Consider one of Bernie’s fellow University of Chicago grads, John Martin, who has been honored by that university: He sits on the board of trustees. Martin heads the price-gouging drug firm, Gilead. Here’s a summary of his 2014 compensation.
Gilead — whose hepatitis C treatment, Sovaldi, can cost patients up to $84,000 for a 12-week treatment — said Martin received compensation valued at $18.9 million last year and gained $187.4 million from previously awarded stock options and restricted shares.
Martin’s 2014 pay included a $1.6 million salary, stock award valued at $8.4 million, stock options worth $5.2 million and $3.7 million incentive award. Excluding gains from exercised stock options and vested shares, Martin’s compensation rose 22% from $15.5 million in 2013, Gilead said Friday in an annual proxy filing.
Martin, CEO since 1996, has scored eye-popping equity gains before.
He exercised stock options for a $158.9 million gain and received $4.8 million from vested shares in 2013. And in 2012, his compensation was valued at $95.8 million after receiving about $54.5 million in 2011 and $53.2 million in 2010, according to company filings.
What’s he making this year? You have to figure he’s pulling in around two hundred million. Just this one guy.
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Who cares? Not shareholders. Not one of America’s best universities, which has put one of the country’s great icons of greed and cruelty in charge of its students’ educations. No one who matters cares. On the contrary. They’re thrilled.
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Gilead and Martin play a very small part in a very large story that Americans are having trouble ignoring. 2015 was the year in which everyone loved to hate Martin Shkreli – in the world of vicious rapacity, he got the spotlight. For a few months, Shkreli stood for all the CEOs holding hundreds of millions of dollars while watching people who could benefit from their medications die, or ruin their lives trying to survive.
But Shkreli is the lowlife, the lurid loudmouth easy to see and easy to hate. John Martin is the quiet, dressed for success, face of income inequality. To focus on John Martin is to understand that income inequality and wealth inequality aren’t mere phrases, mere abstractions. To listen to Bernie Sanders is to hear the only politician willing to bring clarity and outrage to what he calls “the great moral issue of our time.”
January 28th, 2016 at 3:30PM
Comrade Bernie had no problem with wife Jane’s $200K golden parachute after she wrecked Burlington College in Vermont.
Maybe he should start with the great moral issue in his own bedroom.
January 28th, 2016 at 4:02PM
tp: Much as I object to money corruption, that seems a pretty paltry example of it.
January 28th, 2016 at 4:08PM
John D. Rockefeller was one of the founders of U of C. Just sayin….
January 28th, 2016 at 4:41PM
charlie: I don’t expect big money people who do great things like start universities (and public libraries – like Carnegie) to be angels.
If John Martin offloaded a ton of his money onto some great public project that’d be terrific. Don’t see it happening.
January 28th, 2016 at 8:29PM
UD, I doubt John “Competition is a sin” Rockefeller would have a problem with John Martin being a member of the BOT. The two have a business model from which generational fortunes are made, and how some unis become great. But I gotta wonder if they talk about Ludlow, CO at U of C…
January 29th, 2016 at 10:40AM
Jane’s foray into university administration cost Burlington and its lenders many millions of dollars.
I look forward to more discussions of moral imperative from a candidate who genuflected before Fidel Castro and thinks that cervical cancer is caused by insufficient orgasms.
January 29th, 2016 at 2:55PM
tp: You forgot to mention that he and Jane honeymooned in the Soviet Union. There’s a ton of stuff like that.
January 30th, 2016 at 3:00PM
As in the humanities, it’s really important in social and behavioral sciences to understand important differences.
Unlike Shkreli, who simply jacked up the price on an existing drug, Gilead developed a brand new drug that cures what was previously an incurable and incredibly costly disease. Cost effectiveness studies show that even at the price they set, the drug is well worth that price to society in terms of its ability to reduce the existing long-term costs associated with Hep C and improve the quality of life for people with the disease.
Not understanding the differences between those two situations is just as bad as not understanding their similarities.
January 30th, 2016 at 3:38PM
Anon: Link to the studies.
January 31st, 2016 at 5:51PM
One of about a half dozen already out with similar conclusions:
http://archinte.jamanetwork.com/article.aspx?articleid=2471608#Conclusions
January 31st, 2016 at 6:37PM
Anon: Maybe we could start by making a distinction between cost effectiveness and the cost of the drug.
“I think a key policy point here is that the cost-effectiveness is important and this study shows that, but a next and important step is … to address the cost of the drug,” said lead author Harinder Chahal of the University of California, San Francisco, as quoted by Reuters.
http://www.fiercepharma.com/story/jama-gilead-abbvie-hep-c-meds-cost-effective-even-early-stages-liver-diseas/2015-11-24
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January 31st, 2016 at 9:13PM
UD is right on target here… the LA Times piece by Michael Hiltzik to which she linked is a must-read.
