CEO Salaries and Pharmaceutical Costs
I had a conversation recently with someone who was quite upset about how much money pharmaceutical companies spend on CEO compensation — at a time when many people are not able to afford necessary medicines.
While I do not support restricting or limiting compensation, I also often scratch my head and ask, “Does it really make sense for a corporation to give someone tens of millions a year to run a company?” Beyond a certain point, there’s no useful way to spend the extra money. Someone who gets $30,000,000 in a year is grossing more than $82,000 per day, or $575,342 per week. How many steaks can you eat, how many vacations can you take, how many homes can you occupy, how many Ferraris can you drive?
Still, I thought it would be interesting to see how much pharmaceutical makers are spending on CEO compensation, and if this might be a factor in the costs of lifesaving pharmaceuticals. Forbes keeps track of the top 400 CEO compensation packages for American corporations. Pharmaceutical company CEOs are NOT unusually highly paid. There are a few pharmaceutical CEOs in the top 100, but only a few. By comparison, other sectors, such as health care, communications, entertainment, consumer products, and stuff of questionable actual value, are more common in the top 100 list. UnitedHealth Group’s CEO is the top: $101,960,000.
When I started digging into the details of these compensation packages, however, I noticed something very interesting, of which David E. I. Pyott of Allergan (a drug company) is pretty typical: The vast majority of the compensation is stock gains, not salary or bonuses. Of Pyott’s $33.76 million compensation, $30.64 million was stock gains — not salary, bonuses, or other forms of direct compensation. In practice, this means that what the company actually wrote him checks for was about $3 million; the rest is the result of stock option grants.
This is partly because of a law the Democrats passed in the 1990s that prohibits corporations from deducting as business expenses any CEO or other top officer salaries that exceeds $1 million a year. Before this law, most corporate officer compensation was salary; afterwards, it was typically stock options, which I am afraid may have encouraged a more short-term view of appropriate corporate governance.
If you have never been part of a stock option grant arrangement, I should explain that it is not generally a gift. You get the right to buy stock at a certain price, set such that if you manage to increase the value of the company, your stock options will become worth a pile of money. If the stock price does not rise, or falls, those options are often worthless. Without knowing the details of Pyott’s option grant, I can’t even begin to estimate what it actually cost Allergan to give him stock options that netted him more than $30 million, but I am guessing that the out-of-pocket cost was a tiny fraction of that — probably no more than a million or two million dollars.
High CEO compensation troubles me from a moral standpoint (although that does not mean that it is the government’s job to do anything about it). But let’s say that Pyott worked for Allergan for $200,000 a year, and the corporation took that $5 million or so that they saved for his salary, bonus, and stock options, and used it to lower the cost of their pharmaceuticals. Allergan’s 3rd quarter 2011 net sales was $1.311 billion; multiply by four to get a rough net sales of $5.244 billion. What would knocking $5 million off Allergan’s net sales save their customers at the pharmacy cash register? About .09% of the sale price. This is trivial.
Pyott isn’t the only well compensated executive with Allergan, I’m sure. But what if the next twenty executives with Allergan were compensated at an average of 1/4 of Pyott’s level? Multiply by five, so another $25 million savings would reduce drug costs by another .47% at the cash register: again, downright trivial.
There are certainly aspects to how pharmaceutical companies operate that artificially drive up costs, no question. There are legitimate questions about whether they spend too much money marketing their patented products when generic, out-of-patent products are often as effective, or almost as effective. But this focus on CEO salaries is missing the point: it may be obscene, but it has essentially nothing to do with the cost of these drugs to customers.
On the other hand, if the author were to calculate the cost add on of the cost to carry government underfunding in healthcare, the cost of government regulations and the cost of carrying the legal system’s sleaziest components, we would now be talking about real money from the pockets of the consumer.
Not only do private enterprise CEO compensations not bother me on a moral level, they don’t bother me on any level.
