The Tale of AstraZeneca
By Tina Safi – Feb 1, 2011
The pharmaceutical industry is controversial and filled with high-science drama, no doubt. From accusations about company-funded research programs to tax evasions and disputes, the industry has seen its fair share of lawsuits. The more recent story of AstraZeneca, while unsurprising, is one for the books due to a landmark settlement with HM Revenue and Customs.
Formed in April 1999, AstraZeneca is a British-Swedish pharmaceutical company that was once part of Imperial Chemical Industries. The public company is listed on the London Stock Exchange, the New York Stock Exchange and the OMX exchange and was created with the merger of AstraAB and ZenecaGroup PLC.
Most notably, in 2005 the group announced its intention to market anti-cancer agents with Astex. The same year, AstraZeneca told the media of a collaboration aimed at treating cardiovascular disease and announced its induction as a Diamond Member into the Pennsylvania Bio Commerce organization. Remarkable moves for the company include a 2006 partnership with Abbott Laboratories, a 2007 alliance with Bristol-Myers Suibb and the acquisition of MedImmune in the same year for over $15 billion.
The company most markedly works to treat disorders in the cardiac, neurological and psychiatric, infection, respiratory, gastrointestinal and oncology areas. While AstraZeneca’s corporate headquarters are in London, research and development occurs in Sodertalje. The company also has research centers in India and other parts of the United Kingdom.
Recently, AstraZeneca has been in the news due to a multi-million dollar dispute over taxes. £505 million (British pounds) were involved, to be exact. On February 23, 2010, the company agreed to pay the staggering amount to HM Revenue and Customs (HMRC) to finally settle a 15-year-old dispute over the amount of taxes AstraZeneca owes.
As one of the biggest disputes in the United Kingdom over the issue of transfer pricing, the story has drawn headlines around the world. Transfer pricing, or the amount of money a company pays to buy its own goods from overseas subsidiaries, is in itself a complex issue. The dispute, then, took root with problems over the amount AstraZeneca was paying to buy products from overseas. Although companies are supposed to charge fair market rates for such internal transactions, the company was supposedly not doing so.
According to tax authorities, in fact, large companies like AstraZeneca often use transfer prices to charge fake prices for internal transfers and then move their subsequent profits to low-tax countries, all to avoid paying corporate taxes. The HMRC, however, has caught on and has been closely following companies they believe are engaging in this practice.
This new tough stance has tax authorities in the United States, Japan, Canada, Australia, Germany and other countries following suit, prosecuting businesses that they believe won’t be detrimentally affected by often expensive citations and lawsuits.
In the case of AstraZeneca, which had set aside £890 million (British pounds) to settle the dispute, the penalty fee ended up being lower than expected, although still superbly high. Thus, because the amount the company is paying is lower than had been anticipated, AstraZeneca’s profit forecast for this full year has been revised.
If only all tales of prosecution and tax evasion had such optimistic endings! Still, with the way the pharmaceutical industry works, another more dynamic lawsuit is sure to soon replace this one in the news.
By Tina Safi – Feb 1, 2011
The pharmaceutical industry is controversial and filled with high-science drama, no doubt. From accusations about company-funded research programs to tax evasions and disputes, the industry has seen its fair share of lawsuits. The more recent story of AstraZeneca, while unsurprising, is one for the books due to a landmark settlement with HM Revenue and Customs.
Formed in April 1999, AstraZeneca is a British-Swedish pharmaceutical company that was once part of Imperial Chemical Industries. The public company is listed on the London Stock Exchange, the New York Stock Exchange and the OMX exchange and was created with the merger of AstraAB and ZenecaGroup PLC.
Most notably, in 2005 the group announced its intention to market anti-cancer agents with Astex. The same year, AstraZeneca told the media of a collaboration aimed at treating cardiovascular disease and announced its induction as a Diamond Member into the Pennsylvania Bio Commerce organization. Remarkable moves for the company include a 2006 partnership with Abbott Laboratories, a 2007 alliance with Bristol-Myers Suibb and the acquisition of MedImmune in the same year for over $15 billion.
The company most markedly works to treat disorders in the cardiac, neurological and psychiatric, infection, respiratory, gastrointestinal and oncology areas. While AstraZeneca’s corporate headquarters are in London, research and development occurs in Sodertalje. The company also has research centers in India and other parts of the United Kingdom.
Recently, AstraZeneca has been in the news due to a multi-million dollar dispute over taxes. £505 million (British pounds) were involved, to be exact. On February 23, 2010, the company agreed to pay the staggering amount to HM Revenue and Customs (HMRC) to finally settle a 15-year-old dispute over the amount of taxes AstraZeneca owes.
As one of the biggest disputes in the United Kingdom over the issue of transfer pricing, the story has drawn headlines around the world. Transfer pricing, or the amount of money a company pays to buy its own goods from overseas subsidiaries, is in itself a complex issue. The dispute, then, took root with problems over the amount AstraZeneca was paying to buy products from overseas. Although companies are supposed to charge fair market rates for such internal transactions, the company was supposedly not doing so.
According to tax authorities, in fact, large companies like AstraZeneca often use transfer prices to charge fake prices for internal transfers and then move their subsequent profits to low-tax countries, all to avoid paying corporate taxes. The HMRC, however, has caught on and has been closely following companies they believe are engaging in this practice.
This new tough stance has tax authorities in the United States, Japan, Canada, Australia, Germany and other countries following suit, prosecuting businesses that they believe won’t be detrimentally affected by often expensive citations and lawsuits.
In the case of AstraZeneca, which had set aside £890 million (British pounds) to settle the dispute, the penalty fee ended up being lower than expected, although still superbly high. Thus, because the amount the company is paying is lower than had been anticipated, AstraZeneca’s profit forecast for this full year has been revised.
If only all tales of prosecution and tax evasion had such optimistic endings! Still, with the way the pharmaceutical industry works, another more dynamic lawsuit is sure to soon replace this one in the news.