My gloss on this is that medical economists illogically and unethically base their value projections on health system assumptions rather than on a production cost basis for new drugs. So, they argue backwards from costs saved to the system in order to arrive at a maximum tolerated market price. It’s a self-serving approach for the manufacturers that allows them to achieve a profit margin of 85% as reported in this case.
It is contrary to the ethics of medicine to base charges for a consultation or a procedure on projected future savings to the patient. Surgeons don’t charge rates based on Quality Adjusted Life Years (QALYs) gained for saving the lives of 10-year old children by performing appendectomies. Likewise, the cost of a drug needs to be based on the cost of its production, not on how much it saves the system. Note also that Gilead arrived at its price before this report from ICER appeared in JAMA-IM (Anon’s link above). The arbitrary and capricious (and rapacious) nature of Gilead’s pricing is evidenced by the wide geographic variations noted in the Hiltzik article. Innovative treatments are supposed to add value, not to extract added value for the manufacturer. That is Milton Friedman talking.
This is another instance where commercial values are swamping medical values. That is the danger of the medical-industrial complex… and then when government weighs in, watch out!
February 1st, 2016 at 6:28PM
Well, yes! You’ve made an insightful point on the inappropriate use of QALYS.
Aside from those pockets of dedicated (quite burnt-out/frustrated) physicians who still place the patient above all else, the field of medicine does appear to be currently morally challenged. Can immorality be made quantitative? I believe that it can be, at least a lot more than presently.
As is so often posited: “morality cannot be legislated.” Is this right? I think the more appropriate formulation is: “morality can be legislated when it is accompanied by immoral methods of enforcement.” If a government sets a price point and if by law/decree Gilead was ordered to manufacture what seems to be its truly life saving drug, well . . . the company can then comply or decline. What then would be government enforcement if the company declines? Does government steal Gilad’s innovation? Does it imprison/fine its officers? How many patients then die as that process unfolds?
AT ROOT: I’D LIKE TO SUGGEST THAT THE PRESENT COMMERCIAL MODEL OF MEDICINE IS PLAIN WRONG, QALYs or not; that the CENTRAL PROBLEM ARE NOT THE GILEAD’S OR MEDICINE DISTRIBUTOR MONOPOLY.
Harms aside, consider that there are two distinct types of commercial models: 1) when a product does not provide intended value for the buyer, the manufacturer refunds the payment (usually minus a small fee) or provides at the very least a credit that equal the buyer’s payment, or 2) irrespective of whether the product “works” the manufacturer or service provide keeps the payment.
It follows that Medical diagnosis, Drugs/Biologicals, are products sold under the second commercial model. If they were sold under the first model we’d only have drugs and diagnostic panels that work well. Thus, governments would only pay for actual outcomes. There would still be stiff competition for diagnostic panels/acumen that are effective, and drugs/procedures that work. Of course patient self abuse must be factored.
Haven’t you too wondered why charges are similarly non-refundable for automotive, plumbing, electrical, or computer diagnosis, and faulty/iterative repairs? Why aren’t these also on the basis of commercial model #1?
All this is so far is to say, that if a company arrives at near foolproof diagnostic methods and treatments, and if medicines were legislated to be sold on the basis of commercial model #2, we might be glad to pay Gilead what it wanted, because Government could now afford – quite grandly – to kick in.
One further point – excluding marketing costs – it would be enlightening to quantitatively account for how the following factors into Gilead’s pricing of it’s drug: “liability”, pensions, benefits etc. (plus of course its manufacturing costs)
The liabilities incurred by Pharma in general are very opaque in SEC filings. However we know it comes in 4 forms: 1) from considerable legal costs incurred by a manufacturer to defend litigation from immoral ambulance chasing lawyers and patients, 2) from the true unintended harmful consequences of what appear to be solidly safe and effective drugs, 3) from immoral marketing of drugs with known but hidden liabilities, and 4) defending intellectual property. Of all of these, the company’s liability for the true future harms of drugs and biologicals cannot be known at product launch, unless gamed; yet these are more than capable of bankrupting a Gilead type company. The bright Wharton types have surely built into Gilead’s bottom line the costs of defending nuisance litigation, and those of settling up with those patients Gilead may truly unintentionally harm, if not kill. These costs are difficult to ascertain because companies do not proactively accurately report to the SEC all their legal reserves, nor what they have lost in class action suits until after the fact – if ever. For example Merck’s liability on VIOXX alone was estimated at an average of $25bb. Merck could absorb that, but Gilead could not.
This is not to give carte blanche to big or small Pharma – far from it. It is to say that if we had possession of the actual numbers, we might be in a better position to quantitate the degree of Gilead’s “immorality.” I do suspect it is there, but to what extent, I do not know.
How much profit is acceptable in Medicine? Should medicine be based on economic model #2? What are the pros and cons? If so how could this be enacted?
All my best,
Mark