In a non-taxpayer company…what I pay my employees, including the top employee…is none of anybody’s business. In a competitive environment, my prices for goods and services will be sorted out in the marketplace.
The Marxists have done their smear, slander and brainwashing job on a segment of the non-thinking populace. It is NOT a moral issue how non-government executives are compensated, any more than it is a moral issue how pro golfers are compensated or movie stars or rock stars.
As soon as someone makes their fortune…suddenly how they are legaly compensated becomes a matter of public scrutiny? Based upon what…exactly?
Nothing other than class warfare propaganda, that’s what.
96% of high net worth individuals did everything legally to accumulate their fortune…it is a fraud on the public, a canard and a slander to suggest otherwise. MOST of the 4% who “cheated” did so BECAUSE THEY HAD GOVERNMENT PARTNERS in their schemes. Mostly Democrats.
Republicans are scrutinized by the propaganda machine so tightly…and Democrats not at all…that it is MUCH more difficult for Republicans to do a private/government funny money billion dollar deal. Democrats can do it in green energy, union slop at the trough building, in housing and real estate, in the auto industry, in energy (often overseas), in healthcare and wellness, on Wall Street, in Hollywood, on radio, TV, and in high tech.
In fact, if you look at the LARGEST DONORS and biggest advocates for Marxist advancement in our society from the business world…you will find the largest government “goodie bags” for those companies and enormous “pay days” for those principals.
Tax favors, government loans, land and building deals, other assorted “freebies”.
We need to stop being fooled about this…and to stop being brainwashed. If someone makes their money honestly…not on the taxpayer’s back, what they make is nobody’s business. And…if we had an honest media…the Democrat/Marxist party wouldn’t be stealing our money to feed to their crony Socialist buddies.
I agree wholeheartedly with these sentiments. However, I have been puzzled by what happens in the investment banking world. On Wall Street, it is not just CEOs who make millions. Rather, there are tens of thousands in upper to middle management and in Sales and other functions who make per year what most of us make per decade.
But I think that those who vilify the financial industry ask the wrong question. It is not “why do they pay such lavish compensation?” but rather “why are they able to pay such lavish compensation?”. Why doesn’t the free hand of the market and free competition keep financial industry earnings (and thus compensation) down closer to the averages found Hi Tech, Health Care, etc.?
I suspect, if you dig into that question, once again you will find government sponsored crony capitalism, collusion and hyper regulation at the core of the problem.
Mike, I don’t know about anything else, but in the Fortune 100 company I work for, Sales is feast or famine: 75%+ of your compensation is commission, which you aren’t making if you ain’t selling. And you may spend months working on a deal. Oh, and if you go too long without selling, you’re gone. The turnover rate is horrendous.
Agree.
I am one of the “near poor.” (Or maybe even “poor poor” under the new stretchy definitions.
Own a home with no mortgage. Watch our money very carefuly. So what.)
Does not bother me one bit what private companies pay their big dogs. Let the stock holders and the market work it out.
Now *Fannie and Freddie* bonuses really *do* bother me. All that federal money and — what??? More big bonuses. And when Jamie Gorelick and Franklin Raines and Jim Johnson return their dirty gazillions that would be a sign that the Democrats are serious.
What I consider morally wrong is driving up the costs of the drugs with advertising. I know they must get the word out to the physicians but I do not believe we are well served to be bombarded on the airways with medical and drug advertising. I suspect it costs far more to advertise on television and slick magazines for the public than most people realize. And it can cause harm in patients demanding their doctor prescribe medications they do not really need. I put it in the same category as lawyers who advertise their wares to “get you a paid compensation if… ”
I would like to see some studies on what advertising does to the price of drugs.
Ruth, I will play devil’s advocate and tell you what the drug company’s line on this is-
“We are giving patients information they need to know and empowering them to have control over their own health care. How can anyone be against this? It’s freedom of information and a free speech issue.”
…and the correct response to the drug company’s line is to the effect of that the average consumer is ignorant of expert medical knowledge, and so are not competent to determine if the drug Co, is telling the truth, somewhat misrepresenting their product, or lying through their teeth. Joe sixpack would have no way to know.
