Every drug cartel needs someone to do the money laundering. The perfectly legal drug industry known as Big Pharma channels its vast profits through the equally respectable industry we might call Big Dry Cleaners. The most efficient is Ireland. We have to be honest about this – and recognise that what we are doing is neither decent nor sustainable.
Donald Trump stirs so many false grievances that it is hard to recognise when he is exploiting a legitimate one. His gripe factory churns out industrial quantities of whinge. His lies are legion. So the default assumption when he whines about injustices to America is to assume he’s summoning dark fantasies of resentment. Unfortunately for us, the biggest problem for Ireland is not with the million things Trump is hyping into outrageous insult. It’s with the one he’s right about.
To get a grip on this reality, we might conduct a little thought experiment: WWBD? What would Bernie do? Imagine a saner world in which Bernie Sanders had defeated Trump last November and was now trying to take on the social injustices and inequalities that are tearing America apart. What would he do about Big Pharma and Ireland? Pretty much what Trump says he wants to do.
Subtract Trump from this equation and you are left, not just with a fiddle, but with the Martin Hayes of fiddles. For us – and for many rich Americans – it plays a very sweet tune. But for ordinary working- and middle-class people in the US, it produces an unbearably discordant screech. They are entirely justified in wanting it to stop.
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At the heart of this dodge there is what looks like the biggest failure in the history of capitalism. Ostensibly, most of the biggest drug companies in the world are commercial disasters. They lose money faster than a poker player on acid.
Last July, in a blog for the US Council on Foreign Relations, Brad Setser and Michael Weilandt pointed out that “In 2023, Pfizer reported losing $4.4 billion in the United States, AbbVie $3.5 billion, Merck $15.6 billion, and Johnson & Johnson $2.0 billion. Of the biggest U.S. firms, only Eli Lilly appears to have eked out a small ($0.9 billion) profit in the United States.” This was not an anomaly: the scale of these losses is typical of recent years.
Looking innocently at these figures, you would imagine these giant companies must be charities, giving away their life-saving products for nothing in their homeland. Of course, the opposite is the case. Brand-name drugs are astonishingly expensive in America. A study by the Rand think tank (using data from 2022) found that Americans pay more than four times as much for non-generic drugs as people in other developed countries do. The US market is phenomenally profitable – so how come the drug companies are losing tens of billions of dollars every year in the US?
Remember Leprechaun economics, the phrase coined by Paul Krugman to describe the sometimes fantastical GDP figures reported by Ireland? You can’t understand that miracle unless you factor in the move we might call the Reverse Leprechaun. One part of this trick is about making the pot of gold appear at the end of our Irish rainbow. But the Reverse Leprechaun is about making it disappear at the rainbow’s other end across the Atlantic.
The magic ingredient is intellectual property. The pharma giants transfer ownership of their patents to their Irish subsidiaries who then licence the US to produce the drugs – for enormous fees. The Irish arm makes the profits (and pays modest Irish rates of corporation tax); the mother company in the US makes concomitant paper losses – and thus avoids all US tax.
Ireland wants to convince Trump that trade is not a zero-sum game – but that’s literally what the Reverse Leprechaun is. The combined US tax liability of the top seven pharma companies in 2023 was ... zero. Or actually slightly less than zero – they managed to accumulate $250 million in credits to set against future taxes.
Think about this from the point of view of an ordinary working stiff in Ohio. She pays through her taxes to support the research infrastructure that creates the drugs. She then pays (through her health insurance if she’s lucky) extortionate prices for those same drugs. Many of the good jobs manufacturing them are far away in Ireland. And then the pharma companies tell her that they’re losing billions in the US and sadly can’t pay any tax.
So Trump is right about this – albeit with two qualifications. One is that tax changes he signed into law in 2017 actually incentivise the multinationals to engage in this kind of trickery. The other is that it is not “America” that is being ripped off. It is ordinary Americans. After the Shamrock Dry Cleaners has taken its cut (currently we get about €4 billion a year for our services), the profits flow back into the accounts and pension funds of wealthy American shareholders.
Yet even taking account of Trump’s hypocrisy, the truth is unavoidable: we’re gaining from a profoundly unjust and immoral arrangement. This injustice in turn feeds the very culture of resentment and alienation that Trump exploits. We are not mere victims of Maga madness – we help to provoke it by giving ordinary Americans a good reason to think that globalisation is not working for them.
Being honest about this helps to clarify where Ireland’s real interests lie. Instead of defending the indefensible we should retreat to higher ground. Ireland has world-class pharma plants with an excellent workforce. A lot of what they do is perfectly legitimate – producing medicines for EU and world markets. That’s what we should be trying to protect. We can do that best by taking advantage of Trump’s war on science to make Ireland a genuine hub for research.
[ Flight of the Trumpugees: The wealthy Americans fleeing the US for EuropeOpens in new window ]
If we keep fighting to preserve the Reverse Leprechaun, we will lose our credibility when we try to protect our legitimate interests. We should do something that would really stun Trump: tell the truth and do the right thing.
