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Drug Repurposing Hypothesis Generation Using the "RE:fine Drugs" System
Published on: December 11, 2016
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Do high drug prices fund pharmaceutical innovation?
William Lazonick1, Öner Tulum1
1The Academic-Industry Research Network, Cambridge, Massachusetts, United States of America.
Healthcare Management Forum
|August 12, 2024
Summary
Major pharmaceutical companies prioritize shareholder profits through dividends and stock buybacks over investing in innovation. This financialization strategy contributes to high drug prices and reduced research and development in Canada.
Area of Science:
- Health Economics
- Pharmaceutical Policy
- Corporate Finance
Background:
- Pharmaceutical companies assert a need for high drug prices to fund innovation.
- This claim is questioned by the significant profit distribution practices of major US pharmaceutical firms.
Purpose of the Study:
- To analyze the financial practices of US-based pharmaceutical companies.
- To investigate the impact of these practices on innovation investment and drug pricing in Canada.
Main Methods:
- Analysis of financial data from 14 US-based pharmaceutical companies in the S&P 500 Index (2013-2022).
- Examination of profit distribution through dividends and stock buybacks.
- Assessment of the role of executive stock-based compensation in financialization.
Main Results:
- From 2013-2022, pharmaceutical companies paid out 54% of net income as dividends and 51% as buybacks.
- Executive compensation structures incentivize stock price appreciation over innovation investment.
- Financialization practices contribute to elevated drug prices and underinvestment in pharmaceutical R&D in Canada.
Conclusions:
- US pharmaceutical companies' financialization strategies, driven by executive compensation, divert funds from innovation.
- These practices lead to higher drug costs and diminished research and development capacity in Canada.
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