Pharma and Life Sciences Tax News - Vol. 11, No. 5:

Collaboration agreements could determine who bears the burden of non-deductible pharma fees - 5 November 2012

Beginning in 2011, certain pharmaceutical companies are required to pay an annual, non-deductible fee to the federal government based on the companies' branded drug sales for the year. These fees -- which total billions of dollars -- are allocated among the companies based on each company's relative market share of branded prescription drug sales for the preceding year.

Many branded drugs are co-developed with, or licensed to, another pharmaceutical company under so-called collaboration agreements, which are common in the pharmaceutical industry. This article explores the tax considerations related to the non-deductible fee when the branded drug is co-developed with, or licensed to, another pharmaceutical company under a collaboration agreement.