After all, if anyone can understand this information and all of it’s nuances and details, then there would be no reason for people to go to medical school, now would there?
Well, that’s what I think, but by saying so I run the risk of being accused of protecting my professional turf insofar as I am licensed by a trade-restrictive body who is, without a doubt, being manipulated by the AMA to reduce competition.
Oh, certainly. I was a Biomedical Engineer for over a decade, and the same occurs in that field as well. A lot of manipulation goes on, and boy is it ever profitable for the “preferred” vendors.
BTW, what drug companies can and can’t say (“on-label”, which includes advertising and excludes publications in scientific journals) is highly regulated by FDA. I know because I work in pharmaceutical company (in IS, so I don’t have particularly strong opinion one way or another).
The major part of drug cost is clinical trials (over a billion in many cases); second being compliance. Although, for PR reasons, no pharma company calculates compliance cost explicitly. We do things that FDA requires “because it’s the right thing to do” – and because who in his right mind would fight regulators “on principle”?!
Executive salaries are not a factor even in corporate revenues; let alone drug cost (that is, income)
I don’t mind drug advertising. What I mind is physicians being manipulated to prescribe ineffective and even harmful medications driven by drug company profits.
A free market would not allow CEO’s to have extreme salaries. They are being protected from competition. One way they are being protected is by forming cozy relationships with their board of directors. Better and cost competitive cost CEO’s cannot join the “club”. They have gained the power to buy protection from competition by manipulating the corrupt government.
On of the biggest ways they are shielded from competition is by the actions of the FDA. Since it costs so much to release new drugs you get defacto monopolies. Only entities with hundreds of millions to risk even try to compete, thus fewer developers, leading to less or no competiton.
Plus, if you are risking $1.4 billion on drug research and you think you’ll get better business results by paying the CEO $30 mil instead of $10 that doesn’t seem unreasonable. Besides it’s not like government where they are forcibly taking the money from others to pay the CEO salary. If the owners don’t want to pay that it’s there money they can change their mind.
Finally one also needs to take into account the incentive effect that salary has on the next 10 folks in line.
I don’t mind drug advertising. What I mind is physicians being manipulated to prescribe ineffective and even harmful medications driven by drug company profits.
A free market would not allow CEO’s to have extreme salaries. They are being protected from competition. One way they are being protected is by forming cozy relationships with their board of directors. Better and cost competitive cost CEO’s cannot join the “club”. They have gained the power to buy protection from competition by manipulating the corrupt government.
I have my concerns with the pharmaceutical industry, but this isn’t one of them. It’s small potatoes.
The thing that bothers me the most is their marketing budget, which is more than what they put into R & D. That’s right, they spend more on advertising than they do on research. Advertising also apparently results in over-prescribing- although some would say that isn’t a bad thing at all, that it empowers patients.
Consequently, every other country has banned drug company advertising (except maybe New Zealand, if that’s any comfort). I don’t know if that’s something that can or should be done here, all I know is that the reasons behind drug costs are not what most people think they are.
Drug companies make most of their profits in the good old USA, so if we quit feeding the beast it may die. Obviously, that’s no good for anyone. It’s really a tough problem to come up with a solution for, but one thing is for sure- Obamacare did absolutely nothing whatsoever to address it drug costs. If the drug companies wanted a law that favors them, they couldn’t have written it better themselves.
If the FDA and federal government didn’t artificially make it so expensive to bring drugs to market, we could conceivably end the advertisement. However, the government keeps picking winners and losers in the pharmaceutical industry just as it does with Government Motors, Solyndra,and even between UPS and Fed Ex.It has for a very long time–just seems to be snowballing into an avalanche recently.
It is near impossible to keep adding regulations and restrictions without repealing the very first laws that caused today’s unintended consequences.
