The bill deliberated over 18 months, punctuated in part by concessions to interest groups, is being labeled as the biggest climate package in US history. Some pundits believe it could boost the chances for president Joe Biden’s Democratic Party ahead of the November midterm elections.

Aimed at reducing carbon emissions and supporting the “greening” of energy consumption, the legislation also could potentially cut prescription drug costs for the elderly and at the same time eliminate taxation loopholes for corporations and the wealthy.

One of the biggest and most popular changes gives Medicare, the national healthcare program for the elderly, the right to negotiate some prices for prescription drugs.

Drug price negotiation for Medicare is popular

According to a Reuters/Ipsos poll conducted in early August, about half of Americans support the climate and drug pricing legislation, including 69% of Democrats and 34% of Republicans. The drug pricing power for Medicare is supported by 71%, including 68% of Republicans, the poll found.

Republicans in Congress opposed the bill’s passage, saying it would kill jobs by raising corporate tax bills and further fuel inflation with government spending. In particular, Medicare’s negotiating role would inhibit the development of new drugs.

The bill officially called the Inflation Reduction Act (IRA) includes $390 billion for clean energy funding over a decade, $318 billion for deficit reduction, and smaller amounts for targeted health care subsidies and improving the resources of the Internal Revenue Service.

Funds would be doled out as long-term tax credits for wind and solar energy as well as for energy storage, biogas and hydrogen.

An oddity of the new rules is that the funding for use of renewable energy on lands owned by the federal government will be allowed only if Washington also auctions rights to drill for oil and natural gas, a concession to members of Congress with constituents in the fossil fuel industry.

To encourage US consumers to buy electric vehicles, the bill carries a $7,500 tax credit, but this subsidy will only apply to the purchase of models assembled in North America.

Senate finance committee eyes offshore drug profit

Under the new law, companies earning more than $1 billion in the preceding three years would be required to pay taxes of at least 15% of their worldwide “book” profits. There would be an additional tax on big companies using tax breaks to pay less than the 21% corporate rate, as well as a 1% excise tax on corporate share buybacks.

In this sense, Senate finance committee chair Ron Wyden, a Democrat from Oregon, continues to investigate drugmakers who form subsidiaries in low- or zero-tax countries to lower their tax bills. Companies already on his radar include Merck & Co, AbbVie and Bristol Myers Squibb, and Wyden now has his sights on Amgen.

“Amgen generated 70% of its sales in the United States yet reported just 28% of its pretax income in the United States,” Wyden said in a letter to Amgen CEO Robert Bradway that was quoted widely in US media.

Author: Dede Williams, Freelance Journalist