·  Legal News, Analysis, & Commentary

Opioid Drugs

Opioid Makers Plan to Offset Settlement Costs with Tax Breaks

— March 17, 2021

Companies are planning to use COVID-19 tax breaks to help offset their settlement pay out.

As Johnson & Johnson is negotiating a settlement for its role in the opioid crisis, the drug maker is simultaneously being praised for its new, single-dose COVID-19 vaccination that’s been approved by the Food and Drug Administration (FDA).  J&J and three other drug manufacturers, Cardinal Health, AmerisourceBergen and McKesson, are hoping to use their coronavirus tax breaks to offset the costs of the settlement.

Under the terms being negotiated in the opioid case, the companies aren’t likely to admit to any wrongdoing, while potentially paying out as much as $26 billion.  Johnson & Johnson said it expects it “could deduct as much as 21.4 percent of its $5 billion share of the settlement, which would mean a roughly $1.1 billion tax benefit.”

NPR addiction correspondent Brian Mann explained, “In financial filings, the firms say they plan to declare these opioid payments as losses, which is a deduction…So, if they pay $26 billion in opioid settlements, they could recoup as much as 4 billion in tax benefits.”

Opioid Makers Plan to Offset Settlement Costs with Tax Breaks
Photo by Nataliya Vaitkevich from Pexels

Cardinal has big plans, too.  A Cardinal spokesman responded it hopes to make use of the CARES Act tax provision, which complies with “current federal law,” and which allows them to “recover previously paid federal taxes.”

AmerisourceBergen also reported in November it expects a $1.1 billion tax benefit with an additional $371.5 million tax benefit that’ll help to offset costs “possible but uncertain.”  It submitted a statement, saying, “A settlement has not been reached, and, therefore, we applied significant judgment in estimating the ultimate amount of the opioid litigation settlement that would be deductible.”

House Committee members wrote of the implications of allowing the opioid makers to take tax breaks via this loophole, “It would be wrong for you to deduct opioid settlement payments under a CARES Act provision intended to assist businesses that are struggling during the coronavirus pandemic.  The American people should not be on the hook for hundreds of millions of dollars for your company’s role in fueling the opioid crisis.”

“I never thought it would get to the point where they would try to skirt their responsibility to pay…for an opioid crisis that they caused,” Democratic California Rep. Jimmy Gomez, said, one of three that is fighting hard against allowing this plan to move forward.

“#CARESAct funds were meant to help struggling businesses of all sizes make it through this crisis. But now some drug companies are trying to use it to duck their fiscal obligations for the #OpioidCrisis they helped fuel. @RepMaloney, @RepDeSaulnier & I are fighting to stop that,” he posted on Twitter.

The reps are pushing for the companies to provide documentation that AmerisourceBergen will commit to cease such profiting from the CARES ACT, amongst other documents, including a list of past and present employees who’ve been disciplined or terminated amid the crisis.  They’re asking for information regarding AmerisourceBergen’s anti-diversion programs and more transparency, in general.

“If they get away with it, that means less money going into the Treasury.  That means less money for programs that will help deal with the fallout of the opioid crisis,” Gomez added.


Tax Breaks Will Offset $26 Billion Opioid Settlement, Drug Firms Say

The key players in the opioid crisis may be using COVID aid to reduce legal fees. Rep. Jimmy Gomez says no

Drug companies seek billion-dollar tax deductions from opioid settlement

Join the conversation!