Big pharma, like big tech, are used to making big profits. Research shows that profit margins for the pharmaceutical industry averaged almost 14% between 2000 to 2018, close on double 7.7% for other industries. But a recent report from Dutch NGO, SOMO, detailing how Moderna is expected to make 44% profit on its Covid vaccine, is big even for the pharmaceutical industry. Whats more, the report explains how Moderna will funnel much of this lovely lolly through tax havens in the US and Switzerland. The villain in this narrative seems easy to identify. But what about the G7 governments and the EU who allow companies like Moderna and Pfizer to benefit from extensive state funding with so few strings attached? Why do these governments and their citizens demand so little transparency in the struggle for affordable, accessible drugs, developed with tax payers’ money?
Recent research by the Dutch Centre for Research on Multinational Corporations (SOMO), shows that Moderna developed its vaccine with at least $4.1 billion from the US government. The report further outlines how subsidiaries ModernaTX Inc and Moderna Switzerland GmbH have established themselves in corporate friendly, secrecy jurisdictions – Delaware in the US and Basel in Switzerland. The term “secrecy jurisdiction” refers to jurisdictions that specialise in enabling individuals to hide their wealth and financial affairs from the rule of law. In places like these, records of profits generated are not available for public scrutiny. It is difficult therefore to ascertain how much tax Moderna will ultimately pay on profits accrued from a product developed largely with tax payer money.
Lower ‘pandemic pricing’ currently in place from both Pfizer and Moderna for corona vaccines.
Moderna also received initial funding from the Coalition for Epidemic Preparedness Innovations (CEPI). An NGO working under COVAX (the COVID-19 Vaccines Global Access scheme) involving the WHO and Unicef, the funding included agreement to “equitable access principles”. This means the distributions of vaccines according to need and at affordable prices for at-risk populations, especially in low-and middle-income countries. Yet Moderna only reached an agreement in May this year to deliver 34m doses in 2021 via CEPI. It will therefore continue to sell its vaccine primarily to wealthy countries.
Sales of vaccines to wealthy countries are highly lucrative even with the lower ‘pandemic pricing’ currently in place. Leaked documents show that Moderna is charging the EU, $22.50 per dose for their corona vaccine. While Pfizer is charging the US government $19.50 per dose and Moderna is charging $15. Pfizer has stated its intention of increasing its pricing to more ‘normal’ levels of $150 to $170 per dose, once the pandemic has ended. These margins are fantastic. Indeed shareholders in Moderna include a number of large investment companies such as the Vanguard Group and Blackrock.
Why are governments unwilling to hold Big Pharma to account?
The corona vaccine is Moderna’s first commercial product. Yet it had raised substantial amounts of private equity in the years preceding this. According to a report by Follow the Money, Moderna currently has more money invested in financial markets than in pharmaceutical activities. This is in keeping with a growing trend. Large non-financial companies including big pharma, invest in assets rather than R&D in order to maximise gains for their shareholders. As a recent report by SOMO points out, the current Big Pharma business model is designed to benefit shareholders but impedes truly effective and efficient healthcare. SOMO researcher, Jasper van Teeffelen, describes the system as ‘ludicrous’.
Both Van Teeffelen and his colleague, Vincent Kiezerbrink, view the relationship between government and big pharma as inherently unequal. Governments are ‘at the mercy of these companies’ says Van Teeffelen and they ‘will only get more powerful’ predicts Kiezerbrink. Why are governments and powerful institutions like the EU unwilling to hold big pharma to account? Is it the life-saving products that they produce and on which we depend or is there more to this story? The wide-spread acceptance of tax havens and secret jurisdictions shed some light on the problem. As does the system of pharmaceutical patents organised via the World Trade Organisation.
The Global Minium Tax agreement represents a ‘monumental shift in the narrative’ – Jasper van Teeffelen.
The release of the Paradise Papers in 2017 provided unprecedented insights into the extent of tax avoidance by multinationals globally. The EU’s competition chief, Margrethe Vestager’s, efforts to tackle some of the worst offenders further highlighted the complicity of several governments in the creation and maintenance of tax havens. Both Ireland and the Netherlands were involved in the creation of lucrative tax breaks for Apple and Nike, respectively. Many of Pfizer’s activities outside the US are organised by a company near Amsterdam – CP Pharmaceuticals International CV (CPPI) . In the 2018/19 financial year, the Dutch CPPI generated a phenomenal turnover of $40.3 billion dollars, and made a profit of 11.9 billion dollars. All this, with only 220 employees, according to Follow the Money. The Netherlands is currently ranked at number 4 and Switzerland number 5 on the Corporate Tax Haven Index for 2021.
More to gain by enabling tax evasion than preventing it?
Do governments gain more by enabling tax evasion than preventing it? The recent agreement by 130 countries globally on a proposed Global Minimum Tax suggests that things are changing. Jasper van Teeffelen agrees that this agreement represents ‘a monumental shift in the narrative that would have been inconceivable twenty years ago’. The agreement involves two pillars. Pillar 1 is focused on changing where large companies pay taxes; Pillar 2 includes the global minimum tax. Essentially, it will mean that large companies will pay more taxes in countries where they have customers and a bit less in countries where their headquarters, employees, and operations are. The agreement also sets up the adoption of a global minimum tax of 15 percent. This will increase taxes on companies with earnings in low-tax jurisdictions.
Nevertheless, there are always loop holes to be found and the agreement in its current form will doubtless be watered down as compromises within and between 130 countries must be reached. If we consider that the cost of global vaccination is estimated at just $23 billion, then the savings accrued from applying this new tax standard to Big Pharma would certainly cover the bill. The issue of vaccine nationalism clearly involves complicity in the power and unbridled greed of Big Pharma, rich world governments and we, their citizens too. What are we waiting for?