Maybe so. The cost of bringing a drug to market is astronomical, and it means that lesser-used drugs don’t get made at all. But when Morningstar tells me that the one bright spot for investing in healthcare after the passage of Obamacare is in pharmaceutical stocks, I don’t feel too sorry for the drug companies. They’re turning a profit, and using that profit to advertise instead of funding research. No doubt because they get more profit per dollar spent in advertising than in research- which may very well be due to onerous regulations.
Like I said, this is a tough nut to crack.
Investing in healthcare stocks is not the same thing as investing in big Pharma. Companies like McKesson, Expresscripts, United Health, and generics (eg Teva, Mylan, Watson) and other companies in the wholesale distribution chain fall in the category of healthcare stocks as well. And are on trend to be more profitable, on a percentage basis, I might add, than big Pharma is given the dearth of products in the pipeline due to, in fact, some very shortsighted management teams deciding it was better to fire the R&D folks, change the business model (see,eg, GSK with combinatorial chem screening/licensing-in approach) while keeping the sales guys.
“…..their marketing budget, which is more than what they put into R & D.”
It costs billions and years to test and have the FDA approve a drug for market. And even then, the drug companies always need to be on the alert for unexpected reactions and lawsuits. So, do you blame them for having developed a different strategy in response? I perceive drug advertising as informational. And as the author stated, if generic drugs are available, they may be as effective. Things to discuss with your “health care provider” (politically correct term).
Exactly. Drug advertising is informational. It also drives up the cost of medical care. At some point we have to decide where the tipping point is- so far (in the US) it is heavily in favor of the pharmaceutical company.
I use to work in Phase II drug trials, so I do know how incredibly burdensome the regulations can be. I also know that it provides a valuable service- problems that were noted in phase II of the particular drug I worked with did in fact turn out to be a problem later, and those trials may have actually SAVED that company a ton of money by giving them a heads up on this particular side effect. I’m no fan of the FDA- a lot of what they do is pointless or over-reaching. Like regulating Oil of Olay because they finally had a drug-store product that they bothered to prove actually WORKED. Which then made it a “drug” in the eyes of the FDA. That’s total baloney.
But the FDA has also kept a lot of bad stuff away from us, e.g. thalidomide. And many products that you’ll never hear of, thank God. In spite of it all, we have a pharmaceutical industry that produces miracles all the time. There’s a lot that is wrong with how health care is delivered in the US, but there is a lot that is right. The important thing is not to throw the baby out with the bathwater- as soon as we figure out which is which!
The other thing that you have to remember is that the companies who develop the drugs – and spend the billions of dollars in R&D required, are in a race against time with the companies that make the generic versions of the drug – and don’t spend the R&D money. For ever drug that makes it the market place there are a hundred that don’t, and there is a limited amount of time for the pharmaceutical company to recoup their money on that investment.
Lets face it, with all the research over the past 75 or so years, the drug companies have HAD to come up with cures for some diseases. But like the 100 MPG carburetor that’s been kept under wraps, if you cure the disease, you won’t sell anymore drugs. I need to take some medication that has increased in cost from $1,000 per month to $3,000 per month in roughly 5 yrs., while the number of people prescribed and using this drug has increased tremendously. The research and FDA process is done. Why the price increase? BTW, the CEO made $33 million in 2009.
You really are a stupid thug, aren’t you?
The 100 MPG carbeureter wasn’t kept under wraps, it was shelved because any engine using it was grossly underpowered. Turns out you need more than gas vapor in your combustion mix to make a useful engine.
Gee, if only there were some kind of relationship between supply and demand. Perhaps some kind of natural law?
Maybe next time you see your doctor you can ask if he has any pills for stupid. Though given the demand the price would quite probably be astronomic.
Nah. Drug company CEOs (like most CEOs) don’t actually care about the industry- maybe not even their own company, except as they align with their own personal values and profits. If CEOs can bring a fantastic cure to market, they will, as soon as possible. First, because they want to see those stock options pay off ASAP in case their own tenure turns out to be rather short, and second, if they wait a competitor is likely to scoop them.
