# Pfizer halts Alzheimer's and Parkinson's research, uses Tax Scam money to buy back stock

Discussion in 'Politics' started by Kittamaru, Jan 28, 2018.

1. ### KittamaruAshes to ashes, dust to dust. Adieu, Sciforums.Valued Senior Member

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After pocketing a $5 billion tax cut from the GOP Tax Scam, Pfizer decided to end all of its Alzheimer's and Parkinson's research. Then they did exactly as it was predicted, they fired 300 scientists and used that money to buy back their stocks. https://www.npr.org/sections/thetwo...rts-into-alzheimers-and-parkinsons-treatments Pfizer has announced plans to end its research efforts to discover new drugs for Alzheimer's and Parkinson's diseases. The pharmaceutical giant explained its decision, which will entail roughly 300 layoffs, as a move to better position itself "to bring new therapies to patients who need them." http://www.latimes.com/business/hiltzik/la-fi-hiltzik-pfizer-20180108-story.html As it happens, Pfizer signaled how it would apply the tax savings even before the final passage of the tax bill: The company announced a$10-billion share buyback on Dec. 18, four days before President Trump signed the tax cut into law. That buyback was on top of $6.4 billion left to be spent from a previous buyback plan, and was accompanied by a 6% increase in the company's stock dividend, which will be worth roughly another half-billion dollars a year. For comparison's sake, Pfizer's entire research and development budget averaged about$8 billion a year from 2014 through 2016.

Pfizer's diversion of its tax break to shareholders parallels its behavior the last time American companies received a tax holiday on repatriated foreign earnings. That was in 2004, after corporations promised to apply their tax savings to hiring more workers and investing in their business. Instead, they laid off workers, bought back their shares, and pumped up their CEO compensation.

Pfizer brought home more than any other company in that amnesty, $35.5 billion, according to a 2007 investigation by Sen. Carl Levin, D-Mich. From 2004 through 2007, Levin reported, Pfizer bought back more than$27 billion in stock and reduced employment by 11,748 workers.

Woohoo, feel that sweet, sweet trickle-down at work! This will certainly make America great again!

But as long as purely economic considerations drive drug R&D, the prospects for progress are dim. The Republicans who drafted the corporate tax cut promised that it would lead to more business investment and therefore economic growth. But as Pfizer demonstrates, all the incentives run in the opposite direction: More investment in shareholder welfare, less economic growth, and less attention to what corporations are supposed to exist for — improving people's lives.​

3. ### VociferousRegistered Senior Member

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How will they continue to grow and profit after the stock buy-back?
Would they eventually need to resume research to remain competitive?
Would failing to eventually do so lead to losing money, as their own drug patents expire and competitors continue to market new patents?

5. ### KittamaruAshes to ashes, dust to dust. Adieu, Sciforums.Valued Senior Member

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Problem with the US patent system is,they can change one minor ingredient in the thing and boom,it's a new formulation and is not only under patent,but unavailable as a generic.

7. ### VociferousRegistered Senior Member

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Wouldn't that mean that their researching competitors still outperform them?
If you can get the generic drug, without the minor ingredient change, why would you bother with the new one?
The original formulation does become available as a generic, even if a new formulation is patented.

8. ### KittamaruAshes to ashes, dust to dust. Adieu, Sciforums.Valued Senior Member

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I believe that is not the case in the Pharmaceutical industry - though I could be misunderstanding:

http://inventingpatents.com/new-formulation-of-a-known-compound/

Mixing the same old active ingredient into a new mixture creates a patentable new formulation.
So while the old formulation is still "available", if the new one is similar enough to be covered under the patent, then no generic will be made because of some of the rules surrounding generics:

As I understand it - if the "brand name" drug changes, the way I understand it, the generic has to essentially "re-qualify", which is a tedious, long, and expensive process.

My wife had an issue with this a while back - one of the medications she was on for depression, she was taking a generic version of (I think it was Effexor or something like that - can't remember the exact one). Anyway, one day we went in to refill the script, and the co-pay cost had jumped significantly. We asked why that was, and it was because the formulary had changed, and a generic version was no longer available.

The bit that changed? An inactive ingredient used to bind the pill together...

Needless to say, t'was a bit of a shock to us.

