IRS Files Answer in Amgen’s Tax Court Deficiency Case

5.a.1. The subheading is not an allegation that needs to be admitted or denied. Denies the remainder for lack of sufficient information. 

5.a.2. The subheading is not an allegation that needs to be admitted or denied. First through Fifth Sentences. Denies for lack of sufficient information. Sixth Sentence. Denies.

5.a.3. The subheading is not an allegation that needs to be admitted or denied. Admits only that Petitioner is subject to oversight from the Federal Drug Administration (“FDA”) and foreign regulators. Denies the remainder for lack of sufficient information.

5.a.4. The subheading is not an allegation that needs to be admitted or denied. First Sentence. Admits only that participants in the biopharmaceutical industry enter into agreements with one another. Denies the remainder for lack of sufficient information. Second Sentence. Admits only that agreements amongst participants in the biopharmaceutical industry may relate to aspects of the supply chain. Denies the remainder for lack of sufficient information. Third Sentence. Admits only that agreements amongst participants in the biopharmaceutical industry may describe how parties share costs and risks. Denies the remainder for lack of sufficient information. Fourth Sentence. Admits only that Petitioner has entered into agreements with third parties, including agreements related to products licensed to AML. Denies the remainder for lack of sufficient information.

5.a.5. The subheading is not an allegation that needs to be admitted or denied. First Sentence. Denies for lack of sufficient information. Second Sentence. Admits only that Amgen products were sold under the brand names Epogen®, Neupogen®, Aranesp®, Neulasta®, Enbrel®, Vectibex®, Prolia®, Xgeva®, Sensipar®, and Mimpara®. Denies the remainder. Third Sentence and Footnote 2. Denies for lack of sufficient information. 

Unnumbered Paragraph. The subheading is not an allegation that needs to be admitted or denied.

5.a.6. The subheading is not an allegation that needs to be admitted or denied. Denies for lack of sufficient information.

5.a.7. The subheading is not an allegation that needs to be admitted or denied. Denies for lack of sufficient information.

5.a.8. The subheading is not an allegation that needs to be admitted or denied. First Sentence. Admits only that drug product manufacturing is known in the industry as formulation, fill, and finish and requires an aseptic environment. Denies the remainder for lack of sufficient information.

5.a.9. The subheading is not an allegation that needs to be admitted or denied. Denies for lack of sufficient information

5.a.10. The subheading is not an allegation that needs to be admitted or denied. Denies for lack of sufficient information.

Unnumbered Paragraph. The subheading is not an allegation that needs to be admitted or denied.

5.a.11. The subheading is not an allegation that needs to be admitted or denied. First Sentence. Admits. Second Sentence. Denies for lack of sufficient information. Third Sentence. Admits only that during the Years at Issue, Amgen Inc. was the legal owner or a licensee (licensing rights from an unrelated party) of the intellectual property related to Epogen®, Neupogen®, Neulasta®, Amesp®, Prolia®, Xgeva®, Sensipar®, and Mimpara®. Denies the remainder. Fourth Sentence. Denies.

5.a.12. The subheading is not an allegation that needs to be admitted or denied. First Sentence. Admits only that Amgen Inc. acquired Immunex in July 2002. Denies the remainder for lack of sufficient information. Second Sentence. Admits only that during the Years at Issue, Immunex was a wholly owned subsidiary of Amgen Inc. and the legal owner or a licensee (licensing rights from an unrelated party) of the intellectual property related to Enbrel® and Vectibix®. Denies the remainder. Third Sentence. Denies.

5.a.13. The subheading is not an allegation that needs to be admitted or denied. First Sentence. Admits only that since 1995, Petitioner operated a manufacturing facility in Juncos, Puerto Rico. Denies the remainder. Second Sentence. Denies for lack of sufficient information. 

Unnumbered Paragraph. The subheading is not an allegation that needs to be admitted or denied.

5.a.14. The subheading is not an allegation that needs to be admitted or denied. First Sentence. Denies for lack of sufficient information. Second Sentence. Admits only that AML's products were required to meet regulatory and quality standards. Denies the remainder for lack of sufficient information. Third Sentence. Denies for lack of sufficient information.

5.a.15. The subheading is not an allegation that needs to be admitted or denied. Denies for lack of sufficient information.

