But drugmakers aren't the only companies looking overseas for better tax deals.
Last month, U.S. medical device maker Medtronic Inc. said that it had agreed to buy Ireland-based competitor Covidien for $42.9 billion in cash and stock. The combined company would have executive offices in Ireland, which has a 12.5 percent corporate income tax rate. And drugstore chain Walgreen Co. — which bills itself as "America's premier pharmacy" — also is considering a similar move with Swiss health and beauty retailer Alliance Boots.
These tax-lowering overseas deals, which are called inversions, have raised concerns among some U.S. lawmakers over the potential for lost tax revenue. But business experts say U.S. companies that find the right deal have to consider inversions due to the heavy tax burden they face back home.
At 35 percent, the United States offers the highest corporate income tax rate in the industrialized world. By contrast, the European Union has an average tax rate of 21 percent, said Donald Goldman, a professor at Arizona State University's W.P. Carey School of Business.
In addition to the higher rate, the United States also taxes the income companies earn overseas once they bring it back home. The tax is the difference between the rate the company paid where it earned the income and the U.S. rate.
"We tax income where ever it is earned around the world once you bring it back home, and almost nobody else does that," Goldman said.
In addition to lowering a company's tax rate, inversions also can help a company reduce its U.S. tax liability through a process known as earnings stripping. Essentially, the U.S. business takes on debt to fund a dividend for its foreign operations and deducts interest payments on that debt.
Tax lawyer Bret Wells said companies consider an inversion only if they can put together a good deal that will help grow their business. The inversion is really a secondary benefit but also a way for corporations to "vote with their feet."
"When I can see that the other guy, my competitor, can reduce their tax bill, I want to look like them," said Wells, an assistant law professor at the University of Houston.
Inversions can happen if a U.S. company combines with a foreign business and shareholders of the foreign entity own at least 20 percent of the newly merged business. Legally, the foreign company might acquire the U.S. business or the two would create a new entity overseas. But the U.S. company often maintains both its corporate headquarters and control of the company.
President Barack Obama has proposed raising the threshold for inversions on foreign entity ownership to 50 percent, with the goal of making them less attractive.
But Wells, the tax lawyer, says more comprehensive tax reform is needed.
In the meantime, experts say companies will continue to consider inversions.
Walgreen Co. is among those considering it now. The drugstore chain acquired a 45 percent stake in the Swiss health and beauty retailer Alliance Boots in 2012, and it has an option to buy the rest of the company next year. Walgreen executives have told analysts that they will consider a host of variables like what the deal may do for the company's tax rate before they discuss their decision later this summer.
A Walgreen inversion may have a deeper impact than the drug and medical device makers that have already forged ahead because the drugstore chain's business centers on dealing directly with consumers.