By Ethan Rome
Executive Director, Health Care for America Now!
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.
Ethan Rome served as deputy campaign manager in HCAN’s 2009 successful campaign to win comprehensive health care reform. He has been a grassroots organizer, political activist, and strategic communicator for progressive issue and electoral campaigns for more than 20 years. From 2002until 2009, Mr. Rome directed public affairs for the 1.6 million-member American Federation of State, County and Municipal Employees (AFSCME). He managed national communications and media relations for International President Gerald W. McEntee and the union’s priority organizing, legislative and political campaigns. Prior to joining AFSCME in 1999, Rome was chief policy and political adviser to the speaker of the Connecticut House.
Follow Ethan Rome on Twitter: www.twitter.com/@HCAN
This piece is republished from The Huffington Post.