5.a.16. The subheading is not an allegation that need to be admitted or denied. First Sentence. Denies and alleges that Petitioner does not identify the intercompany agreements covered by Petitioner's self-defined term “Intercompany License.” Second Sentence. Admits only that Amgen Inc. and AML entered into an agreement entitled “Commercial Exploitation Agreement” with a stated effective date of January 1, 2002 related only to Epogen®, Neupogen®, and Aranesp®. Denies the remainder. Third Sentence. Admits only that Immunex and AML entered into an agreement entitled “Commercial Exploitation Agreement” with a stated effective date of November 1, 2004 related to Enbrel®. Denies the remainder. Fourth Sentence. Denies. Alleges that Amgen Inc. and AML entered into an agreement entitled the “Restated and Amended Commercial Exploitation Agreement” with a stated effective date as of January 1, 2010 that includes U.S. Prolia® and Ex-U.S. Prolia® as AMGEN Covered Products. Further alleges that Amgen Inc. and AML entered into an agreement entitled “Amendment No. 1 to Restated and Amended Commercial Exploitation Agreement” with a stated effective date as of November 18, 2010 that includes U.S. Xgeva® as an AMGEN Covered Product. Further Alleges that Amgen Inc. and AML entered into an agreement entitled “Amendment No. 2 to Restated and Amended Commercial Exploitation Agreement” with a stated effective date as of July 15, 2011 that includes Ex-U.S. Xgeva® as an AMGEN Covered Product. Fifth Sentence. Admits only that in 2011, Immunex and AML entered into an agreement. Denies the remainder. Alleges that Immunex and AML entered into an agreement entitled the “Amended and Restated Commercial Exploitation Agreement” effective as of November 1, 2009 and that Immunex and AML entered into an agreement entitled “Amendment No. 1 to Commercial Exploitation Agreement” effective as of July 1, 2011, which amended and restated Schedule 1 to the November 1, 2009 Commercial Exploitation Agreement by adding Vectibix® as an Immunex Covered Product. Sixth Sentence. Denies. Alleges that Amgen Inc. and AML entered into an agreement entitled “Amendment No. 3 to Amended and Restated Commercial Exploitation Agreement” with a stated effective date of May 15, 2012 that includes Sensipar® and Mimpara® as AMGEN Covered Products.

5.a.17. The subheading is not an allegation that needs to be admitted or denied. Denies for lack of sufficient information.

5.a.18. The subheading is not an allegation that needs to be admitted or denied. First Sentence. Admits only that during the Years at Issue, Amgen USA was a party to a distribution agreement with AML. Denies the remainder for lack of sufficient information. Second Sentence. Denies. Third through Fifth Sentences. Denies for lack of sufficient information.

5.a.19. The subheading is not an allegation that needs to be admitted or denied. Denies.

5.b.1. The subheading is not an allegation that needs to be admitted or denied. Respondent incorporates herein his responses to paragraph 5.a. 16 above and denies the remainder.

5.b.2. The subheading is not an allegation that needs to be admitted or denied. First Sentence. Admits only that Immunex and an unrelated party entered into an agreement entitled “Amended and Restated Promotion Agreement” (the “Co-Promotion Agreement”) dated December 16, 2001 related to one of Amgen's products and that the Co-Promotion Agreement was effective during the Years at Issue. Denies the remainder. Second Sentence. Denies. Third Sentence. Denies and alleges that pursuant to Section 1.34 of the Co-Promotion Agreement, “marketing expenses shall mean any and all commercial expenses relating to Enbrel on a country-by-country basis in the Territory other than Sales Force Costs.” Fourth Sentence. Denies for lack of sufficient information.

5.b.3. The subheading is not an allegation that needs to be admitted or denied. First Sentence. Neither admits nor denies and alleges that section 9008 of the Patient Protection and Affordable Care Act (“ACA”), enacted in 2010, imposed an annual fee on branded prescription pharmaceutical manufacturers and importers. Second Sentence. Denies and alleges that the term “covered entity” is a defined term under section 9008 (d)(1) of the ACA and “means any manufacturer or importer with gross receipts from branded prescription drug sales.” Further alleges that the term “branded prescription drug sales,” “branded prescription drug” and “prescription drug” are defined terms with specific meanings under section 9008(e) of the ACA. Third Sentence. Admits.

5.b.4. The subheading is not an allegation that needs to be admitted or denied. First Sentence. Denies and alleges that pursuant to subsection 9008(d)(2)(A) of the ACA, “all persons treated as a single employer” under subsection (a) or (b) of section 52 of the Internal Revenue Code of 1986 or subsection (m) or (o) of section 414 of such Code shall be treated as “a single covered entity.” Second Sentence. Admits. Third and Fourth Sentences. Denies and alleges that Petitioner does not accurately represent the complete requirements of sections 52(a) and 1563(a). Fifth Sentence. Admits. Sixth and Seventh Sentences. Denies.

