Harvoni, a drug for treating Hepatitis C made by Gilead Sciences. (courtesy of Gilead Sciences, Inc.) 
 
 Over the last few years, Gilead Sciences has grown into one of the world’s largest pharmaceutical companies, fueled by the sales of expensive specialty treatments for hepatitis C. The company’s revenue has tripled since 2012, to $32.6 billion last year. 
 
 According to a report to be released Wednesday, Gilead has also developed another specialty: Avoiding billions in taxes. 
 
 The California-based pharmaceutical giant moved some of its assets to Ireland, apparently allowing income from some U.S. drug sales to be shifted abroad and taxed at a lower rate, according to Americans for Tax Fairness, a liberal advocacy group. It has also avoided nearly $10 billion in taxes by not bringing some of its foreign profits back to the United States, the group says. 
 
 Gilead declined to comment on the report. 
 
 The study strikes at a simmering battle between the Obama administration and the business community over whether U.S. corporations are inappropriately avoiding billions in taxes by taking advantage of a flawed tax code. 
 
 In 2013, Gilead launched the drug Sovaldi – a hepatitis C cure that carried an $84,000 list price for a 12-week course of treatment. That drug was followed by another treatment, Harvoni, which carried a list price of $94,500. Last month, Gilead received approval for a third treatment, Epclusa, which carries a list price of $74,760. 
 
 Last year, a Senate Finance Committee investigated the company’s pricing of hepatitis C drugs and concluded the company had sought to maximize profits at the expense of making the remedies accessible to patients. 
 
 The drugs’ prices also had a noticeable effect on overall prescription drug spending. In 2015, health care spending on prescription drugs grew more than 12 percent, according to an analysis published in the peer-reviewed medical journal Health Affairs, a rise attributed in part to the new generation of hepatitis C treatments. 
 
 The new report by Americans for Tax Fairness shows that as Gilead’s revenues and profits have grown, driven largely by its hepatitis C franchise, a perplexing incongruity has developed: In 2015, nearly two-thirds of its revenues were generated by U.S. sales, but the U.S. accounted for only 37 percent of its profits before taxes. That’s despite the fact that the U.S. generally pays more for drugs than other countries. 
 
 The report suggests that “transfer pricing” helps account for this disparity. In 2013, Gilead’s chief financial officer said the company’s tax rate would “decline over time” because its intellectual property for Sovaldi had been transferred to a subsidiary in Ireland, which has a lower corporate tax rate, 12.5 percent, than the United States. 
 
 This strategy is common, legal and increasingly used by pharmaceutical companies, said Jeremy Scott, editor-in-chief of commentary at Tax Analysts, an organization specializing in tax policy. 
 
 "People weren’t doing it as aggressively in the ‘90s as in the past five to 10 years," Scott said. “This is a recent trend." 
 
 The new report notes that Gilead's effective tax rate tumbled to 16.4 percent last year compared with 27.3 percent in 2013. (The statutory U.S. federal tax rate in the is 35 percent.) 
 
 Meanwhile, Gilead has kept a growing amount of its foreign profits overseas, reaching $28.5 billion in 2015. The company would have to pay about $9.7 billion in taxes if it brought those profits back to the United States, according to the report. 
 
 “Gilead excels at tax dodging and price gouging," Rep. Lloyd Doggett (D-Tex.) said in an e-mail. "Instead of innovation, it has spent more on stock buybacks for executives and shareholders than on research and development. Gilead’s formula for success: prices up, profits up, tax avoidance up." 
 
 Gilead is just one of dozens of large pharmaceutical and technology companies that is using a variety of tactics to potentially lower its taxes. Apple has nearly $200 billion in profits overseas, Microsoft has about $100 billion, while Gilead's competitor, Pfizer, has about $193 billion. If they were to bring those back to the United States, the companies would owe billions in taxes. 
 
 "It is quite amazing what the pharma companies can pull off, and it’s a global issue," said Steven M. Rosenthal, a senior fellow at the Urban-Brookings Tax Policy Center. ||||| Sovaldi, an expensive Hepatitis C treatment, is made by Gilead Sciences. (AP Photo/Courtesy of Gilead Sciences) 
 
 This story has been updated. 
 
 Gilead Sciences executives were acutely aware in 2013 that their plan to charge an exorbitantly high price for a powerful new hepatitis C drug would spark public outrage, but they pursued the profit-driven strategy anyway, according to a Senate Finance Committee investigation report released Tuesday. 
 
