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BUSINESS A25
Tuesday 24 November 2015

How to fly free forever: Put $160B Pfizer and Allergan deal raises outcry

$170 million on your AmEx LINDA JOHNSON Democratic presidential companies have inverted
TOM MURPHY contenders, criticized the in the past decade, and
KEN SWEET AP Business Writers deal. more are considering it, ac-
AP Business Writer A $160 billion deal an- Clinton said it will leave cording to the nonpartisan
NEW YORK (AP) — Chinese billionaire Liu Yiqian, who nounced Monday to “U.S. taxpayers holding the Congressional Research
doesn’t exactly struggle to afford a plane ticket, can merge Pfizer and Allergan bag,” while Sanders said Service. Treasury said it had
now likely fly free, in first class, with his whole family, and create the world’s it will be a “disaster” for no comment Monday.
anywhere in the world, for the rest of his life. biggest drug company re- Americans already pay- The health care sector has
All because he bought a painting. newed the outcry in Wash- ing high prescription drug been the hottest in U.S.
Liu was the winning bidder for Amedeo Modigliani’s ington over “inversions,” costs. mergers this year and last,
“Reclining Nude” at a Christie’s auction this month in which U.S. corporations Asked if the deal was de- with deals worth $451 bil-
— offering $170.4 million — and when the sale closes combine with companies signed to avoid taxes, Pfiz- lion, according to Dealog-
he’ll be putting it on his American Express card. overseas to lower their tax er CEO Ian Read said only ic.
Liu, a high-profile collector of Chinese antiquities and bill. that company executives’ Drugmakers, insurers and
art, has used his AmEx in the past when he’s won art The combination — the obligation is to sharehold- pharmacy chains are com-
auctions. He put a $36 million tea cup from the Ming second-largest merger in ers and patients. bining to boost revenue,
Dynasty on his AmEx last year, according to reports, history — could have rami- The merger is subject to ap- cut costs and increase their
and put other artifacts on his card this year. He and fications around the globe, proval from regulators in the clout in negotiating prices
his wife said they plan on using their American Express pushing up drug prices and U.S., European Union and and contracts. Each new
card to pay for the Modigliani, according to news re- spurring more such deals elsewhere. It also needs deal puts pressure on small-
ports after the sale.
American Express will not confirm Liu Yiqian’s Modigli- A man enters Pfizer’s world headquarters, Monday, Nov. 23, 2015, in New York. Pfizer and
ani purchase, or say if it would be the biggest ever on Allergan will join in a $160 billion deal to create the world’s largest drugmaker.
their cards, citing privacy reasons. But it can be done.
“In theory, it’s possible to put a ($170 million purchase) (AP Photo/Mark Lennihan)
on an American Express card,” said American Express
spokeswoman Elizabeth Crosta. “It is based on our re- in the fast-consolidating the go-ahead from share- er rivals to bulk up.
lationship with that individual card member and these health care sector and holders of both countries. John Colley, a professor at
decisions are made on a case-by-case basis, based other fields. Pfizer makes such drugs as Warwick Business School in
on our knowledge of their spending patterns.” It is also increasing the Viagra, cholesterol-low- Britain, predicted even big-
Liu has an American Express Centurion Card, also election-year backlash ering Lipitor and the clot- ger deals as “industry play-
known as the AmEx “black card,” an invitation-only from U.S. politicians who preventer Eliquis. Allergan ers become concerned
card that is given only to AmEx’s biggest spending cli- have been criticizing drug- produces the wrinkle treat- about being left behind in
ents. The card has no official credit limit — and it earns makers recently over medi- ment Botox and Restasis for the race for scale.”
points, just like most of the cards non-billionaires carry cine prices that sometimes dry eyes, and also has a For consumers, however,
around. exceed $100,000 a year. superior pipeline of medi- such combinations could
Each AmEx card issued in each country accrues In what would be the big- cines in development. lead to higher drug prices,
points differently. But using a baseline of one point per gest inversion ever, Pfizer If it goes through, the merg- as well as higher taxes to
dollar, what American Express uses for its U.S. Platinum could save hundreds of mil- er will return Pfizer to the cover the lost tax revenue,
and Centurion Cards, Liu will earn 170,400,000 Mem- lions in U.S. taxes because top spot in the pharmaceu- said Jerry Reisman, a New
bership Reward points for his painting purchase, which it would move its tax head- tical industry, after years in York merger expert.
doesn’t include tax or the fees Christie’s charges. He quarters from America to which competition from “We’re all going to feel
has likely earned tens of millions of points for his earlier Ireland, where Allergan is cheaper generics cut into this,” he said.
fine art buys, like the expensive tea cup. based. Pfizer, which cur- its revenue from some of its The deal will enable the
Liu and his wife, in an interview with The New York rently operates out of New blockbuster drugs. combined company to
Times, said they plan to use the points to allow their York, would slash its tax rate The combination will essen- pour around $9 billion a
family to travel for the rest of their lives. from around 25 percent this tially be Pfizer “but with a year into research on new
That shouldn’t be a problem, according to Zach Ho- year to about 18 percent. lower tax rate,” wrote Bern- treatments, Read said in
nig, editor-in-chief of the travel rewards site ThePoints- Inversions have long been stein analyst Tim Anderson. an interview. That includes
Guy.com. attacked by some politi- Despite attempts by Con- work on cures for Alzheim-
“He’s probably reached that goal with that single cians as a tax dodge, and gress and the Treasury De- er’s disease, Parkinson’s,
painting,” Honig says. Hillary Rodham Clinton and partment to thwart the cancer and other difficult-
Honig estimates that if Liu converted his Member- Bernie Sanders, the leading practice, about 50 U.S. to-treat illnesses.q
ship Rewards points into one of a number of airline
frequent flier programs, he and his family could travel
anywhere, in style. He could fly 3,000 times between
the U.S. and Europe in the ultra-deluxe first class suites
offered by Singapore Airlines (estimated cost: $17,800
round trip), if he converted points to Singapore’s pro-
gram. Even if Liu wanted to use his AmEx points to pay
for flights, a less efficient use of them, he could still
redeem those points for hundreds of first class flights
anywhere in the world.
One potential loser here could be Christie’s. Every
time an American Express card holder uses the card,
AmEx charges the merchant a fee. That fee is usually
2 to 3 percent, depending on the merchant. For a
$170 million painting, millions of dollars could flow to
AmEx instead of Christie’s — enough, presumably, for
AmEx to pay for the Liu family’s future flights, and then
some.q