Apr 1, 2019

GOP tax law lifts health care industry

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Data: Company reports. Get the data; Chart: Andrew Witherspoon/Axios

Health care companies reported larger profits in the final quarter of 2018, compared with the same period in 2017, and the Republican tax overhaul helped pad their bottom lines, according to an Axios analysis of financial documents.

The intrigue: Like other industries, many health care companies took sizable charges in the final quarter of 2017 as they repatriated overseas cash. Now, firms are feasting on lower tax rates — and in some cases, are getting federal tax refunds.

Between the lines: The GOP law made it easier to bring home money that was parked abroad, which many pharmaceutical and medical device companies did in late 2017. It also eliminated tax provisions that have specifically helped large companies like Blue Cross Blue Shield insurers. But the industry's biggest prize has been the significantly reduced corporate tax rate.

  • Drug giant Pfizer received a $563 million tax benefit in the fourth quarter, and its corporate income tax rate in all of 2018 was just 6%.
  • Johnson & Johnson's effective tax rate in the last quarter of 2018 was 2.6%.
  • Almost half of the $551 million tax break recorded by hospital chain HCA Healthcare in 2018 came in the fourth quarter.

Yes, but: Industry profits would have been even larger in the fourth quarter if it weren't for a few outliers.

  • AbbVie had a $1.8 billion net loss in Q4 because it had to book a $4 billion impairment charge for a drug acquisition that flopped. Mallinckrodt similarly had a giant impairment charge, leading to a $3.7 billion loss in the quarter.

The big picture: The industry remains financially powerful.

  • Tax law aside, the companies that handle the most revenue, like health insurers collecting premiums and drug distributors shipping products, are not the most profitable.
  • The highest margins are still usually associated with manufacturers of prescription drugs and medical devices.

Go deeper:

Go deeper

Blue Cross Blue Shield insurers sue CVS, alleging drug pricing fraud

Photo: John Lamparski/SOPA Images/LightRocket via Getty Images

Six Blue Cross Blue Shield insurers have sued CVS Health, alleging the pharmacy chain overcharged them based on "artificially inflated prices" for generic drugs and concealed the true cash prices of those drugs.

The big picture: CVS has faced legal scrutiny over its cash discount programs since 2015, and this lawsuit adds big names to a mounting problem.

World coronavirus updates

Data: The Center for Systems Science and Engineering at Johns Hopkins; Map: Axios Visuals

New Zealand has only eight active novel coronavirus cases and no COVID-19 patients in hospital after another day of zero new infections. However, the death toll rose to 22.

Zoom in: A top health official told a briefing a 96-year-old woman "was regarded to having recovered from COVID-19 at the time of her death, and COVID-19 is not recorded as the primary cause of her death on her death certificate." But it was decided to include her in the overall tally of deaths related to the virus.

Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Global: Total confirmed cases as of 10 p.m. ET: 5,690,951 — Total deaths: 355,575 — Total recoveries — 2,350,071Map.
  2. U.S.: Total confirmed cases as of 10 p.m. ET: 1,699,073 — Total deaths: 100,396 — Total recoveries: 391,508 — Total tested: 15,192,481Map.
  3. Public health: CDC issues guidelines for reopening officesFauci says data is "really quite evident" against hydroxychloroquine.
  4. States: California hospitals strained by patients in MexicoTexas Supreme Court blocks mail-in expansion to state voters.
  5. Business: MGM plans to reopen major Las Vegas resorts in June — African American business owners have seen less relief from PPP, Goldman Sachs says.
  6. Tech: AI will help in the pandemic — but it might not be in time for this one.
  7. World: EU proposes a massive pandemic rescue package.
  8. 1 🎶 thing: Local music venues get rocked by coronavirus.
  9. 🎧 Podcast: Trump vs. Twitter ... vs. Trump.
  10. What should I do? When you can be around others after contracting the coronavirus — Traveling, asthma, dishes, disinfectants and being contagiousMasks, lending books and self-isolatingExercise, laundry, what counts as soap — Pets, moving and personal healthAnswers about the virus from Axios expertsWhat to know about social distancingHow to minimize your risk.
  11. Other resources: CDC on how to avoid the virus, what to do if you get it, the right mask to wear.

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Updated 3 hours ago - Politics & Policy