 "Let's not fold to advocacy pressure in 2014," Kevin Young, Gilead's executive vice president for commercial operations, wrote in an internal email. ‘‘Let’s hold our position whatever competitors do or whatever the headlines." 
 
 Gilead gained federal approval for its drug Sovaldi in late 2013 and ultimately settled on the price of $84,000 for a 12-week course of treatment. To the company, that price seemed to deliver the right balance: value to shareholders while also not so high that insurers would "hinder patient access to uncomfortable levels," according to internal documents. But they also got more than they bargained for: an outpouring of outrage from the public, a backlash from government and private payers, and political scrutiny. 
 
 The 18-month Senate committee investigation reviewed more than 20,000 pages of company documents. 
 
 “The documents show it was always Gilead’s plan to max out revenue, and that accessibility and affordability were pretty much an afterthought," said Sen. Ron Wyden (D-Ore.), who co-led the investigation with Sen. Charles Grassley (R-Iowa), in a news conference. 
 
 In a statement released Tuesday, Gilead disagreed with the conclusions of the report, saying that the price was "in line with previous standards of care.” The company noted that it has programs in place to help uninsured patients and those who need financial assistance access the treatments. More than 600,000 patients around the world have been treated with Gilead’s hepatitis C drugs since 2013, according to the company. 
 
 Here are four key takeaways from the investigation: 
 
 1. It could have been priced at $115,000 for a course of treatment. 
 
 Gilead considered a range of prices for Sovaldi and weighed the value to its shareholders against the "reputational risks," meaning the potential outrage from patients, physicians and payers. The potential prices ranged from $50,000 to $115,000. 
 
 Executives believed a $50,000 price would build good will and ensure easy access to the drug because it would be covered by most plans. But it would cause "significant foregone revenue," and activists would still critique the price, even at this relatively low level. 
 
 At $115,000, executives were concerned about "external considerations" and predicted: "High levels of advocacy group criticism and negative PR/competitive messaging could be expected at $115K and it would be increasingly difficult to manage at these levels." 
 
 2. Gilead priced Sovaldi partly based on the expectation it would set a benchmark for the next drugs in the pipeline. 
 
 A company presentation noted that Gilead has "considerable pricing potential" for Sovaldi, but that future pricing for next-generation drug launches would be limited by competition -- what it referred to as a second wave of treatments. 
 
 "Wave 1 will set a price benchmark against which Wave 2 will ultimately be evaluated," the presentation stated. 
 
 "By elevating the price for the new standard of care set by Sovaldi, Gilead intended to raise the price floor for all future hepatitis C treatments, including its follow-on drugs and those of its competitors," the report states. 
 
 Its next hepatitis C drug, Harvoni, was priced at $94,500. 
 
 3. Patients were warehoused to limit access to Sovaldi. 
 
 Facing pent-up demand for a hepatitis C treatment, insurers quickly began to implement restrictions -- essentially, warehousing patients by putting sick people aside until they were even more sick. Medicaid programs in 27 states limited which patients could get access to Sovaldi. Private insurers did, too. 
 
 In a letter, the Oregon Health Authority reported that while more than 10,000 Medicaid patients were deemed good candidates for Sovaldi and its competitors in fall 2014, the estimated cost of treating half of them would more than double the entire $600 million spent on all drugs in the previous year. Instead, because treating more advanced patients would be more cost effective, the state implemented a plan to treat at the rate of 500 patients a year for the first six years. 
 
 Kentucky's Medicaid program noted that the state's heroin epidemic exacerbated its hepatitis C problem -- people who had injected drugs were being tested for the disease, raising the tricky question of when to start treatment. 
 
 "Given the current cost of the newer treatment options and to remain fiscally responsible we will be forced to make difficult decisions regarding who does and does not get access to treatment medications upon diagnosis," Samantha McKinley, pharmacy director of the Kentucky Department for Medicaid Services, wrote in a letter to Grassley and Wyden. 
 
 4. Cost-per-cure, not cost of development. 
 
 The report suggests that the factors Gilead used to set its price were not based on the research and development needed to bring the drug to market, or on the $11.2 billion it paid for Pharmasset, the company that developed Sovaldi. Instead, Gilead executives looked at what previous treatments had cost and the effect of future waves of competition on the revenue it could bring in. 
 
