With every passing day, it becomes clearer who's reaping the benefit of the huge tax cut handed over to American corporations by the Republican-dominated Congress in December.
Spoiler alert: Not workers or customers, but shareholders, especially the rich ones. (Don't be fooled by those $1,000 bonuses handed out by a few big companies anxious to curry favor with the Trump White House — if they were serious about improving their employees' lot they'd distribute the money in the form of permanent raises, not a bonus that you can safely bet will be a distant memory by this time next year.)
The big drug company Pfizer seems intent on being a pace-setter in cranking out the benefits of the tax cut to stakeholders who need them the least. In an announcement over the weekend, Pfizer said it was shutting down its research efforts on treatments for Alzheimer's and Parkinsonism. The company didn't say how much it was spending on the two conditions, but said about 300 researchers will lose their jobs as it redirects its research and development budget elsewhere.
"Pfizer routinely reviews its R&D pipeline," the company said in its formal statement of the change. It said it was continuing its R&D programs for the drugs tanezumab and Lyrica. That's a bit of non sequitur, since the first is a treatment for chronic pain from osteoporosis and other conditions and the latter is a drug for nerve pain caused by diabetes, shingles and spinal cord injury and is an anti-seizure medication for epilepsy patients. They do both fall within the neurology field, however, which also encompasses Alzheimer's and Parkinson's.
Pfizer's announcement dismayed advocates for victims of central nervous system diseases, which have presented researchers with some of the most intractable challenges in the healthcare field.
"It's really alarming to see such a large pharmaceutical company deciding to abandon research into the brain and central nervous system," James Beck, chief scientific officer at the Parkinson's Foundation, told me Monday. "It's telling for how difficult it is to do research into neurodegenerative diseases." Of even greater concern, he said, is that "having Pfizer exit does not augur well for what other companies are likely to do."
Pfizer's move also raises questions about what role Big Pharma should play in drug R&D, especially for conditions without known treatments or those with relatively few sufferers.
Research into these two diseases is about as risky as one could imagine, since no treatment thus far has been shown to have any promise in curing either disease or averting its onset; some drugs may delay symptoms for up to a year or temporarily alleviate symptoms, but patient advocates consider those to be modest advances at best.
On the other hand, an Alzheimer's cure would be the very definition of a blockbuster drug, since 5.5 million Americans are known to suffer from the disease and the patient base is expected to expand markedly as the population ages. Parkinson's afflicts about 1 million Americans, the Parkinson's Foundation says.
Normally, that would place this research right in Pfizer's wheelhouse. The company is explicit about basing its R&D strategy on drugs with "multi-billion dollar blockbuster potential," as its R&D chief, Mikael Dolsten, told a J.P. Morgan healthcare conference on Monday.
No one would say that drug companies should engage in research as a philanthropic exercise, but within the context of the U.S. pharmaceutical industry, Pfizer looks risk-averse. The second-biggest U.S. drug company by sales (after Johnson & Johnson), Pfizer in recent years seems to have devoted more effort to financial engineering than biomedical engineering. In 2015, for instance, it announced a $160-billion merger with Allergan, the maker of Botox. The deal was a so-called inversion, aimed transparently at cutting Pfizer's tax bill in part by eliminating U.S. tax on $147 billion in profits it had stashed overseas.
Although the company denied that the deal was "simply… a tax transaction," the truth emerged in 2016 when the deal was canceled; the only thing that had changed was that the U.S. Treasury had implemented new rules that all but eliminated the tax savings. So, bye-bye, Allergan.
Pfizer is expected to be among the prime beneficiaries of the corporate tax cut. The measure allows companies to pay a tax rate as low as 8% on foreign earnings they bring home, a big discount from the 21% top rate the law assesses on domestic earnings, itself a big cut from the previous rate of 35%. By some estimates, that could be worth more than $5 billion to Pfizer alone, not counting any gains from the lower tax rate.
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.
This time around, the company is again gifting its shareholders and laying off workers. Abandoning a challenging research field is a new wrinkle, however.
What's most discouraging to patient advocates is the dearth of alternatives to big pharmaceutical companies in brain research. Pfizer's withdrawal, especially if it prompts other big pharma companies to flee the field, places more of the burden on small biotech firms, academia, foundations and government. The news "reinforces the urgent need for additional federal investment in Alzheimer's research," a spokesman for the Alzheimer's Foundation of America told me. But the Trump administration has placed funding for government research projects in almost all scientific fields on the chopping block.
Some experts recognize that the big drug companies may have been less than sturdy partners all along. "Many groups have been hoping for quick wins in the [central nervous system] space and we haven't succeeded," Beck of the Parkinson's Foundation says, "so there's some frustration from the viewpoint of management that we're not getting the progress we need."
He says his organization and others will still focus on the most promising pathway to a cure: Trying to understand the mechanisms of these diseases, which are still very murky. Only once those riddles are solved can drug research truly move ahead.
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.