Michelle Hanlon (MIT; Google Scholar) & Jeffrey L. Hoopes (North Carolina; Google Scholar), The Pharmaceutical Industry: Effective Tax Rates Before and After the TCJA, 185 Tax Notes Fed. 2325 (Dec. 23, 2024): 

In this report, Hanlon and Hoopes analyze various measures of the effective tax rate for domestic and foreign pharmaceutical companies in the five years before and after passage of the Tax Cuts and Jobs Act, with a focus on the largest companies [U.S.: Johnson & Johnson, Pfizer, Merck, AbbVie, Bristol-Myers Squibb, Celgene, Lilly, Abbott, Regerneron, Zoetis; Foreign: Novartis, Roche, Teva, Sanofi, GSK, Novo, Allergan, Astrazeneca, Shire, Takeda].

Conclusion
Overall, the data are consistent with the U.S. pharmaceutical companies having similar or slightly higher GAAP ETRs relative to their foreign competitors before the TCJA. Based on the data in our analysis, U.S. companies in the pharmaceutical industry demonstrate larger declines in their ETR measures after the TCJA than their foreign counterparts. After the TCJA, the average annual GAAP ETR and the average long-run GAAP ETR are lower for the U.S. pharma industry relative to the foreign pharma industry. While the average annual rate for U.S. companies appears to be increasing starting in 2022 and 2023 — and part of this can be attributed to the capitalization of R&D expenses for tax purposes — more years of data are necessary to determine if the higher rates are a trend or a temporary outcome. In terms of the comparison of the largest 10 U.S. and 10 largest foreign pharma companies, the results are not as clear. The U.S. sample appears to have a somewhat lower average annual GAAP ETR after the TCJA, but in regression analysis this differential does not reach statistical significance. Moreover, in a comparison of long-run ETRs, the 10 largest foreign pharmaceutical companies have a higher long-run ETR after the TCJA than the 10 largest U.S. pharmaceutical companies. As more years pass and more data become available, continued analysis will be helpful to decipher the outcomes for U.S. and non-U.S. pharmaceutical companies.

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