Pharma and life sciences companies face rising tax rates, says PwC

The global financial crisis, government pressure, changing market dynamics for an industry experiencing significant change, and rapidly evolving health care reforms are likely to drive up the effective tax rate for the pharmaceutical and life sciences industry, according to a report released by PricewaterhouseCoopers entitled Pharma 2020: Taxing times ahead - Which path will you take? The industry's response to these trends, including diminishing reliance on the 'blockbuster drug model,' will make tax planning more complicated and challenging for tax executives working for pharmaceutical and life sciences companies.

The results of a poll of 35 senior tax executives from pharmaceutical, biotechnology and medical device companies conducted last month by PricewaterhouseCoopers showed that:

- Six in ten tax leaders (62% of those polled) agreed that an increase in the effective tax rate for the pharmaceutical and life sciences industry is inevitable.
- 63% agreed that the cost of increased taxes on their organizations might eventually be passed to consumers unless they find ways to operate more efficiently and transform their approach to R&D and sales & marketing.
- 62% of tax executives polled said they are looking to maximize tax credits and other incentives for research and development.
- Virtually all executives polled (100%) said they believe that the demand for tax specialists will grow substantially as tax issues for the industry become more complex.
- More than half of the respondents said they are now being consulted early on by senior management in strategic business decisions, and thus have influence over the direction of the company. Still, 34% said they are consulted late in the game, and 9% of tax leaders said they are informed after the fact about strategic business decisions that have tax implications for the organization.