 "Company officials surmised that its drug had a ‘value premium' because of increased efficacy and tolerability, shorter treatment duration, and its potential to ultimately be part of an all-oral regimen," the report states. 
 
 In its statement Tuesday, the company said, “We stand behind the pricing of our therapies because of the benefit they bring to patients and the significant value they represent to payers, providers, and our entire healthcare system by reducing the long-term costs associated with managing chronic [hepatitis C virus].” 
 
 With another Senate committee now probing price increases at four other pharmaceutical companies, the final conclusion of the report may be one we see repeated. 
 
 "This might be an example that received the most attention in some time, but it won't be the last," Grassley said in a statement. 
 
 Correction: The story formerly misidentified patients in Oregon as enrollees in Medicare, not Medicaid. ||||| In an announcement on Monday morning, Pfizer, the big drug company, whose headquarters are on East 42nd Street, in Manhattan, said that it is merging with one of its competitors, Allergan PLC. Ian Read, a Scottish-born accountant who is Pfizer’s chairman and chief executive, said that the proposed deal, which is valued at a hundred and sixty billion dollars, would “create a leading global pharmaceutical company with the strength to research, discover and deliver more medicines and therapies to more people around the world.” 
 
 On Wall Street and in the world of big pharma, that statement will raise chuckles. It is widely acknowledged that the primary impetus for the deal is a financial one. In merging with Allergan, which is based in Dublin, Pfizer intends to move its corporate residency to Ireland, where the corporate tax rate is just 12.5 per cent, compared to thirty-five per cent for a company of its size in the United States. Over the next few years, the merger could save Pfizer billions of dollars in taxes and deprive the U.S. Treasury of the same amount. 
 
 Tax-driven deals of this nature are known as “inversions,” and they are becoming increasingly common. Burger King, Liberty Global, and Medtronic are among the U.S. corporations to have carried out mergers that moved their headquarters abroad. Last year, Treasury Secretary Jacob Lew said that inversions were “wrong,” and that he would try and restrict them. Only last week, the Treasury Department issued some new administrative guidelines in this area. Without actual legislation, though, there isn’t very much the Obama Administration can do to prevent these exercises in corporate tax-dodging, and Republicans on Capitol Hill have displayed little eagerness to coöperate in a crackdown. 
 
 The Pfizer–Allergan deal will be the biggest inversion yet, and it is nothing short of a disgrace. Drug companies like Pfizer have long benefitted from taxpayer-funded research carried out under the auspices of organizations like the National Institutes of Health and the National Science Foundation. Now, Pfizer is seeking to avoid paying the taxes that are due on its profits, particularly profits generated by its overseas subsidiaries. Even though the Obama Administration doesn’t have the legal powers to block the Allergan transaction, it should seek to shame Pfizer and its board of directors into calling it off. 
 
 Founded in 1849, in Williamsburg, Brooklyn, by two German cousins, Charles Pfizer and Charles Erhart, Pfizer has a long history of researching and developing new drugs and chemicals. Its first commercial product was an anti-parasitic pill designed to fight intestinal worms, which were a common affliction at the time. In the late nineteenth century, it became a leading manufacturer of citric acid, ascorbic acid, and vitamin pills. During the Second World War, it developed a new way of making penicillin, which was then seen as a miracle drug. After the war, the company established itself as a global leader in antibiotics and other areas of medicine. During the nineteen-seventies and eighties, it invested heavily in R. & D., boosting its research budget to about twenty per cent of its sales. These investments produced a number of blockbuster drugs, including Procardia (angina and hypertension), Glucotrol (diabetes), Feldene (inflammation), Zoloft (depression), and Viagra (erectile dysfunction). In 1999, when Pfizer celebrated its hundred and fiftieth anniversary, it was widely seen as the leading drug company in the world. 
 
 Pfizer continues to employ thousands of dedicated scientists and to invest heavily in medical research. Since 2010, though, when Read took over as chief executive, it has cut its R. & D. budget significantly and raised its spending on stock buybacks. Under Read’s leadership, cost-cutting and financial engineering have sometimes seemed to be driving the company’s strategy. To some extent, these kinds of changes were unavoidable. As the pace of discovery for blockbuster new drugs has slowed in recent decades, all of the big pharmaceutical companies have come under pressure to trim their research budgets and pursue more effective ways of developing products, such as teaming up with innovative startups. 
 
