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Big Pharma spends billions more on executives and stockholders than on R&D

Senate report points to greed and "patent thickets" as key reasons for high prices.

ARS TECHNICA – When big pharmaceutical companies are confronted over their exorbitant pricing of prescription drugs in the US, they often retreat to two well-worn arguments:

One, that the high drug prices cover costs of researching and developing new drugs, a risky and expensive endeavor, and two, that middle managers—pharmacy benefit managers (PBMs), to be specific—are actually the ones price gouging Americans.

Both of these arguments faced substantial blows in a hearing Thursday held by the Senate Committee on Health, Education, Labor and Pensions, chaired by Sen. Bernie Sanders (I-Vt.).

In fact, pharmaceutical companies are spending billions of dollars more on lavish executive compensation, dividends, and stock buyouts than they spend on research and development (R&D) for new drugs, Sanders pointed out.

“In other words, these companies are spending more to enrich their own stockholders and CEOs than they are in finding new cures and new treatments,” he said.

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And, while PBMs certainly contribute to America’s uniquely astronomical drug pricing, their profiteering accounts for a small fraction of the massive drug market, Sanders and an expert panelist noted.

PBMs work as shadowy middle managers between drugmakers, insurers, and pharmacies, setting drug formularies and consumer prices, and negotiating rebates and discounts behind the scenes.

Though PBMs practices contribute to overall costs, they pale compared to pharmaceutical profits.

Rather, the heart of the problem, according to a Senate report released earlier this week, is pharmaceutical greed, patent gaming that allows drug makers to stretch out monopolies, and powerful lobbying.

On Thursday, the Senate committee gathered the CEOs of three behemoth pharmaceutical companies to question them on the drug pricing practices: Robert Davis of Merck, Joaquin Duato of Johnson & Johnson, and Chris Boerner of Bristol Myers Squibb … read more. 

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