9. ### VociferousRegistered Senior Member

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If the original drug is found unsafe, both it and its generics will be discontinued. It's doubtful a drug company would, or even could, intentionally do that.
Generic qualifying is basically a rubber stamp, which is why they cost so much less.
But assuming you're absolutely correct, isn't there still a competitive gap between altering existing drugs and continuing to develop new drugs?

10. ### KittamaruAshes to ashes, dust to dust. Adieu, Sciforums.Valued Senior Member

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One would think so, but the prevailing argument in the US has been that if drug companies cannot reap positively ridiculous profits, they'll simply stop developing new medications... but then you have cases like "Pharma Bro" Martin Shkreli who just go around and buy up drug patents and jack the price through the roof on critical medications (the kind people, literally, will not live without) to make a buck.

It's the problem with making healthcare a for-profit industry... the almighty dollar ends up being far more important than peoples lives and well being.

11. ### DaeconKiwi fruitValued Senior Member

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That's the problem when ANY essential service becomes for-profit, whether it be healthcare, schools, or prisons.

12. ### VociferousRegistered Senior Member

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What not-for-profit healthcare systems are developing significant new drugs?

13. ### KittamaruAshes to ashes, dust to dust. Adieu, Sciforums.Valued Senior Member

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St. Jude Children's Research Hospital comes to mind...

Doctors without Borders

The Drugs for Neglected Diseases Initiative

Those are just ones I know of off hand. I'd wager there are others, especially outside the United States.

Then again, that depends on how you qualify "significant"... I'm sure you probably have little worry about a drug for something such as Sleeping Sickness, since your chances of you or a loved one coming down with it are probably virtually zero. In developing nations, though, it is a very real concern.

14. ### VociferousRegistered Senior Member

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Those are not-for-profit healthcare providers, not healthcare systems. The difference is that such providers are funded by charity, where healthcare systems are either for-profit, publicly funded, or some of both. So could you answer the question asked?

15. ### KittamaruAshes to ashes, dust to dust. Adieu, Sciforums.Valued Senior Member

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By your provided definition, there are no "not for profit" health care systems, because per your definition:

Given that a "publicly funded not for profit" would, by apparent definition, be a charity... and you are excluding them from your criteria...

Of course, we are also on a rather curious tangent - what, pray tell, does this have to do with the fact that the GOP Tax Bill is doing exactly what was predicted, and that is putting billions of dollars back into shareholders pockets and not resulting in increased innovation or job growth...?

16. ### VociferousRegistered Senior Member

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Since when is public funding charity?

Public funding is money that comes from the government, often through taxes, that's used to help the public through goods and services.
charity - generous actions or donations to aid the poor, ill, or helpless

To my knowledge, taxation doesn't require any generosity, because it's not voluntary.
Are you saying all government spending is charity? That seems like an odd claim, especially when you consider that those same public funds also support wars. Very generous of them to share so many bullets. And with enemies. How noble.

"Publicly funded healthcare is a form of health care financing designed to meet the cost of all or most healthcare needs from a publicly managed fund. Usually this is under some form of democratic accountability, the right of access to which are set down in rules applying to the whole population contributing to the fund or receiving benefits from it.

The fund may be a not-for-profit trust that pays out for healthcare according to common rules established by the members or by some other democratic form."​

Seems like you're playing semantic games instead of answering a simple question. Why are you afraid to acknowledge that after stock buy-backs something else will be required to improve profits and remain competitive? Is that somehow controversial?

The long-term results are a tangent? Why the myopic insistence on very short-term results?

17. ### KittamaruAshes to ashes, dust to dust. Adieu, Sciforums.Valued Senior Member

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Ok, my mistake - I thought you meant a Public Funded charity, such as 501c type 3; historically, I am accustomed to someone referring to "paid by tax" directly as "government funded".

Again, my apologies for the misinterpretation of what you were saying.

My my, how hostile you are.
I'm not "afraid" of any such thing - I pointed out there are already groups creating medications for problems afflicting large populations of differing countries. You didn't like the criteria on that and provided new criteria.

What "long term" results are you referring to? The continued reduction in the workforce as these companies openly admit to using the tax money to further automate? That they will see these tax savings go to shareholders?

https://www.bloomberg.com/news/arti...ses-undercut-by-ceo-plans-to-reward-investors

Major companies including Cisco Systems Inc., Pfizer Inc. and Coca-Cola Co. say they’ll turn over most gains from proposed corporate tax cuts to their shareholders, undercutting President Donald Trump’s promise that his plan will create jobs and boost wages for the middle class.
How is any of that short-sighted? It's their stated plan...

