House Panel Probes Opioid Companies on Tax Breaks for Legal Fees

The House Oversight and Reform Committee is probing whether executives at four drug industry companies plan to use a pandemic-related tax break to deduct opioid settlement payments.

Drug distributor Cardinal Health Inc. has said it plans to use a temporary tax break in the 2020 Cares Act that allows corporations to deduct losses, including those tied to legal settlements, to offset profits in previous years and generate a refund from the Internal Revenue Service.

A letter from the committee said that Cardinal Health disclosed in regulatory filings that they expect to receive a nearly $500 million tax refund because of the Cares Act tax break, which allows them to carry back losses to previous years when tax rates were higher.

The House panel also sent letters to McKesson Corp., AmerisourceBergen Corp. and Johnson & Johnson asking if they plan to employ the same tax strategy. Those three companies along with Cardinal Health, have collectively agreed to pay a combined $26 billion to settle claims from dozens of states and local jurisdictions regarding their roles in the opioid crisis, the letter said.

“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 letter, led by House Oversight Chair Carolyn Maloney, said. “Any attempt to reduce your settlement costs by taking advantage of a tax provision intended for businesses suffering coronavirus-related losses is an insult to every community suffering from the opioid crisis and the pandemic.”

The four companies did not immediately respond to a request to comment.

Opioids were involved in 46,802 drug overdose deaths in 2018, or more than two-thirds of all such deaths, according to the U.S. Centers for Disease Control and Prevention. West Virginia, Delaware, Maryland, Pennsylvania, Ohio and New Hampshire had the highest rate of drug overdose deaths that year, according to the CDC.

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