My husband has been a pharmaceutical scientist for 25 years. He and his colleagues do NOT invent “cures” then sit around plotting how to hide the “cures.”
The human body is extremely complex. The fact that we have found mostly treatments, not cures, is testament to that complexity. If you knew one iota about human chemistry, you’d know that it’s still a mystery why one medication works just fine for one person, yet fails or causes reaction in another.
Until mankind figures out the human body, we should be g*ddamned grateful that we have treatments which have extended the lives of millions and enhanced the quality of life for millions more.
Take off your tinfoil hat. There’s no grand drug conspiracy.
Note, too, that Allergan’s sales revenue is what they sell to pharmacies, hospital ,etc., who have to have their own markup. Hence, the “discount “would be even less that the minuscule amounts demonstrated.
I wonder how much the lawyers made from all that with their BS/frivolous lawsuits.
I think you just skated over an issue orders of magnitude more important that the cost of pharmaceuticals, or even the whole pharmaceutical industry: that above may be one of the major factors leading to the banking bubble. When congress messes with success and tries to “fix” something that isn’t broke, we can sometimes end up with catastrophic consequences.
How many myopic decisions were made by banking executives because of that? Forget pharmaceuticals, that’s just one industry. What they did with that dimbulb move may have had more to do with creating this depression than all of the other monkey business put together.
You are correct. I have pointed out the consequences of the million dollar limit before. It was strictly a “we’re looking out for you little people” electoral strategy, and the results have encouraged very short-term thinking.
I don’t buy this premise…By the way why do some-not necessarily Pharma companies- some get a huge amount for Failing companies???
What I find most morally reprehensible about all of this is all the people commenting on what they find morally wrong about what the Pharma companies are doing.
1. If companies are advertising, it means that they believe it brings them more money in sales. More money in sales means the drug has reached more people who WANTED it or NEEDED it. Thus, this is a good thing.
2. If companies are spending millions on a CEO, they believe it will help them grow the company. A growing company means it can help more people and provide for more people. A growing company, due to economies of scale, means that the goods can be provided at a LOWER cost, not higher. Thus this is a good thing.
Bottom line, most companies are not going to act against their own best interest. True, none are perfect, but excuse me if I fail to believe that anyone could run a perfect company. This brings me to my last point:
3. If you think you can do it better, cheaper, or more moral, then don’t comment about it. DO it. Because if you are right, you can put the companies you are complaining about out of business. This, also, is a good thing.
WELL SAID! THANK YOU!
As a beneficiary of one of the newer drugs, I cannot complain about drug costs. R and D is expensive and almost all of us benefit from it in one way or another.
Word. The first drug my husband worked on was Lipitor, in 1987. It didn’t get approved until 1997. The company (NOT Pfizer–Parke-Davis/Warner-Lambert) spent close to $1 Billion before selling one single dose.
It’s going off patent at the end of this month, and now generic-makers can make a killing off it with nearly zero investment. Yet another reason drugs are so incredibly expensive–the manufacturers have to make a product-lifetime profit in a very few years before everyone else gets a cut. /rant off
This short marketing window also creates an urgent need for companies to establish *brand* recognition, which is different from informational advertising. Once the generics move into a market, the original developer of a drug can still charge a premium for the brand-name version–and the stronger the branding, the greater the premium. The payback for the upfront advertising blitz is that it can significantly increase the lifetime revenue that a new drug can generate.
