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Tuesday, Sen. Bernie Sanders (I-Vermont) issued a report slamming the U.S. prices of drugs and executive pay of three major drug manufacturers—Johnson & Johnson (J&J), Merck, and Bristol Myers Squibb—just before a Feb. 8 hearing.
Thursday the CEO’s of all three drug manufacturers had to appear before a hearing to be grilled by Sanders, prepared by staff associated with the U.S. Senate Committee on Health, Education, Labor, and Pensions (HELP Committee). The New York Times reports that they testified on their behalf Feb. 8, telling their side of the story.
Americans, hands down, pay the most for life-saving drugs compared to other countries, the senator’s report summarized. In some cases, Americans are paying nearly 10 times the price as what Germans pay. Sanders’ detailed report outlines how the three companies are spending more on executive pay and stock buybacks than drug research and development (R&D).
“The United States pays, by far, the highest prices in the world for prescription drugs,” the report reads, written by staff and headed by Sanders as Chair. “At a time when one out of four Americans cannot afford the medicine their doctors prescribe, ten large pharmaceutical companies made over $112 billion in profits in 2022 while paying their chief executives exorbitant compensation packages and spending billions of dollars on stock buybacks and dividends to make their wealthy stockholders even richer.”
If you’re an American on the life-saving cancer drug Keytruda, you’re paying more than twice the amount that citizens in Germany—a highly industrialized nation—pay out of pocket. Merck began selling Keytruda in 2015 at an annual cost of $147,000 in the U.S. and $132,000 in Germany.
Keytruda now costs $89,000 annually in Germany, but $191,000 in the U.S. In Japan, Ketruda costs $44,000 annually, which is less than one-fourth of what Americans pay. The drug Eliquis, which prevents strokes, costs $770 annually in Germany but $7,100 in the U.S.—nearly 10 times as much.
“The current industry business model is based on ripping off the American people,” the report reads. “For some of their most popular drugs, Johnson & Johnson, Merck, and Bristol Myers Squibb made more money in the U.S. than the rest of the world combined.
Report’s Key Findings
The report includes a few key findings: In 2022, Johnson & Johnson made $17.9 billion in profits and its CEO received $27.6 million in compensation. J&J spent $17.8 billion that same year on stock buybacks, dividends, and executive compensation, compared to just $14.6 billion on R&D).
“In other words, the company spent $3.2 billion more enriching executives and stockholders than finding new cures,” the report reads.
In 2022, Bristol Myers Squibb made $6.3 billion in profits and its former CEO made $41.4 million in compensation. Bristol Myers Squibb spent $12.7 billion the same year on stock buybacks, dividends, and executive compensation, compared to just $9.5 billion on R&D. “Just like Johnson & Johnson, Bristol Myers Squibb spent $3.2 billion more enriching executives and stockholders than finding new cures,” the report reads.
In 2022, Merck made $14.5 billion in profits and its CEO made $52.5 million in compensation. That year, the company spent over $7 billion on dividends and executive compensation, and $13.6 billion on R&D.
“If Merck’s cancer drug Keytruda was its own company, its 2022 sales would rival McDonald’s annual revenue, and exceed the revenue of the hotel chain Marriott,” it reads.
Other Attempts to Limit Drug Manufacturers
Senators have introduced bills to hold pharmaceutical drug companies accountable for pricing as well as other related practices.
One angle to lower the cost of drugs has been bills that aim to reduce the cost incentive for pharmacy benefit managers (PBMs) to prioritize more expensive drugs because they receive higher payouts for higher priced drugs.
In September 2023 Senate Finance Committee Chair Ron Wyden, (D-Oregon), and Ranking Member Mike Crapo, (R-Idaho) introduced the Modernizing and Ensuring PBM Accountability (MEPA) Act, a bill to brings more transparency, accountability and competition to pharmacy benefit manager practices in the pharmaceutical supply .
Sen. Menendez (D-New Jersey), a senior member of the U.S. Senate Committee on Finance, said the Modernizing and Ensuring PBM Accountability (MEPA) Act includes his own inclusion, the Patients Before Middlemen (PBM) Act.
HIV drugmaker Gilead Sciences was slammed for its PBM Express Scripts because it jacked up the prices of its lifesaving hepatitis C cures Sovaldi and Harvoni. But Gilead later changed its tune and joined a chorus of drugmakers—turning on PBMs.
With the committee hearing Thursday, Sen. Bernie hopes to hold accountable the companies spending the least on drug development and the most on executive kickbacks.
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