5.b.5. The subheading is not an allegation that needs to be admitted or denied. Admits only that in 2011 and 2012, Amgen USA and Amgen Inc., respectively, paid HCR Fees related to Amgen products. Denies the remainder.

5.b.6. The subheading is not an allegation that needs to be admitted or denied. Denies, incorporates Respondent's response to paragraph 5.a. 16.2, and alleges that there is no “Reimbursement Agreement” calling for reimbursement of HCR Fees.

5.b.7. The subheading is not an allegation that needs to be admitted or denied. First Sentence. Denies for lack of sufficient information. Second Sentence. Admits only that in 2011 and 2012, Amgen Inc. received payments in connection with HCR Fees from an unrelated party. Denies the remainder.

5.b.8. The subheading is not an allegation that needs to be admitted or denied. First and Second Sentences. Admits only that in 2011 and 2012, Amgen Inc. excluded payments received from AML and an unrelated party in connection with HCR Fees from income. Denies the remainder.

5.b.9. The subheading is not an allegation that needs to be admitted or denied. Admits only that Respondent increased Amgen Inc.'s income in 2011 and 2012 for payments it received from related and unrelated parties in connection with HCR Fees imposed on Amgen Inc., which it did not include in income. Denies the remainder.

5.c.1. The subheading is not an allegation that needs to be admitted or denied. First and Second Sentences. Admits and alleges that the payments were made to resolve Amgen Inc.'s criminal and civil liabilities resulting from federal government investigations of its marketing practices. Third Sentence. Admits only that Amgen Inc. made payments in 2012 to the federal government. Denies the remainder for lack of sufficient information. Fourth Sentence. Admits only that AML made payments to Amgen Inc. in 2011 and 2012 and alleges that the amount of the 2011 payment was $312,000,000 and the amount of the 2012 payment was $13,560,000. Denies the remainder.

5.c.2. The subheading is not an allegation that needs to be admitted or denied. Admits only that Amgen Inc. excluded from income payments received from AML in 2011 and 2012 of $312,000,000 and $13,560,000, respectively. Denies the remainder.

5.c.3. The subheading is not an allegation that needs to be admitted or denied. Admits that Respondent increased Amgen Inc.'s income by the amount of the payments by AML in 2011 and 2012 to Amgen Inc. in the amounts of $312,000,000 and $13,560,000, respectively. Denies the remainder.

5.c.4. The subheading is not an allegation that needs to be admitted or denied. Denies.

5.c.5. The subheading is not an allegation that needs to be admitted or denied. Denies for lack of sufficient information.

5.c.6. The subheading is not an allegation that needs to be admitted or denied. Admits only that Petitioner requested an additional deduction of $9,331,721 for 2012. Denies the remainder for lack of sufficient information.

5.c.7. The subheading is not an allegation that needs to be admitted or denied. Denies.

5.d.1. The subheading is not an allegation that needs to be admitted or denied. First Sentence. Admits only that during the Years at Issue, Amgen USA donated medicines to qualifying section 501(c)(3) organizations. Denies the remainder for lack of sufficient information. Second Sentence. Admits only that Amgen USA and AML executed a document entitled “Distribution Side Letter Agreement.” Denies the remainder for lack of sufficient information. Alleges that the Distribution Side Letter Agreement is undated and states that it “memorializes the commercial and legal arrangement existing since January 1, 2009” between Amgen USA and AML. Third Sentence. Admits only that the Distribution Side Letter Agreement between Amgen USA and AML states that “both Parties hereby agree that Donated Products shall continue to be supplied by AML to AMGEN USA at AML's standard cost.” Denies the remainder for lack of sufficient information. Fourth Sentence. Admits

5.d.2. The subheading is not an allegation that needs to be admitted or denied. Admits.

5.d.3. The subheading is not an allegation that needs to be admitted or denied. First and Second Sentences. Admits only that Respondent's primary position is that Amgen USA is entitled to the section 170 deductions described in paragraph 5.d.l of the Petition only if Respondent's AML transfer pricing adjustment is fully sustained. Denies the remainder. Third and Fourth Sentences. These sentences do not contain a material allegation of fact for which a response is required under Tax Court Rule 36(b).

5.e.1. The subheading is not an allegation that needs to be admitted or denied. First and Second Sentences. Admits. Third Sentence. Denies and alleges that foreign tax credit adjustments were not all computational adjustments. Fourth and Fifth Sentences. Denies.

5.e.2. The subheading is not an allegation that needs to be admitted or denied. First and Second Sentences. Admits. Denies the remainder.

5.e.3. The subheading is not an allegation that needs to be admitted or denied. Denies.