• The five biggest pharmaceutical companies in the U.S. collectively reported profits of $82 billion in 2022.
•  They then increased their stock buybacks and dividend payouts by nearly $7 billion.
• According to a study by economists William Lazonick and Öner Tulum, the 14 largest publicly traded pharmaceutical companies spent $747 billion on stock buybacks and dividends from 2012 to 2021. This is substantially more than the $660 billion they spent on research and development during the same period.

PhRMA loves to say that pharma needs its profits for R&D, but that’s a lie.

According to a study by economists William Lazonick and Öner Tulum, the 14 largest publicly traded pharmaceutical companies, they spent $747 billion on stock buybacks and dividends from 2012 to 2021. This is substantially more than the $660 billion they spent on research and development during the same period.

The study, published in the journal Critical Sociology, found that the pharmaceutical industry’s focus on stock buybacks and dividends has come at the expense of research and development. This is because stock buybacks and dividends are a way for companies to return money to shareholders, and they can be funded by either cutting costs or raising prices. In the case of the pharmaceutical industry, companies have been more likely to raise prices than cut costs.

Some in the pharma industry have criticized the study’s findings and argue that stock buybacks and dividends are necessary to attract and retain investors. However, the study’s authors say that these practices harm innovation as they reduce companies’ money to invest in research and development.

Other researchers have also echoed the study’s findings. A 2022 Institute for Policy Studies study found that the ten largest pharmaceutical companies spent an average of $1.5 billion per year on stock buybacks and dividends while only spending $1.2 billion per year on research and development.

The increasing focus on stock buybacks and dividends by the pharma industry is a concern for many people, as it raises questions about the industry’s priorities. If companies focus more on returning money to shareholders than investing in research and development, it could harm the development of new drugs.

The analysis included companies like Eli Lilly, the U.S.’s largest pharmaceutical company based on market cap, which has raised the price of its insulin drug Humalog by 600 percent since 1996. Eli Lilly saw its net income increase by 12 percent to over $6 billion in fiscal year 2022. 

Johnson & Johnson, the second largest pharmaceutical company in the U.S., spent nearly $18 billion on dividends and stock buybacks in fiscal year 2022, despite its net earnings decreasing by 14 percent between 2021 and 2022 after the company bought a medical device company for $16.6 billion.

Merck, the third-largest pharmaceutical company, saw its profits climb by 11 percent last year, resulting in a $14.5 billion profit. Merck has filed one of several industry-backed lawsuits against the previous year’s Inflation Reduction Act (IRA), claiming that the bill’s plan to allow Medicare to begin negotiating the price of less than two dozen drugs over the next six years is unconstitutional and violates the company’s First Amendment rights to free speech.

It’s about profits and shareholders. It’s not about patients anymore.