tax rates have made this a much more attractive move. Once registered in the UK, the mega-company would not pay the UK-rate corporate tax on all its profits – currently listed at 21%. Instead, the “patent box” tax deal announced in the 2012 budget lowers this to just 10% for profits associated with intellectual property, controlled by legal documents called patents. Pharmaceutical companies generate a huge amount of their profit from patents, and it’s no surprise that Pfizer described this as an “attractive incentive”, but the deal has also been met with scrutiny. The Institute of Fiscal Studies, an independent-think tank, described the patent-box as “an expensive and poorly targeted policy” and projects the deal to result in a substantial loss in government revenue.

This comes after Pfizer shut a major research centre in Sandwich in 2011, with a loss of 2,400 jobs. There is no requirement for companies benefiting from the patent-box deal to move their research and development, and the associated jobs in this sector, back to the UK. This merger highlights how large companies look for alternatives to investment to restore their rate of profit, taking over competitors rather than investing in their own workforce.

The merger comes at a time when scrutiny has been placed on the industry for making drugs that make money, over drugs that people need (like antibiotics) or work (like Tamiflu). Ben Goldacre highlights in his 2012 book Bad Pharma how the industry is failing to deliver new drugs, favouring instead to produce and advertise “me-too” drugs which allow companies to maintain patents, and higher profit rates on drugs which have effective and cheaper counterparts. He also describes the misuse and cover-ups of medical-trail data that have enabled this to go.

Contrary to the statement of Pfizer and AstraZeneca, patients need healthcare which is free and accessible at the point of need, and a welfare system which doesn’t haemorrhage funds into the coffers of corporations.


  1. I feel that it’s worth pointing out that the ‘patent box’ tax incentive isn’t as bad as it appears tone described here. Yes there is a cost to the government, but by ‘taking advantage’ of the scheme companies will be moving their R&D capabilities to the UK, and in turn creating jobs and wealth in the UK economy.
    It’s also worth remembering that no matter how you frame the negatives of a tax inversion, the UK will in this instance be a beneficiary of additional tax receipts.


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