July 12, 2021
Report Shows Top 14 Drug Corporations Could Easily Afford Medicare Price Negotiation
On Thursday, Rep. Carolyn Maloney (NY), the Chairwoman of the House Committee on Oversight and Reform, held a press conference with Speaker Nancy Pelosi (CA) to release a new report analyzing the finances of 14 of the world’s largest drug corporations.
The report found that the corporations have spent $56 million more on stock buybacks, dividends to investors and other forms of executive compensation than on research and development in recent years.
One company, Amgen, spent nearly six times as much on buybacks, dividends, and executive compensation as it did on R&D in 2018. From 2016 to 2020, compensation for the 14 corporations’ top executives totaled $3.2 billion, with annual compensation growing by 14% over that five-year period.
In addition, many drug corporations spent a significant portion of their R&D budget on finding ways to suppress generic and biosimilar competition while continuing to raise prices, rather than on innovative research.
The pharmaceutical industry has targeted the United States for price increases for many years, while cutting prices in the rest of the world. The United States is particularly vulnerable to these pricing tactics because current law prohibits Medicare from negotiating directly with drug corporations to lower prices.
H.R. 3, the Elijah E. Cummings Lower Drug Prices Now Act, would address many of the findings in the report by empowering Medicare to negotiate directly with the corporations, and the Congressional Budget Office estimates that would save taxpayers $456 billion over ten years.
Even if the pharmaceutical industry collected less revenue due to pricing reforms such as H.R. 3, drug companies could maintain or exceed their current R&D expenditures if they reduced spending on buybacks and dividends.
“The report echoes what retirees know: that Americans pay the highest drug prices in the world, and seniors bear the brunt of this because they need more medicines to stay healthy,” said Richard Fiesta, Executive Director of the Alliance. “Industry claims that those prices are justified by spending on research is false. This report is further evidence that it is time to require Medicare to negotiate lower prices, the way that the Veterans Administration does, and rein in drug corporations’ anti-competitive practices. Older Americans, in particular, cannot wait any longer.”