So Pfizer will bring its tax bonanza back to the U.S.? Uh-huh

To hear Pfizer (PFE) chief executive Ian Read tell it, his company's $160 billion takeover of Allergan (AGN) will have a benefit beyond saving a pile in taxes. The tax savings will free up more cash that it can invest in the U.S. and create jobs, Read told Washington officials, according to news reports.

Don't bank on that rosy outcome, judging by how Pfizer had handled a tax break on its overseas cash before and by its indifferent record on research and development.

The merger aims to create the world's largest drug maker, which will be domiciled in Ireland, where corporate income taxes are a lot lower than in the U.S. By moving there, New York-based Pfizer could get to slash its tax rate to 5 percent, the level that Dublin-headquartered Allergan paid last year. While some estimates are not that low, there's no doubt Pfizer will fork over much less than its 26 percent levy in 2014.

With enormous amounts of cash held overseas, untaxed by the Internal Revenue Service, Pfizer is the latest U.S multinational to decamp to an offshore tax haven, a strategy known as an inversion. The pharmaceutical giant has $74 billion in profits it keeps overseas. Presumably under the Read scenario, a chunk of that stash will be channeled to the U.S. without the IRS taking a bite, thus showering manna on American hiring and research and development.

Too bad it didn't work out that way the last time Pfizer got a chance to bring back the bucks. In 2004, the federal government gave Pfizer and other U.S. corporate behemoths a tax holiday: They could repatriate their offshore earnings without paying taxes, on the assumption that this would spur job creation and innovation. A report from Democratic lawmakers, however, concluded that the money stayed in the companies' pockets.

The 15 corporations that snagged the greatest bounty -- which included Pfizer, Coca-Cola (KO) and Johnson & Johnson (JNJ) -- brought back $155 billion, the report said. And over the next three years, they cut their U.S. workforces by 21,000 jobs. R&D spending suffered too.

In recent years, Pfizer, which did not return a request for comment, has mostly scaled back its R&D. The company began lowering the research outlay to below $7 billion in 2011 from $9.4 billion the year before. In fairness, last year it hiked R&D to $8.3 billion from $6.5 billion. But that's still short of what it was five years before.

Mergers in the drug industry are at a frenetic pace lately, driven by an urge to buy new products (it's easier to acquire an innovative company than develop a new treatment yourself), expiration of many lucrative patents and cheap interest rates. With deals worth $200 billion, pharma M&A activity is overshadowed only by that of the tech, media and telecom sector, for the year's first half, according to consulting firm Deloitte. The Pfizer-Allergan agreement will pad the pharma total considerably.

But how will Pfizer's enlarged scale enhance its value for shareholders? Revenue and earnings are off, partly thanks to patents expiring on blockbuster drugs like Viagra. Its stock has been stuck in a trading range, between $30 and $35 per share all year. Allergan doesn't spend anywhere near what Pfizer does to develop new drugs.

All the pharma consolidation will not result in a cornucopia of useful new drugs, said Nick Bosanquet, professor of health policy at Imperial College London, quoted on an industry website earlier this year. Ever-bigger drug companies, he said, tend to shy away from developing medications useful for mass populations, in favor of those to treat niche illnesses, a less expensive endeavor.

So any applause for the Pfizer-Allergan union, the year's largest merger, might not get picked up by lab researchers or investors.