Several Democrats on the House Oversight and Government Reform Committee are pushing the Justice and Treasury departments to review the tax filings of four pharmaceutical companies that were forced to pay settlements for their roles in the opioid crisis.
Johnson & Johnson, McKesson, AmerisourceBergen, and Cardinal Health agreed to pay $26 billion to 46 states to settle claims that they falsely marketed opioids as nonaddictive, leading to widespread substance abuse and overdoses. Several other states, including New York and West Virginia, maintained separate lawsuits against the companies. Other businesses, including the consulting firm McKinsey & Company and Purdue Pharma, the maker of Oxycontin, also paid massive amounts to plaintiffs.
Johnson & Johnson, McKesson, AmerisourceBergen, and Cardinal Health plan to seek more than $4.5 billion combined in tax deductions from the settlements, according to corporate filings first reported by The Washington Post. They may be allowed to do so by a provision in the CARES Act that allows companies to deduct a previous year’s operating loss from their tax burden over a five-year period. The provision, known as a net operating loss deduction, was intended to help businesses struggling with major losses caused by COVID-19 pandemic disruptions.
However, according to New York Rep. Carolyn Maloney and California Reps. Jimmy Gomez and Mark DeSaulnier, writing off the settlements violates a provision of the 2017 Tax Cuts and Jobs Act that prohibits companies from deducting such payments. (RELATED: Judge Overturns Purdue Pharma’s Opioid Settlement That Shielded Sackler Family From Lawsuits)
Michael O’Malley, prosecutor for Cuyahoga County, walks out of Federal Courthouse after an opioid trial in Cleveland, Ohio on October 21, 2019. – Three leading drug distributors and an Israeli drugmaker blamed for a deadly US opioid epidemic settled with plaintiffs Monday just hours before they were to go on trial, a federal judge announced. The deal is worth $260 million to two Ohio counties at the center of the lawsuit but could spell billions more for 2,700 US communities devastated by addiction and overdose epidemic.The settlement involved the three leading US drug distributors — Cardinal Health, Amerisource Bergen, and McKesson Corp and Israel’s generic drug manufacturer Teva. (Photo by MEGAN JELINGER/AFP via Getty Images)
“In denying these deductions, Congress sought to ‘help deter taxpayers from violating the standards Congress has enacted to protect the American public, and ensure that wrongdoers fully pay their penalties,'” the Democrats write in a letter to Attorney General Merrick Garland and Treasury Secretary Janet Yellen.
In addition, the pharmaceutical companies did not comply with document requests from the Oversight Committee, saying that they would not do so unless they were required by their settlements.
“Companies like Cardinal Health, McKesson Corporation, AmerisourceBergen, and Johnson & Johnson have exacerbated a public health crisis that has devastated families and communities across the country,” the Democrats add.
“The Committee remains deeply concerned that these companies will be allowed to claim billions in tax benefits resulting from great harm to the American people.”
More than 100,000 Americans died of drug overdoses between April 2020 and April 2021, according to the Center for Disease Control and Prevention, a record high. In response, the Senate passed the Rural Opioid Abuse Prevention Act, which would create grants for programs in rural communities that have been hit hard by opioid overdoses. More than 75% of drug overdoses during the COVID-19 pandemic were associated with opioids.
Customs and Border Protection agents seized a record amount of drugs in Fiscal Year 2020, and seized a record amount of opioids in FY2021.