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For people who were blown away to learn recently that the 11 largest global pharmaceutical companies made an astonishing $711 billion in profits over the last decade, here's another measure of the industry’s greed: The same companies paid their chief executive officers a combined $1.57 billion in that period. Not bad work if you can get it. They achieved this thanks in part to their systematic exploitation of Medicare and an epidemic of illegal marketing activity.

According to corporate filings analyzed by Health Care for America Now (HCAN), in 2012 the drug companies’ CEOs drew total compensation of $199.2 million, two and a half times the total in 2003. In 2006, the first year of the Medicare prescription drug law, the pay of the CEOs jumped by $58.9 million from the previous year, the largest one-year increase in the decade HCAN reviewed.

Inflated Drug Prices

These huge spikes in pay coincided with eye-popping profits bolstered by a provision the pharmaceutical lobby inserted into the law to prohibit Medicare from using its unparalleled purchasing power to obtain discounts or negotiate prices with drug companies. By prohibiting Medicare to get better drug prices, the federal government is effectively subsidizing the greed of the drug makers and their CEOs. As a result, Americans pay vastly higher prices than people in other countries for identical drugs. This is ludicrous and wasteful. It hurts the government, seniors and middle-class families.

It should not be the official policy of the United States to price-gouge our people and government – a practice that’s especially offensive at a time when some in Washington are talking about cutting Medicare benefits.

Simply empowering Medicare to buy drugs under the same bulk purchasing discounts used by state Medicaid programs would save the federal government billions. For example, the Medicare Drug Savings Act, introduced by Sen. Jay Rockefeller (D-WV), would save $141 billion over the next 10 years without reducing Medicare benefits. Similar measures are in President Obama’s budget proposal and the House Democratic budget plan.

Illegal and Improper Conduct on the Rise

The increases in CEO pay and drug company profits also corresponded with a surge in illegal and improper conduct by the industry. From 2003 to 2012, financial penalties paid by drug manufacturers to settle allegations of illegal marketing, price-gouging of government programs and other violations rose by more than 500 percent, according to a report issued by Public Citizen in September 2012.

In 2003, there were only nine settlements with the federal or state governments, amounting to $967 million in penalties. In 2011, federal and state government agencies reached a record 44 settlement agreements with drug makers. And by July 2012, with the year only half over, drug companies had already agreed to pay nearly $6.6 billion as part of 19 settlements with the government. Data on the second half of 2012 have not yet been compiled by Public Citizen.

Here's the kicker: The most common drug-company violation cited by regulators and law enforcement agencies between 1991 and July 2012 was overcharging government health programs. Really? How much overcharging do they need?

Over the last decade, the drug companies racked up unprecedented penalties for criminal and civil violations. They jacked up prices for seniors and the government. They made excessive profits and gave unconscionable compensation to the CEOs in charge of this all.

End Corporate Tax Giveaways

It is obscene that any lawmakers in Washington — even the most extremist Republicans who hate civilization as we know it — are even talking about cutting benefits for seniors in the midst of what amounts to a drug industry scandal.
We shouldn't be making any benefit cuts to Medicare, Medicaid, the Affordable Care Act or Social Security. Not now, not ever. Instead, we should make the wealthiest Americans pay their fair share in taxes and eliminate indefensible special-interest tax breaks and subsidies for big corporations like the companies that ship jobs overseas, Big Oil, and a drug industry that has made a science out of ripping off the American
people.

*   *   *   *   *

HCAN’s analysis of CEO pay focused on 11 companies: Johnson & Johnson, Abbott Laboratories, Pfizer, Novartis, Eli Lilly, Roche, Merck, Bristol-Myers Squibb, Sanofi, GlaxoSmithKline and AstraZeneca. Over the 10-year period, the $1.57 billion in total compensation was split among 27 executives. The top earners in 2012 were Johnson & Johnson’s William Weldon, who took in $29.8 million, and Pfizer’s Ian Read, who received $25.6 million. By comparison, the median household income in the U.S. last year was $50,054, while half of all Medicare beneficiaries had less than $22,500 in annual income. Click here for details on Big Pharma’s annual CEO compensation expenditures. In April, HCAN compiled data showing that the 11 drug companies reported $711.4 billion in profits over the same 10-year span.

