Thursday, December 14, 2006

Legal Drug Pushers

Legal Drug Pushers written by Maria Tomchick several years ago in Mother Jones magazine talks about the obscene profits of the pharmaceutical industry and also this which I thought very interesting:

In addition to marketing costs, pharmaceutical companies take huge markups in devious ways. Most drug companies belong to a larger holding company that also owns a chemical company. The chemical company can make the drug chemicals in its own plant, then "sell" them to its sister division, the pharmaceutical company, at a high markup; this is called "transfer pricing." When consumers complain about prices, the pharmaceutical company then points to the high price it had to pay for "raw materials"—but they bought the chemicals from themselves and manufactured the high markup.
In addition to padding their own pockets, pharmaceutical companies still get a special tax credit (subsidy) from the U.S. government (U.S. taxpayers) when they manufacture the "raw materials" into pill form. The Section 936 tax credit applies to any company that sets up a manufacturing plant in Puerto Rico. Other industries have benefited from this tax credit too, but by the early '90s drug companies were collecting more than all other industries combined. This little loophole is being phased out, but it still saves the pharmaceutical industry over a billion dollars every year


The site has a problem with one chart overlapping the article, but just switch to the print version for the full poop.

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