House Panel Questions Opioid Companies on Using Tax Break

The House Oversight and Reform Committee is probing whether executives at four drug industry companies plan to use a pandemic-related tax break to deduct opioid settlement payments.

Drug distributor Cardinal Health Inc. has said it plans to use a temporary tax break in the 2020 Cares Act that allows corporations to deduct losses, including those tied to legal settlements, to offset profits in previous years and generate a refund from the Internal Revenue Service.

A letter from the committee said that Cardinal Health disclosed in regulatory filings that they expect to receive a nearly $500 million tax refund because of the Cares Act tax break, which allows them to carry back losses to previous years when tax rates were higher.

The House panel also sent letters to McKesson Corp., AmerisourceBergen Corp. and Johnson & Johnson asking if they plan to employ the same tax strategy. Those three companies along with Cardinal Health, have collectively agreed to pay a combined $26 billion to settle claims from dozens of states and local jurisdictions regarding their roles in the opioid crisis, the letter said.

“It would be wrong for you to deduct opioid settlement payments under a Cares Act provision intended to assist businesses that are struggling during the coronavirus pandemic,” House Oversight Chair Carolyn Maloney and other members of the committee said in the letter. “Any attempt to reduce your settlement costs by taking advantage of a tax provision intended for businesses suffering coronavirus-related losses is an insult to every community suffering from the opioid crisis and the pandemic.”

AmerisourceBergen spokesman Gabe Weissman said in a statement that the company has “no plans to use the Cares Act tax provision with regards to any opioid settlement costs” and that it would share that information with the House Oversight Committee.

Johnson & Johnson spokesman Jake Sargent said that the company’s settlement agreements don’t relate to any tax provisions in the Cares Act and that it plans to respond to the committee’s request. A spokesperson for Cardinal Health declined to comment. McKesson did not respond to a request for comment.

The lawmakers said that using opioid settlements to create tax relief raises questions about whether the companies feel “remorse for exacerbating our nation’s opioid crisis” and whether they are “truly committed to changing its behavior going forward.”

Opioids were involved in 46,802 drug overdose deaths in 2018, or more than two-thirds of all such deaths, according to the U.S. Centers for Disease Control and Prevention. West Virginia, Delaware, Maryland, Pennsylvania, Ohio and New Hampshire had the highest rate of drug overdose deaths that year, according to the CDC.

The loss carryback tax break at issue has been one of the most controversial parts of the Cares Act because it directs large tax savings to corporations and investors.

Some Democrats have sought to repeal the special provision because they said that money should be directed toward small businesses and jobless workers. Republicans have defended the break, arguing that it’s a tool Congress has repeatedly used to help keep businesses afloat during cash flow shocks.

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