18. ### iceauraValued Senior Member

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The US college and university research infrastructure is almost entirely non-profit. Most significant new drugs come from that system, in the first place.

19. ### VociferousRegistered Senior Member

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Sorry, I honestly didn't imagine someone talking about politics wouldn't know what "publicly funded" meant. Just seemed intentional, but it clearly wasn't. Misunderstandings all around.

While I haven't seen anything specifically linking tax cuts and automation, I think we can agree that automation is increasingly attractive, especially with pushes for higher minimum wages, with or without such cuts.

Paying dividends for underutilized capital is never desirable, and there is a good potential to reissue shares at a profit later.

Another major reason why businesses repurchase their own shares is to take advantage of undervaluation. Stock can be undervalued for a number of reasons, often due to investors' inability to see past a business' short-term performance or sensationalist news items. If a stock is dramatically undervalued, the issuing company can repurchase some of its shares at this reduced price and then re-issue them once the market has corrected, thereby increasing its equity capital without issuing any additional shares.
So the stock buy-back allows them to save money short-term. But that's typically part of a larger strategy to increase share value over the longer-term.
Limiting new products isn't a sound long-term strategy...unless those products have consistently been pursued at a loss.

Since Alzheimer's and Parkinson's research both already have dedicated charity funding, it may not be a very profitable market.

US colleges are generally either for-profit or publicly funded.

If you take prescription medications, thank a taxpayer.

That’s the take-away from an article being published in Thursday’s edition of the New England Journal of Medicine that examined the role of “public-sector research institutions” – think universities, hospitals, nonprofits and federal labs like the National Institutes of Health – in drug development.
http://articles.latimes.com/2011/feb/10/news/la-heb-drug-development-taxpayers-20110210

20. ### KittamaruAshes to ashes, dust to dust. Adieu, Sciforums.Valued Senior Member

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Fair enough.

The whole pushing / selling point of the Trumpian / GOP tax cuts were that it would result in "higher wages, more jobs, make America great" blah blah blah... and yet, we have employers admitting they are going to use that money to fund automation efforts and cut jobs.

21. ### VociferousRegistered Senior Member

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Yes, the short-term strategy of some companies is to consolidate their shares and reduce their cost of working capital. That is a sensible plan, especially if looking at further expansion down the road. I'm less sure that it makes sense without any plan for further expansion.
But other companies seem to be well-situated to go ahead and create new jobs and give out bonuses.

It's also very early to be making pronouncements about the overall economic/jobs impact.

Many big companies will also face a bit of a hurdle before fully capitalizing on the tax break. Deferred-tax assets are basically older losses that can be used to lower future tax bills. But with the corporate tax cut comes a devaluation of those assets, meaning they will have to initially pay more taxes.

22. ### iceauraValued Senior Member

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The ones doing significant drug research and related research are generally non-profit - that was the point.
That would be 'create new jobs or give out bonuses, no? In most cases.

There's already so much cash swimming around in the American economy, and so much cheap credit, that it's hard to see how a tax break would have much effect on investment - beyond the usual bias toward return on capital rather than labor.
The new automation is threatening mostly higher wage - not minimum wage - jobs. The connection with tax cuts is of course the direction of windfall investment - and with little increase in demand on the horizon it probably wouldn't be in the direction of expanded production, but rather increased efficiency, and mobility, of production.
Significant new drug discovery involving basic research into disease is seldom profitable in any market.

23. ### iceauraValued Senior Member

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But very easy to make pronouncements about the overall rich people's income and lifestyle impact: http://badattitudes.com/MT/archives/2018/01/beyond_satire.html

One of the Koch brothers - one of linked Wyatt's uncles - gave Paul Ryan 500,000 dollars - a cool half a million - a day or so after the tax bill passed.

Look, if common sense has completely malfunctioned in the rightwing mind, one can at least recall the wisdom of Reagan, the rightwing canard: tax something you get less of it, reduce taxes you get more of it. By reducing taxes on profit-taking and on return to capital, one encourages taking profits and investing for capital return. Not hiring employees.

Last edited: Jan 30, 2018