Generic Lipitor is coming to market because Pfizer chose to enter licensing deals/settlement agreements (google Pfizer, Ranbaxy, Lipitor, 2008). Pfizer has had no competition with a “me too” Lipitor precisely because of its early patent protection and FDA regulatory barriers. No other industry gets a period of competition-free time on the market like the Pharma industry. And yes, patents expire. For good reason–if they did not, you would lose the incentive to innovate. Whether drugs should be allowed on the market after a Phase II study, which they were pre-thalidomide scare, is a separate issue, but that would go a long, long way towards reducing the inherent regulatory cost of drugs. Far more than capping CEO salaries…
Good article providing much insight on the “problem” of so called “excessive” executive compensation but this a dry spit in the wind as far as the OW (Occupy Wherever) crowds now attempting to portray themselves as the new hope and change for the future; the demise of their much hated America and the rise of a socialist world order where everybody is entitled to the release of all indebtedness and the right to the proverbial “free lunch,” “a chicken in every pot.” From each according to ability to each according to need, the impossible, unrealistic, inhuman ambition of the intellectual Left.
The problem America and the world faces is an ever growing population with an ever increasing number mired in the swamp of ignorance and self indulgence. It takes no great intellectual prowess to contemplate Capitalism, the American version, and figure out that it is the only system that is capable of operating effectively within the context of the obvious imperfections and inherent differences in human behavior, ambition, intelligence and ability, differences no amount of social engineering can erase. All other systems of social order require humans to behave in conformance with rules established by the ruling class; usually a self described intellectual elite impervious to criticism and certain in their narcissistic assessment of their inherent superiority and an obsessive determination to modify and mold human behavior to conform to their perverted idea of perfection. Deviations from the “norm” are severely punished to keep the underclass in the “classless” society in line. That this has been tried and failed numerous times is of no consequence. Every new incarnation of this bunch believe their version hasn’t been tried and will absolutely succeed where the other “inferior” versions failed.
The best of Capitalism operates with a minimum of interference from the governing class which, at its best, does not rule but is directed to compensate for, suppress and hold at tolerable levels the ever present and inevitable criminal element in human nature by enforcing the democratically established rules of law. Its major focus is not equality of outcomes but equality of the opportunity for each individual to reach his or her optimum potential and/or desired ambition undeterred by the abuse of their Constitutional rights. In effect, despite the ever present predatory elements, each individual elevates all others by operating in their own best interests, behavior considered selfish, greedy and desperately in need of modification and control by the anti-Capitalists. Profit is the motivation, the reward VS profit is evil.
Despite the whining and sometimes rabid protestations of the “peaceful” protesters about the evils of Corporate America and their greedy profit motives, ostentatious lifestyles, and excessive executive compensation the latter represent the pinnacle of what can be achieved in a Capitalist society and they provide a guide post for all their ilk to follow from mega corporations like Apple, Boeing and IBM to the mom and pop shop in every hamlet, that provide the opportunity for all to participate in their success and insure their own. They are the roadmap, the gold ring waiting to be grabbed by the few willing and able to take the risk, invest, make the effort. Equal opportunity, not equal outcomes. Human beings are not equal; not equally capable, equally ambitious, equally qualified, etc., etc.
The OW crowds need to stop obsessing over their perceived inequities in the economic scale and their own selfish grievances and take a hard look at what the hated American Capitalist system has achieved in the historically brief period of 235 years since America declared itself an independent nation. They won’t. They’ll wallow in their ignorance nourished and encouraged by an elite political class determined to fan the fiery dragons breath, create a permanent disgruntled class always directing their anger and frustration everywhere but at the instigators of that misdirected frustration and anger, an unintentional description of the majority of Blacks and their devotion to the Democratic Party; the model of the environment sought by the current version of that party that they seek to create on the entire American electorate. Ignorance is the key. The OW crowd is a perfect fit and Mr. Cramer’s common sense argument will unfortunately fall on the deaf and dumb ears where it might do the most good.
David E. I. Pyott of Allergan makes $33 million. Allergan makes thousands of products that help people in more then 100 countries live better. In these free exchanges they earn over $5 billion in revenue and lead 10,000 employees. (from marketwatch.com)
A-Rod makes $32 Million for hitting a baseball.(ok he’s a good fielder too)
I think David has done far more good for society then A-Rod. Maybe David needs a raise!
Thanks David – you evil CEO you. If only you would campout at an OWS somewhere then we would be impressed.
