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Drug companies could get millions in tax refunds for opioid settlement costs

Kaylee Greenlee, DCNF

Pharmaceutical companies are planning to deduct restitution payments from opioid lawsuit settlements from their tax filings and will get back around $1 billion each, The Washington Post reported Friday.

Johnson & Johnson, McKesson, AmerisourceBergen and Cardinal Health paid around $26 billion for their role in the opioid crisis and plan to receive tax benefits from the settlement, The Post reported. The settlement requires the companies to each pay between $5 and $8 billion to communities for the cost of the health crisis.

Supporters of the settlement say it will give communities struggling with addiction access to funds while resolving the complex litigation process, The Post reported. Critics say that $26 billion doesn’t account for the financial toll of the epidemic nor does it include an admission of guilt from companies that family members of victims want.

The four companies said they didn’t do anything wrong and that they’re not legally responsible for the epidemic since they produced federally approved prescription medication, delivered the pills to pharmacies and implemented measures to prevent abuse, The Post reported.

Activist Harry Cullen said it’s “incredibly insulting” for the companies to attempt to deduct the payments made as part of a settlement, The Post reported. “As if they are donating it to these people who they harmed in the first place.”

U.S. tax law allows companies to deduct the compensation paid to victims from their taxes, The Post reported. Cardinal Health spokesperson Erich Timmerman reiterated that the company’s deductions are legal and that the company is “committed to being part of the solution to this epidemic,” as an executive said in November.

Cardinal Health is expected to pay $6.6 billion as part of the settlement and expects to receive around $1 billion from the IRS after filing for a tax break under the Cares Act, The Post reported. The company initially estimated a deduction of $488 million, though the Cares Act allows the company to recoup losses from previous years.

Cardinal Health seems to be “getting a bit of a windfall from laws that Congress intended to help companies that are suffering due to a pandemic,” the University of Nevada at Las Vegas Professor Francine J. Lipman said, The Post reported. The Cares Act made tax breaks available to companies during the COVID-19 pandemic.

McKesson is expected to pay $6.7 billion after its deductibles, saving the company around $1.4 billion, The Post reported. AmerisourceBergen expects at least $1.1 billion in tax benefits, with another $371.5 million possibly available.

“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,” the company said, The Post reported.

The payments will be eligible for deduction depending on the wording of the settlement, though “restitution” has frequently been used by companies accused of misconduct to file for deductibles, The Post reported.

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