 So, like many other big American corporations, Pfizer is facing challenges adapting to a changed world. But nothing in its financials or its strategic position suggests that it is facing the sort of threat that might justify the radical and potentially self-destructive move that giving up its U.S. domicile entails. A venerable member of the Fortune 500 now looks for all the world like a greedy tax exile, skipping off to a dodgy foreign locale. (Viewed in terms of its corporate tax policies and the assist it provides to big multinationals seeking to avoid paying taxes in their homelands, Ireland is distinctly dodgy.) 
 
 Read, in his statement explaining the proposal to merge with Allergan, said that it would help put Pfizer “on a more competitive footing within our industry.” This was a reference to the fact that other big pharma companies, such as AstraZeneca, GlaxoSmithKline, and Novartis, are headquartered in countries with lower corporate tax rates than the United States. However, there is scant evidence that being based in the United States has handicapped Pfizer or made it more difficult for the company to raise capital. 
 
 To the contrary, being based in the United States enables Pfizer to exploit the vast reservoirs of technical expertise that reside here, and to access federal support for scientific research. For example, according to the company’s Web site, it has dozens of collaborative projects with the National Institutes for Health. And being headquartered in the United States certainly hasn’t prevented Pfizer from making a lot of money. Over the past two years, the company has generated almost nineteen billion dollars in net profits. 
 
 All things considered, it’s hard to avoid seeing the merger proposal as a cynical move designed to boost Pfizer’s stock price and generate a windfall for the company’s senior managers, who are compensated mainly in equity. If the Obama Administration can’t block the deal, the best hope may be to put some public pressure on Pfizer’s non-executive directors, whose approval is necessary for the merger to go through. Its lead independent director is Dennis Ausiello, an eminent physician who, for many years, was chief of medicine at Massachusetts General Hospital. Other non-executives on the Pfizer board include Frances Fergusson, a former president of Vassar College; Helen Hobbs, a professor of medicine at the University of Texas Southwestern Medical Center; W. Don Cornwell, a former chief executive of Granite Broadcasting; and James Kilts, a founding partner at the private equity firm Centerview Capital. These directors are all experienced, worldly individuals. Last year, according to Pfizer’s 2015 proxy statement, they were each paid more than three hundred thousand dollars to carry out their duties, which include overseeing the company’s full-time management and protecting the long-term interests of all of its stakeholders: employees, shareholders, and customers. 
 
 One of those key interests, surely, is safeguarding Pfizer’s reputation, which has already suffered in recent years, following a big marketing scandal over the since-discontinued painkiller Bextra and other missteps. Read has for years been telling shareholders in his annual letter to them that “earning greater respect from society” is one of Pfizer’s strategic imperatives. One of the ways the company could do this, he said, was through “acting as a respectable corporate citizen.” So here is a question for the independent directors: Do you really think that traducing Pfizer’s proud history by moving to Dublin and shafting American taxpayers would be the act of a “respectable corporate citizen”?
– A pharmaceutical company that has in recent years made billions of dollars on hepatitis C treatments—the three the FDA has approved range from $75,000 to $94,500—has been named a "price gouger" and "tax dodger" in a new report. Gilead Sciences, the sixth richest drugmaker in the world, "is making a fortune selling essential drugs to the very government and taxpayers that helped pay to develop them, and then dodging taxes on the resulting profits," says Frank Clemente, executive director of Americans for Tax Fairness, which issued the report this month. Gilead has avoided some $10 billion in taxes by moving assets to Ireland, where there is a lower tax rate, and then not bringing some $28.5 billion in profits back into the US. Per the Washington Post, the California-based company's revenues in 2015 hit $32.6 billion, up three times from 2012. As for the accusation of gouging: Last year, a Senate investigation found that the company "pursued [a] profit-driven strategy" with its hepatitis drugs, rather than making the drugs more accessible at a lower price (it had considered $50,000). As the Post notes, Gilead, which declined to comment on the report, isn't alone in looking overseas for tax relief. Plenty of other pharmaceutical and technology companies do it. Apple, for instance, has squirreled away nearly $200 billion abroad, Bloomberg reported last year. According to Citizens for Tax Justice, that's enabled the company to avoid paying $59.2 billion in US taxes. Pfizer has some $193 billion abroad, per the Post. The new report singling out Gilead, the Post points out, highlights the "simmering battle" between President Obama and big business over the practice of sending assets to foreign countries.