To the Editor:
I would like to submit revised text and a Table to the article entitled “The Tax Cuts and Jobs Act of 2017 and the Pharmaceutical Industry” (46, no. 3 (2018):806-808). Due to a technical error in the financial inputs into my calculations, the results should be adjusted as follows: the top eight manufacturers earned a median of $28.0 billion in gross revenue in 2016 (interquartile range [IQR] $22.5–$43.1 billion) (Table 1). Median income before taxes was $8.1 billion (IQR $5.6–$11.1 billion), and a flat corporate tax on this amount at the statutory rate of 35% would have resulted in a median payment of $2.8 billion per manufacturer (IQR $2.0 – $3.9 billion). By comparison, the median reported effective tax rate in 2016 was 17.7% (IQR 15.6–21.8%), resulting in a median of $1.4 billion in taxes paid (IQR $1.0–$2.3 billion). Starting with a new statutory rate of 21% under the Act, the median effective tax rate for 2016 would have dropped to 10.6% (IQR 9.4–13.1%) based on 2016 tax deductions per company—an estimated median tax obligation of $855 million (IQR $0.6–$1.4 billion). The model therefore arrives at a median tax savings of $570 million per company as a result of the Tax Cuts and Jobs Act. Of note, the effective tax rate includes only taxes on domestic revenue; manufacturers already obtain significant deductions on their US tax bill due to taxes paid to foreign governments;1 a 2017 report found that these eight manufacturers held approximately 90% of all 2016 and 2017 cash holdings abroad.2
Table 1. Gross Revenues with Estimated and Reported Tax Burdens of Large Pharmaceutical Manufacturers
* All values in $ millions
