House panel presses DOJ, Treasury to review drugmakers’ opioid settlement tax breaks

The House Oversight and Reform Committee on Monday pressed the departments of Justice and the Treasury to look into the tax deductions of four U.S. drug companies that agreed to a multibillion-dollar settlement last month to end opioid-related lawsuits.

In a letter to Treasury Secretary Janet Yellen and U.S. Attorney General Merrick Garland, the panel said it had found four companies that agreed to the $26 billion settlement — Cardinal Health, McKesson Corporation, AmerisourceBergen, and Johnson & Johnson — are possibly trying to “put taxpayers on the hook for billions of dollars in settlement costs.”

“We request that you determine whether these tax maneuvers comply with the law, and we urge you to do everything in your power to ensure transparency and accountability for the companies and executives that fueled our country’s deadly opioid crisis,” wrote the committee.

As the panel noted, all of the drug companies had indicated their plans of claiming tax deductions for their settlement agreement, with billions of dollars worth of such deductions possibly being claimed. The committee said it was concerned that these plans could place an “improper burden on taxpayers.”

“The Committee remains deeply concerned that these companies will be allowed to claim billions in tax benefits resulting from great harm to the American people,” read the letter.

Cardinal Health had apparently informed the committee that it intended to claim emergency tax relief provided by the pandemic relief CARES Act. The House committee questioned this move, noting that the company was claiming 2020 losses, despite the settlement payments not being scheduled to start until April 2022.

In a statement, Cardinal Health told The Hill, “We have been forthright about our approach to opioid-related tax obligations. As we noted in our response to the Committee last year, we publicly disclosed in February 2021 that we recorded a net operating loss for tax purposes, which, as permissible under current federal law, will be carried back across previously paid federal taxes.”

The Hill has reached out to the other companies named in the letter for comment.

Thousands of state and local governments as well as tribes had filed lawsuits against the four companies for allegedly contributing to the opioid crisis. As part of the settlement, the drug distributors admitted to no guilt in the lawsuits while agreeing to pay billions of dollars over 18 years to 46 states and D.C.