Actually, the issue is why the stockholder is the one receiving less whether 100 dollars or a penny on the return of his/her investment to aggrandize a senior manager. Need top dollar to attract top talent is the reply. Really. Anyone think that Petreaus isn’t worth a salary higher than what he’s receiving? Somehow we enjoy his managerial and leadership skill at a rock bottom price. No, for all the rationalizations here, we’re really dealing with egos and self worship not necessarily skill as amply demonstrated by all the high priced and powered managers and board members whose corporations and businesses have vanished in the last couple of years. How were they worth those multi-millions in salary and stock options only to have nothing to show for it today. One big confidence game. It’s the stockholders who are the ones really taken for the ride.
The biggest driver of high cost for prescription medications is not CEO salaries,marketing costs or the like. It is the absurdly long process of getting drugs approved by the FDA coupled with the fact that patent protection only lasts 20 years from the time of filing and they need to file early before someone else beats them to it.
Pharmaceutical companies spend spend hundreds of millions of dollars, if not billions, in developing new drugs, running the required clinical trials testing safety, efficacy, etc. If they have to spend anywhere up to, say, 10 years going through that process then they only have 10 more to recoup all the investment in R&D necessary to bring the drug to market and make a reasonable profit for the investors that put their money at risk to develop it.
I work in financial services and have arranged debt financing to many pharmaceutical companies that had yet to make dime-one of revenue from their R&D efforts yet were able to raise capital on the promise their inventions showed. That is a hell of a lot of risk to take and be compensated appropriately for.
If the patent protection period for pharmaceuticals were to start at the time of FDA approval rather than filing of the patent that would go a long way to reducing the cost to the patients using it. If drug patents could be extended to 25 or 30 years it would go even further. Hey, as copyright has effectively been extended to almost 100 years to keep Mickey Mouse happy, why not?
Great comments, all. But Dana, I have to call out this statement: “The thing that bothers me the most is their marketing budget, which is more than what they put into R & D. That’s right, they spend more on advertising than they do on research.”
Not so. The R&D spend is at least $40BN a year. The “marketing” is maybe half that and falling; and a big part of it is something that isn’t “marketing” as you or I would know it. Free samples. Which doctors use to help out patients who are broke. It’s a form of charity as much as it is an educational tool, enabling doctors to get a better sense of how the product works in their practice. But it gets written up as if it were those sleazy stupid TV ads.
I worked in the business (supporting R&D) so I know something of this, by no means all of it. But it always bothers me to see this canard about marketing > R&D spend.
As for overpaid executives: yep. I think they’re no worse than any other industry, but organizations are imperfect. The guys at the top of the food chain arguably get too much dough for what they’re “worth” but it’s such a confused, thin market up there, full of people (like comp committees and HR advisors) who have every incentive to see the numbers go up year after year, that it’s hard to say what the number “should be.” My beef is less the dollars than the distorting psychological effect they produce on CEO decisionmaking. Most of us know what a dollar is worth. If (relatively) suddenly we were being paid $500K a WEEK, we would be in psychological shock. We would have to compensate for this disparity between our previous experience of what we were “worth” and what we were seeing on the pay stub. We would do so, not by throwing away the money (although I am sure that some do, with silly toys and bad habits), but by deciding we WERE “worth it,” and we were somehow magically the smartest people on the planet. And guess what? We’d be surrounded by others who were busily trying to persuade themselves of the same thing.
Result: stupid decisions by arrogant insecure people who can’t believe their luck, are living on a knife-edge, and have to look “visionary.” Typical output is a merger or other bold corporate move that makes very little sense.
CEO salaries bother me a lot. Shareholders (minus insiders) who are owners of the company should get to vote on executive pay. When ceo’s take home 30 million a year,they are ripping off the shareholders who could have gotten a higher stock price or bigger dividend. Salaries are way out of line.
There are likely many David E. I. Pyott that could run allergan well. There is only one A-rod and only a few people with that talent.
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