Despite Big Pharma’s claim that high-cost medicines are the price society must pay for innovation, recent research provides ample evidence that overpriced medicines are not necessary for the industry to find cures or revolutionize. Rather, high-cost and low-quality medicines are the price patients pay for an industry that prioritizes profit-seeking over public health.
Like all markets today, the pharmaceutical industry is structured by distorted economic policy choices of the last 50 years. In the “Profit Over Patients: Americans are Paying for a Financialized Pharmaceutical Industry” issue brief—the third in a series—Roosevelt Fellow Katy Milani explores the outsized influence of the financial sector (known as “financialization”) within the pharma industry and analyzes the high costs everyday people pay for life-saving medicines.
To illustrate the magnitude of financial incentives and extractive corporate behavior in the pharma industry, Milani specifically examines the stock buyback spending of two major corporations, Eli Lilly and AbbVie Inc., which produce the leading diabetes and arthritis medications, respectively. She finds:
- Eli Lilly’s diabetes medication earned the company over $9 billion in 2018. The same year, Eli Lilly spent $6.5 billion on payments to shareholders in the form of buybacks and dividends combined. To put this spending on shareholders payments into perspective, the $6.5 billion Eli Lilly spent on dividends and buybacks is equivalent to 68 percent of the money that it made on diabetes drugs from patients.
- AbbVie’s bestselling drug, Humira, earned the company $19.9 billion in revenue in 2018. The same year, AbbVie spent $18.1 billion to reward shareholders in the form of buybacks and dividends combined. To understand the magnitude of AbbVie’s shareholder payments, the $18.1 billion spent on dividends and buybacks is equivalent to 91 percent of the money AbbVie made on Humira.
To work toward an industry that serves the public good over private interests, policymakers and regulators must rein in Big Pharma’s extractive, highly financialized business model.