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Comment Preferences

  •  I'd like to say (3+ / 0-)
    Recommended by:
    marina, skywriter, JerryNA

    it's unbelievable, but unfortunately it's not.

    This is precisely why our health care system is broken, and it won't really be reformed until this crap is fixed.

    "There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning." —Warren Buffett

    by Joan McCarter on Wed May 08, 2013 at 12:54:10 PM PDT

  •  I don't know what we can do (2+ / 0-)

    about all the people involved in this big scam and the other big scams happening all around us. The people involved have no ethics or morality beyond their money-seeking, that I can see. With sociopaths allowed free rein in our economy, it can do nothing else but fail again.

    "I Regard the [Wall Street] Moral Environment as Pathological."--Jeffrey Sachs
    Interview here.

  •  Why over 10 years not just one year? (0+ / 0-)

    Why do you write this up as compensation over 10 years when people are accustomed to looking a pay for people in one year terms?

    What you are doing is similar to saying a school teacher is paid $1 million including pay and benefits, and then as an aside saying that is over 10 years.

    Who can trust reading something that tries to mislead the reader - starting in the first 9 words?

    The most important way to protect the environment is not to have more than one child.

    by nextstep on Wed May 08, 2013 at 01:30:49 PM PDT

    •  Think again (1+ / 0-)
      Recommended by:
      JerryNA

      The diarist accurately summarized the source material. No one has been misled. A decade is the time period studied in the originating research and that is what Ethan is reporting.

      Paying the CEOs of 11 companies $1.57 billion over 10 years is far more than paying a teacher $1 million over the same period.

  •  What does that buy (1+ / 0-)
    Recommended by:
    JerryNA

    Exactly how much better is a 100 million a year CEO than a 1 million a year CEO?

    •  in terms of the shareholders (0+ / 0-)

      On the minus side:

      You get someone who has developed mastery over the  people who decide his compensation package.

      On the plus side:
      You usually get someone with much more influence on events and people (big investors, regulatory, congress,  state govt, etc) outside of the company.

      50:50 chance:  may get someone with truly superior leadership and management skills,

      slim chance: You may get someone with a great "vision" for the company, whose ideas and focus raises a sinking ship, picks the right direction, etc.  I say slim chance because this period of Pharma was an absolute disaster right across the board. Cost of R&D skyrocketed while drug approvals plummeted, companies kept failing phase III trials and having their drugs yanked after approval due to inappropriate prescriptions, toxicity, and poor efficacy. Problems started years before the recession; comparisons to the  steel industry in the '70s and Pharma in the 'aughts get made pretty often.

      CEOs of the period were known for pointing out their nifty new "vision" du jour which usually could be summed up as "look at this shiny object while we make our scientists play musical chairs for their jobs". Half of the time the shiny object was a misapplied management fad, the other half it was a new scientific paradigm that was still too untested to deliver real results.  Meanwhile they hid from the real and very hard to solve problems: increasingly difficult drug target validation, exponentially increasing amounts of data that looked provocative but couldn't predict for useful drugs, more stringent rules at the FDA, and perverse incentives at every stage of the pipeline.

  •  Very important story and thanks for the diary. (0+ / 0-)

    This needs to be repeated again and again. The CEPR paper you linked is good. Dean Baker has been shouting from the roof top about this for years. But his voice gets drowned out thanks to our lame stream media.

    "The word bipartisan means some larger-than-usual deception is being carried out”. - George Carlin

    by Funkygal on Thu May 09, 2013 at 04:26:57 PM PDT

  •  I have Chronic Lymphocyctic Leukemia (0+ / 0-)

    There is are new drugs for this cancer that are in trial, but so far, are so effective they are pushing for early release, or whatever it is called by the FDA so it can be given outside trials.  This is not chemo--a pill.  The downside is, of course, nobody knows yet how long they will be effective and what affect long term use will have on the body.   However, the cost will be, IIRC, over $100,000 per year. It is so bad, even doctors are asking whether this is sustainable.

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