Income Tax Expense (Benefit)

9 Months Ended

Sep. 30, 2012

Income Tax Expense (Benefit)

Note 10. Income Tax Expense (Benefit)

Our income tax expense (benefit) was ($4.2) million and $16.3 million for the quarters ended September 30, 2012 and 2011, respectively, and $12.7 million and $57.1 million for the nine months ended September 30, 2012 and September 30, 2011, respectively. Our income tax expense (benefit) includes federal, state and foreign income taxes at statutory rates and the effects of various permanent differences.

Our effective tax rates for the nine months ended September 30, 2012 and September 30, 2011, were 53.0% and 39.5%, respectively.

The effective tax rates for the nine month periods ended September 30, 2012 and 2011 are higher than the statutory U.S. tax rate due to state income taxes, certain share-based compensation that is not tax deductible and an increase in the fair value of contingent consideration that is also not deductible for tax purposes. In addition, the effective tax rate for the nine months ended September 30, 2012 is higher than the statutory U.S. tax rate due to foreign losses on which no tax benefit is provided or on which the tax benefit is less than the U.S. statutory tax rate and non-deductible amortization expense. These increases to the effective tax rate are partially offset by tax benefits related to orphan drug credits, manufacturing deductions and charitable contributions. Tax expense (benefit) for the quarters ended September 30, 2012 and 2011 are a combination of the nine month effective tax rate and adjustments for changes in the effective tax rate from the prior quarter.

During the nine months ended September 30, 2012, we had no material changes to our liability for uncertain tax positions. Our last U.S. tax examination for 2008 concluded in the first quarter of 2011 with no material adjustments. We are currently under examination in a foreign tax jurisdiction and various state income tax returns are also currently under examination. At this time, we do not believe that the results of these examinations will have a material impact on our financial statements.