IN SUMMARY: When the list price of a drug goes up but the net price goes down there is something dreadfully wrong with our healthcare system. The hearings, before Congress yesterday, were meant to convey to voters that “we’re doing something” but patients are not likely to see any benefits from ANY Congressional hearings until the SYSTEM is questioned.
Politicians love to convey that they care about voters but the only thing most politicians care about is being reelected. Pharma CEO’s came to Capitol Hill and left relatively unscathed in yesterday’s “show” for the public. We still don’t, for example, know why the price if insulin has risen so much. While AbbVie was called out for their gaming of the system with their blockbuster Humira the message to Congress was clear “drug prices aren’t going to come down until the system is changed”.
Health-Care Spending Projected to Accelerate
A report from actuaries at the Centers for Medicare and Medicaid Services is likely to add to the pressures making health care a significant issue in the 2020 election. Health care’s share of the economy is projected to climb to 19.4% by 2027 from 17.9% in 2017, assuming no legislative changes to the U.S. health system. Prescription-drug spending is projected to have grown 3.3% in 2018, compared with 0.4% in 2017, partly because of an increase in the number of new drugs on the market, according to the report.
But Pharma CEO pay remains high and too much money goes to shareholders
According to Mr. Lazonick, who is an emeritus professor of economics at the University of Massachusetts, Lowell. “Despite their claims, the big American drug companies have not been using profits from high prices to ramp up investment in drug development. Our research shows that for 2008 through 2017, 17 pharmaceutical companies in the S. & P. 500 distributed just over 100 percent of their combined profits to shareholders, $300 billion as buybacks and $290 billion as dividends. These distributions were 12 percent greater than what these companies spent on research and development”.
He goes on to say “with most of their compensation coming from exercising stock options and stock awards, senior executives benefit immensely. We gathered data on the 500 highest-paid executives in the United States from 2008 through 2017. The number who came from the drug industry ranged from 21 (in 2008 and 2011) to 42 (in 2014). The total compensation of those 42 executives averaged about $73 million, compared with an average of an already over-the-top $32 million for all 500 in 2014.
A total of 88 percent of the 2014 compensation was based on stock. In 2017, 28 drug executives in the top 500 averaged more than $41 million in total compensation, with 83 percent stock-based. By jacking up product prices and distributing the increased profits to shareholders, executives lift stock prices and their take-home pay.
Then there are health insurance companies
Health insurance premiums continue to rise faster than inflation. And while Americans struggle to find affordable plans, leading insurance company executives report staggeringly high annual incomes. Since passage of the Affordable Care Act, David Cordani, CEO of Cigna, has taken home more than $140 million of compensation. Yet he feels poor compared to Stephen Hemsley, the CEO of UnitedHealthGroup, who has made almost $300 million.
Until Congress understands that healthcare in America is as broken as it can get nothing is going to change because there is too much money to be made. It’s time to erase the board and start from scratch and come up with solutions that ensure that we can all afford healthcare.