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Message
Big Pharma Spent More for Stock Buybacks than R&D
Posted on 7/19/17 at 8:53 am
Posted on 7/19/17 at 8:53 am
quote:
Under fire for skyrocketing drug prices, pharmaceutical companies often offer this response: The high costs of their products are justified because the proceeds generate money for crucial research on new cures and treatments.
It’s a compelling argument, but only partly true. As a revealing new academic study shows, big pharmaceutical companies have spent more on share buybacks and dividends in a recent 10-year period than they did on research and development. The working paper, published on Thursday by the Institute for New Economic Thinking, is entitled “U.S. Pharma’s Financialized Business Model.”
A few companies have spent more money repurchasing shares than they allocated to research over the period, the study found. They included Gilead Sciences, which spent $27 billion on buybacks versus $17 billion on research, and Biogen Idec, which repurchased $14.6 billion in stock and spent $13.8 billion on research and development.
Yes, its the NYT
Not really a great look when your argument for $500 bottles of pills is high R&D costs. Also, it seems like buybacks are getting a little crazy these days and are being used at a cheap tool for CEO's to return money to investors in lieu of new products.
Take this worrying statistic
quote:
In fact, according to a chart from Credit Suisse, Fink may be more correct than he even knows. As CS' strategist Andrew Garthwaite writes, "one of the major features of the US equity market since the low in 2009 is that the US corporate sector has bought 18% of market cap, while institutions have sold 7% of market cap."
What this means is that since the financial crisis, there has been only one buyer of stock: the companies themselves, who have engaged in the greatest debt-funded buyback spree in history.
LINK
Any of this concern anyone else? Maybe its just me.
Posted on 7/19/17 at 8:56 am to AUbused
Why should that concern me? What are the duties you feel pharma companies owe and have violated?
Posted on 7/19/17 at 8:57 am to AUbused
quote:So what? Did you flunk Finance 1001??
Big Pharma Spent More for Stock Buybacks than R&D
Posted on 7/19/17 at 8:59 am to AUbused
quote:
Big Pharma Spent More for Stock Buybacks than R&D
So what? Did you flunk Finance 1001??
This. AUbused
Posted on 7/19/17 at 8:59 am to BBONDS25
quote:
What are the duties you feel pharma companies owe and have violated?
Hopefully the opiate epidemic anvil doesnt fall out of the sky onto your head.
Posted on 7/19/17 at 9:01 am to Lakeboy7
Not the fault of the people who make the opiates.
What the companies are guilty of, however, is not ensuring a good supply of cheap but life saving drugs.
Don't get me started on bicarbonate
What the companies are guilty of, however, is not ensuring a good supply of cheap but life saving drugs.
Don't get me started on bicarbonate
This post was edited on 7/19/17 at 9:03 am
Posted on 7/19/17 at 9:04 am to AUbused
Are we going to regulate the amount of money drug companies are going to make? I have never understood this argument.
Posted on 7/19/17 at 9:04 am to AUbused
Posted on 7/19/17 at 9:06 am to AUbused
Probably a lot more to do with the extremely low interest rate environment since 2008 than anything else.
Also, did they include M&A in the R&D calculations? Increasingly so, most major pharma are acquiring IP rather than developing it in house. More than ever, their specialty has become hand-holding potential products through FDA approval, not necessarily developing original IP.
Also, did they include M&A in the R&D calculations? Increasingly so, most major pharma are acquiring IP rather than developing it in house. More than ever, their specialty has become hand-holding potential products through FDA approval, not necessarily developing original IP.
Posted on 7/19/17 at 9:07 am to GumboPot
quote:THis. No one is spending on CAPEX. Cash has to go somewhere.
Big Pharma is not alone. It's a trend amongst all publicly traded corporations.
Posted on 7/19/17 at 9:08 am to AUbused
quote:
Any of this concern anyone else?
Nope.
quote:
Maybe its just me.
It is. Well, hopefully, anyways.
Posted on 7/19/17 at 9:25 am to AUbused
A lot of the majors have decent dividends so buying back stock to retire those quarterly obligations is a good thing. As far as debt financing, I'd imagine that has a lot to do with the long period of low interest rates we've seen that could make sense depending on the analysis of the dividend yield compared to interest on the debt.
Afterall, going public gave these companies a cash infusion to fund R&D and/or make the necessary capital investments to produce and distribute said drugs in the first place.
I think it makes for easy bad optics and may or may not be the best use of their cash, but it's likely not as bad as it is made out to be.
Afterall, going public gave these companies a cash infusion to fund R&D and/or make the necessary capital investments to produce and distribute said drugs in the first place.
I think it makes for easy bad optics and may or may not be the best use of their cash, but it's likely not as bad as it is made out to be.
Posted on 7/19/17 at 9:29 am to Tiguar
quote:
Don't get me started on bicarbonate
Arm & Hammer, tap water, and stir into veins.
Also Atropine? Epi? Epi-pen.
But this is PT board. Gouge baby! Market drives.
Why only charge $12 for a med that only costs $2 to manufacture and is life saving? ITS LIFE SAVING!!!! They'll pay $1200 for that epi pen when their kids trachea sounds like a kazoo. They'll pay $250 to restart moms heart with that atropine.
Not spending much on R&D is not shocking to me. They spend more on marketing. Or they did 10 years ago. And their R&D was just tweaking meds slightly to be able to charge brand name prices again. Clarinex for Claritin. Nexium for Prilosec. Also, combo meds. Taking two old pills and combining them to one so they can again charge for a new formula or medication. Caduet, anything and HCTZ, Zegerid, Duexis. Take an old med and tweak it or two old meds and combine them for the minimal benefit of it being in one pill and charging incredible amounts.
Nothing Big Pharm does will shock me. I don't know where capitalism meets decency? I think it is adding a zero to the price. Not two or three zeroes. Or just not making old meds because they don't make enough.
Posted on 7/19/17 at 9:40 am to GumboPot
Yes, that graph was in my second link.
Posted on 7/19/17 at 9:44 am to LSU alum wannabe
quote:
I don't know where capitalism meets decency?
The pure capitalist in my says capitalism is not required to meet decency, but in healthcare it does seem like a unique set of variables that make it unique. You are exactly right. What would you pay to save your child? Everything you can. At the very least government should be clearing every roadblock possible to competition on drugs to bring prices down.
Posted on 7/19/17 at 9:51 am to AUbused
^ I mostly agree with. Trump has discussed taking some of those roadblocks out and I believe has done some work on it in his early EOs.
Are you potentially arguing for Pharma to be a totally non-profit industry?
Are you potentially arguing for Pharma to be a totally non-profit industry?
This post was edited on 7/19/17 at 10:15 am
Posted on 7/19/17 at 9:59 am to AUbused
Does the article mention anything about real R&D expenditures during that time, i.e. were they increasing or decreasing?
Posted on 7/19/17 at 9:59 am to DabosDynasty
quote:
Are you potentially arguing for Pharma to be a totally non-profit industry?
No not at all. I personally think capitalism is the only way because I believe in profit motive. I believe that capitalism is, by nature, amoral and thats fine. Im not really sure what the answer is. Maybe there is no good answer.
Posted on 7/19/17 at 10:01 am to AUbused
I have to agree with that too. I'm not really sure what the answer is either, but I'd love an in depth public discussion on healthcare and pharma instead of the back door, only those in the club discussion we have now that's lead to shite legislation.
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