Senate Finance Committee Chairman Ron Wyden is investigating embattled drugmaker and formula producer Abbott Laboratories’ low tax rates and alleging the company’s investments in stock buybacks may have driven the nationwide baby formula shortage.
Wyden, in a letter to Abbott chief executive officer Robert Ford, highlighted the company’s tax rate — which has averaged 12% over the past three years — and $8 billion in stock buybacks in recent years.
“I have long been concerned that windfalls from sweeping tax cuts for mega-corporations enacted by the 2017 Republican tax law would be used for padding the pockets of corporate executives and wealthy shareholders,” Wyden said in the letter, which was obtained by Bloomberg News. “It appears my concerns have been validated in this case, as Abbott chose spending billions on buying back its own stock instead of investing in critical upgrades to a plant essential to feeding our nation’s infants.”
An Abbott spokesperson did not immediately respond to a request to comment.
Abbott’s plant was shut in February after four children who had been fed formula made there were sickened by cronobacter bacteria, and two died. No further cases of children being sickened by formula have since been reported, according to the Centers for Disease Control and Prevention, which closed its investigation of the outbreak last week.
Abbott said its products are not to blame for the illnesses and deaths. Top FDA officials said on a call with reporters Monday evening it was too early to tell.
The shutdown exacerbated the existing shortage of baby formula, and the crisis has intensified with stores seeing inventories exhausted by panic buying.
Wyden’s announcement comes one day after the House Energy and Commerce Committee announced a May 25 hearing with Abbott Senior Vice President Christopher Calamari. Also testifying next week are FDA Commissioner Robert Califf, as well as Nestle SA Gerber vice president Scott Fitz and Reckitt Benckiser Group Plc senior vice president Robert Cleveland. Califf also is scheduled to testify at an Appropriations Committee hearing on Thursday.
Wyden’s investigation, which asks Abbott to provide details about their tax strategy and what investments have been made into the Michigan plant, is the latest step in a broader inquiry into how large pharma companies use the tax code to slash their tax rates. In January, Wyden asked Bristol-Myers Squibb Co. for details about an offshore tax arrangement that allowed it to get a refund from the IRS.
— With assistance from Fiona Rutherford
