Big Pharma Uses Its Massive Profits to Enrich Shareholders, Not for Research
Big pharma justifies its exorbitant prices by arguing that the huge profits it nets from price markups will be spent on research. Yet the industry clearly prefers to funnel its profits to shareholders — which means enriching the already rich rather than spurring medical innovation.
Big pharmaceutical companies are using the cost of innovation as a key argument in their campaign to keep Medicare from being able to negotiate lower drug prices. (MirageC / Getty Images)
Pharmaceutical giants rang in the new year by quietly announcing price hikes in the United States on more than 350 drugs — and they continue to insist these price hikes are necessary for innovation. But new research shows that the business model of America’s largest pharmaceutical companies involves far more spending on enriching shareholders and executives than on research and development.
Between 2012 and 2021, the fourteen largest publicly traded pharmaceutical companies spent $747 billion on stock buybacks and dividends — substantially more than the $660 billion they spent on research and development, according to a new study by economists William Lazonick, professor emeritus of economics at University of Massachusetts, and Öner Tulum, a researcher at Brown University.
But that hasn’t stopped drug companies and their lobbying groups from using the cost of innovation as a key argument in their campaign to keep Medicare from being able to negotiate lower drug prices. The pharmaceutical industry has spent at least $645 million on federal lobbying over the past two years.
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