Pfizer's move to acquire British-based pharma company AstraZeneca has proven that too many in the political world have not a clue how markets work, how innovation takes place, or how economic growth is achieved. The UK Parliament has grilled Pfizer CEO Ian Read, asking him to make un-make-able promises about the future. Oregon Senator Ron Wyden, chairman of the U.S. Senate Finance Committee, is asking if the deal finally yields enough proof to justify new corporate tax policy that would close certain "loopholes."
On neither side of the Atlantic are the right questions being asked. Nor is Mr. Read, however convenient a scapegoat, the right person to be interrogating
Instead, the pundits should be asking what can be done to ensure that the R&D pharmaceutical sector remains vibrant, ambitious, and well-funded into the coming decades. Quite soon, there will be two billion people over 60, and this population will be increasingly subject to disease and health deterioration, which needs the resurgence of the "miracles" of the 20th century that contributed mightily to our current longevity. These are not questions for a CEO, but for policymakers who create the conditions that enable or discourage investment. And these conditions themselves will lead to jobs, innovation, and economic growth.
Instead of asking Ian Read about Pfizer's plans to hire or fire, government leaders should be asking their health, science, and finance ministers what kinds of R&D programs could be put in place to enable the British population to age with more vitality. They should ask their scientists how the evolving industry landscape can be shaped to become a better, more efficient producer of health solutions for a more active and healthier aging. Ask the NHS about what new kinds of therapies can improve health outcomes while driving down costs. Ask the education minister if investments are being made to enable the considerable skills and knowledge that scientists will need for the exploding demands of an aging population.
This is as much about caregiving as health provision. The answers will give clues to 21st century public policy where one's focus ought to be.
It is interesting that UK Prime Minister David Cameron has stepped to the global stage with Alzheimer's, using his presidency of the G7 to spearhead a worldwide coalition to beat this devastating disease. The future of jobs in aging Britain is far more wrapped up in the fate of Alzheimer's than whether Pfizer buys AstraZeneca. And so the UK's focus might shift to correcting the adverse regulatory and political system that has doomed discovery for Alzheimer's innovation rather than imposing politics to squelch a market deal.
But the UK isn't asking these questions. And the US is equally upside down.
As Senator Wyden has suggested, it is true that Pfizer's potential move overseas exposes just how damaging the US tax code can be. The practice of "inversion" - in which one US company buys another and adopts its foreign billing address - is becoming increasingly common. And President Obama's quest to put an end to the practice has only motivated more organizations to invert while they still can.
Inversion, however, isn't the problem. It is, rather, the result of confiscatory tax policy that has impact on company decision makers. Senator Wyden is asking how to stop inversion, when he should be asking why companies are inverting.
Fix the basic problem, not the symptom.
This is, of course, the U.S.'s corporate tax rate that is one of the highest in the world - and the incentive for companies to save billions by changing their address. Pharmaceuticals - an industry that, as much as any other, truly unites some of the world's most brilliant minds - is thoroughly global. A move from New Jersey to Dublin or London isn't much more than paperwork. And if a decision on location benefits the shareholders - by billions, no less - Mr. Read and his team are doing their job, exactly.
Like his political counterparts in the UK, Sen. Wyden is asking the wrong questions and directing them at the wrong people. The newly minted Chairman of the Senate Finance Committee should grasp the moment to lead by asking his fellow policymakers how the tax code can be revised to promote pharmaceutical innovation and R&D here in the US? Or, how such revision would create jobs, attract world-class talent, and assert the US as the leader in health and pharmaceutical innovation.
Or, a revision to get at the cause of this inversion issue and enable the trillions that US corporations have overseas to be repatriated and invested here. US companies would no longer be incentivized to pack up and move their address; funds for investing in infrastructure, technology, medicine, etc. could be allocated and strategically deployed in America for America's renaissance. Now, that would be exciting and that would constitute leadership. Allow repatriation and literally hook it with incentives for investment at home. The infrastructure build that President Obama has been touting would benefit enormously from these trillions.
The point here, however, is not the process or potential of repatriation. It's that Sen. Wyden's seizing upon the Pfizer deal is nothing but a distraction. Behavioral economics teaches us that people act based on their incentives, which suggests government might consider changing those incentives to align to the outcomes they want.
Sen. Wyden should not be asking Mr. Read why Pfizer is doing what Pfizer is doing. He should be asking his colleagues in the Senate how they can work together to create a more hospitable American investment environment that will be the engine for economic growth and prosperity in our 21st century.
Perhaps it's no coincidence that the uproar is centered on the Pfizer-AstraZeneca deal. Not because it's such a huge deal, but because the stakes for global health are in the balance. The real question is what the US and the UK can do together to create the incentives for 21st century pharmaceutical innovation that will pale the achievements of the 20th. Our aging global population is demanding it more than ever. You can be certain the jobs and economic value will follow.