A Bitter Pill

By ColumnsFOXBusiness

When you use the phrase “drug war” you probably think of Mexico or Colombia, but there’s a battle being fought right now in front of Parliamentary committees in Britain that is getting very ugly.

The proposed takeover of UK based pharmaceutical company AstraZeneca (NYSE:AZN) by giant U.S. drug maker Pfizer (NYSE:PFE) is turning from a business story into a shameless game of nationalism with British politicians taking the opportunity to grandstand for votes.

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The $105 billion takeover bid of AstraZeneca has become politically fraught amid fears that the U.S. firm would cut science and manufacturing jobs in the UK. British Prime Minister David Cameron has touted his administration’s efforts to make Britain a center for scientific research and critics claim the giant merger of the two drug companies could undermine that goal.

But it’s not just about jobs. Pfizer is hitting back at AstraZeneca's claims that a takeover by the company would risk lives by delaying the development of important drugs.

Pfizer's chief executive, Ian Read, says warnings that the proposed merger would disrupt AstraZeneca's drug pipeline are simply not valid.

Read told reporters after giving evidence to the UK’s business select committee, "In this integration, I frankly see no risk of delays for any important products for Pfizer or AstraZeneca. I'm afraid I think that's a real red herring."

He went on to tell the Independent newspaper “ We would do the integration in a way that the scientists of both AstraZeneca and Pfizer would say 'these are projects that need to be kept on time, need to be ring fenced, need resources', and I have no doubt we would not slow up any of this development."

Not so, says Pascal Soriot, AstraZeneca's chief executive who told British lawmakers that the merger would be a distraction from potentially lifesaving research, especially if Pfizer makes cuts once the takeover is complete.

Soriot told the Committee, "What will we tell the person whose father died from lung cancer because one of our medicines was delayed – and essentially was delayed because in the meantime our two companies were involved in saving tax and saving costs?"

Pfizer says those claims are alarmist and the company continues its pledge to keep 20% of the combined company's research scientists in Britain, but also admitted there would be cuts in both jobs and the research budget if the merger were approved.

In Britain’s court of public opinion it appears the decision has already been made, Pfizer the big, brash American bad guy should be sent packing across the pond with its tail between its legs. This court believes Pfizer is merely trying to avoid higher taxes while stripping AstraZeneca into pieces.

It should be pointed out that AstraZeneca itself is the result of a mega merger when Swedish Astra joined forces with British Zeneca in 1999. In the past 15 years, the new company has been gobbling up smaller pharmaceutical business ever since and then last year announced it would cut 2,300 jobs as part of a cost cutting plan.

In other words, AstraZeneca is accusing Pfizer of doing all the things that it has done. And talking of hypocrisy, Pfizer admits that a move to the UK would give it "substantial tax benefits", paying a 20% corporate tax rate compared with 40% in the US. The UK designed it that way to encourage companies to do business in the UK, now its lawmakers are criticizing Pfizer for doing just that.

Hopefully it will also serve as a wake-up call to the United States and its ridiculously high corporate tax rate that forces American companies to stockpile its cash overseas rather than bring it back to the US.

Whether this deal is approved or not, it is clear that much of the rhetoric should be ignored, especially when the politicians get involved.

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