Tax breaks will offset $ 26 billion in opioid payments, drug firms say

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RACHEL MARTIN, HOST:

Johnson & Johnson has received high praise for its FDA-approved single-dose COVID-19 vaccine last weekend. But to end the pandemic, Johnson & Johnson is also among the four largest American healthcare companies negotiating a deal on their role in the country’s deadly opioid crisis. Tens of billions of dollars are at stake, but companies also plan to take advantage of corporate tax breaks, including a new one created during the pandemic, to offset those opioid payouts. Some members of Congress are angry about this.

NPR addiction correspondent Brian Mann is now joining us. Brian, so we mentioned Johnson & Johnson, but there are other companies in the same situation, right?

BRIAN MANN, BYLINE: Yeah, that’s right Rachel. Johnson & Johnson is obviously the brand company here. Those other three, Cardinal Health, AmerisourceBergen, and McKesson, worked more behind the scenes. It is these really big companies that have made tremendous profits distributing highly addictive opioid drugs and now they are facing this wave of litigation related to this business. We know from financial reports that the companies are on the verge of reaching an agreement that would resolve all of this. This is where Michael Kaufmann, CEO of Cardinal Health, speaks to investors last month.

(SOUNDBITE OF ARCHIVED RECORDING)

MICHAEL KAUFMANN: I’ll just treat the opioids quickly. You know, as I have said in the past, that negotiations are still complex, with many moving parts. But we continue to make progress there.

MAN: Under the tentative terms of this agreement, Cardinal Health and these other three companies are not expected to admit any wrongdoing. But up to $ 26 billion would be paid out to help communities affected by the opioid crisis.

MARTIN: But now these companies have announced plans to write off some of those opioid payments on their taxes. How is that supposed to work?

MAN: Yes, that’s really controversial. In financial reports, companies say they plan to declare these opioid payments as losses, which is a deduction, right? It’s similar to one that anyone could use to pay less federal taxes. So if they pay $ 26 billion in opioid settlements, they could get up to $ 4 billion in tax breaks back. And that annoys some lawmakers, including Congressman Jimmy Gomez. He’s a California Democrat. He says these churches need this money.

JIMMY GOMEZ: If you can get away with it, it means that less money goes into the treasury. That means less money spent on programs that help manage the aftermath of the opioid crisis.

MANN: The companies are now saying that they only obey the federal tax law, and that seems to be the case.

MARTIN: One of the companies, Cardinal Health, is planning to introduce a new tax break that was introduced last year after the CARES act. This was a law signed by former President Trump to help companies struggling with the pandemic. Is Cardinal Health a Troubled Company?

MAN: No. And that’s why this is so controversial. These health and pharmaceutical companies have done very well financially over the past year. However, Cardinal Health has confirmed that it plans to continue to take advantage of this pandemic tax benefit to recoup $ 420 million in taxes already paid. The company sent a statement to NPR saying its tax plan was “federal law”. However, Congressman Gomez described this application of the CARES law as outrageous and wrong. Its 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 these questions by next week.

MARTIN: NPR addiction correspondent Brian Mann, thank you.

MAN: Thank you. Transcript provided by NPR, Copyright NPR.