The five largest U.S. pharmaceutical companies by market cap — Eli Lilly, Johnson & Johnson, Merck, AbbVie and Pfizer — reported combined earnings of $81.9 billion in 2022, an $8 billion increase from 2021, according to a new analysis by Accountable.US.
The left-leaning corporate watchdog found the firms' combined stock buybacks and dividends increased by $4.4 billion and $2.5 billion, respectively, from 2021 to 2022.
The report comes as major players in the pharmaceutical industry try to buck provisions in the Inflation Reduction Act (IRA) that would allow Medicare to directly negotiate the prices of certain drugs with manufacturers in an effort to cut costs for older Americans.
An analysis by the nonpartisan Congressional Budget Office found the IRA drug pricing provisions will reduce the federal deficit by $237 billion from 2022 to 2031.
The Centers for Medicare & Medicaid Services will is set to announce the first 10 drugs by Sept. 1, and their newly negotiated prices will take effect in 2026.
Pharmaceutical Research and Manufacturers of America (PhRMA), the U.S. Chamber of Commerce, Merck and Johnson & Johnson have sued to block the implementation of the Medicare Drug Price Negotiation program, saying there will be negative outcomes for patients, including decreased investment in research and development.
PhRMA and the Chamber were two of the top three federal lobbying spenders in 2022, spending $29.2 million and $81 million, respectively, to lobby on a range of issues including drug price negotiations, according to federal lobbying disclosures analyzed by the nonpartisan money-in-politics sleuths at OpenSecrets.
A Merck spokesperson pointed to estimates that it takes an average of one decade and $2.5 billion to develop one new drug, and the company says it invested $102.3 billion into new medication development in 2021.
“The Program [...] uses the threat of enormous monetary penalties to compel manufacturers to provide Medicare beneficiaries with ‘access’ to their drugs at whatever discounted price the Government, in its unreviewable discretion, selects,” Merck said in a summary judgment motion on the case.
“It then disguises those forced transfers as the product of a negotiated agreement, to deceive the public into thinking the manufacturers have ‘agreed’ that these prices are ‘fair,’ and thereby to conceal the reality of the Program’s radical central-planning approach,” the motion continues, adding the harm this could have on future drug innovations.
A Pfizer spokesperson pointed to public comments filed with CMS in which it characterized the drug price negotiation guidance as a “dangerous price setting policy” that’s already shifting how the pharmaceutical industry invests its resources.
Pfizer's net income skyrocketed past $31.4 billion during fiscal year 2022, a 42.5 percent increase from 2021 according to Accountable.US’ analysis, which also found shareholders received over $10.9 billion in stock dividends and buybacks. Last year, Merck’s net income climbed to more than $14.5 billion and the company spent over $7 billion on shareholder dividends.
Liz Zelnick, director of Accountable.US’ Economic Security & Corporate Power program, said she finds claims about research and development (R&D) expenses “unconvincing” given the billions of dollars paid to investors last year.
A previous Accountable.US report found that the $125 billion the top five pharmaceutical companies — which included Thermo Fisher instead of Merck — spent on stock buybacks and dividends from 2019 through 2021 outpaced the $112 billion they spent on R&D through the same period.
AbbVie spent over $4.6 billion more on shareholder returns than it did on research and development, according to the latest Accountable.US report, which also found the Humira manufacturer’s net earnings climbed to over $11.8 billion and shareholders received over $11.1 billion in stock buybacks and dividends.
Johnson & Johnson gave shareholders over $17.7 billion in combined stock buybacks and dividends in 2022, according to the Accountable.US analysis, a 22 percent increase from the previous fiscal year even as the company’s profits decreased by 14 percent. Eli Lilly saw its net income jump to over $6.2 billion in 2022, and shareholders received more than $5 billion in stock buybacks and dividends.
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