Pharma Execs Play While Patients Pay With Their Lives

From The Institute for Health and Socio-Economic Policy.

Since the United States does not regulate prescription drug prices, Americans are forced to pay the price that the pharmaceutical industry chooses to charge. This often causes a financial strain for many American families.

The pay incentives offered to pharma executives is adversely affecting patients’ access to affordable medication. Unlike most Americans, who receive a cash based salary; executives of large U.S. corporations receive annual stock options that are larger than their base salaries and bonuses. As such, stock options comprise a large portion of executives’ yearly income and wealth in this industry.

It’s not uncommon for Senior Executives to have 60 to 80 or even close to 100% of their compensation based on performance. Performance can be measured by stock prices of the company’s shares, quarterly earnings, or some other type of financial marker. Therefore, higher stock prices often mean more money for executives.

Such an arrangement encourages executives to make risky and short term decisions that personally benefit them at the expense of consumers. The result is high medication prices that are often out of the financial reach of many American families.

The average American has experienced years of wage stagnation, while executives in the pharmaceutical industry have been continuously paid outrageously for their services. The median pay for healthcare and pharmaceutical executives in 2015 was approximately $14.5 million.

Large executive compensation packages are not necessarily a reflection of a company’s size. Not only do pharma executives lead in compensation within the healthcare sector, but executives at small pharmaceutical companies are being paid more than CEOs of well known corporations in various industries.

Year      Total of Compensation Over $1 Million    No. of Executives
2011                $1,323,232,824                                                  391
2012                 $1,530,705,363                                                 433
2013                 $1,724,553,532                                                 504
2014                 $2,386,219,978                                                 538
2015                 $2,622,086,531                                                 602
Total                $9,586,798,228                                              2,468

Pharma Executive Compensation

Year              Total                        Average                  Maximum
2011         $1,606,872,448        $1,595,703          $36,709,986
2012         $1,815,362,381        $1,759,072          $81,551,448
2013         $2,078,334,139        $1,691,077          $38,217,929
2014         $2,684,342,963        $2,318,085         $50,640,659
2015         $2,832,837,833         $2,847,073         $93,379,077
Total        $11,017,749,764

Several pharma CEOs were paid a base salary of $1.5 million, with added stock option grants, cash bonuses, and other stock awards. This means, their actual income for that year was approximately $15 million. Yet, in the pharmaceutical industry a $15 million dollar salary is on the low end of the pay scale. In fact the number of pharma executives making over one million dollars a year has increased every year since 2011. The total number of executives making over one million dollars for the past years is 2,468.

Oct. 6, 2016

Editor: Although the date of an article may not be current the information is still valid.