Year by year, drugmakers disclose the compensation they hand out to top executives. But the year-by-year numbers don't tell the full story. As Reuters notes, CEOs have reaped payoffs much bigger than proxy filings estimate, as long-term share awards meet big stock gains.
|Gilead CEO John Martin|
Take the case of Gilead Sciences ($GILD) CEO John Martin. After factoring in stock and options, Martin's compensation from 2009 to 2013 amounts to $400.6 million, the news service figures. And that's about to be half again as much. Because of additional option exercises, Martin's haul will grow to $600 million by this summer.
What's the word from Gilead's proxies over that timeframe? Citing data compiled by Equilar, Reuters comes up with a $75 million total from 2009 to 2013. Gilead's outsized stock performance in recent years--its shares climbed by almost 300% since 2008--turned that $75 million in estimated compensation into much, much more.
Of course, investors aren't likely to complain about Martin's payoff, because they've seen big payoffs, too. And with the company's hepatitis C franchise jet-fueling revenue past $20 billion in 2014, the gains continued. Gilead hasn't filed its proxy yet this year, so we don't yet know how his pay package fared in that record-breaking year.
That sort of growth won't repeat this year, partly because of discounts Gilead was forced to offer to payers, now that AbbVie's ($ABBV) competing Viekira Pak is on the scene. The company's 2015 forecast accounts for comparatively modest growth, at $26 billion to $27 billion in sales compared with $24.5 billion in 2014. The forecast fell about $2 billion short of analyst expectations, and Gilead shares slipped on the news.
Still, though Martin's numbers are enormous, pay watchdogs can't accuse the company of rewarding its CEO for poor performance. "You're seeing overpayment, or outsized payments, for what is market performance or mediocre performance," Aeisha Mastagni, an investment officer for the $191 billion California State Teachers' Retirement System, told Reuters. "Directors can't ignore the issue of pay inequality or rising executive pay."
What Gilead is likely to see--or continue to see, rather--is pushback from patient advocates, who've long criticized the company for high prices. Most recently, Doctors Without Borders attacked Gilead for some stringent riders on its agreement to allow generics companies to sell cut-rate versions of Sovaldi and Harvoni. The generics licenses include requirements that patients prove their identity and return pill bottles for refills.
The moves are designed to thwart moves to import those cheap meds into markets where the drugs are much more expensive. But the international public health organization says they'll keep patients from getting treatment. The group has previously slammed Gilead for restricting those generics to the poorest countries, when patients in middle-income markets might find those breakthrough treatments out of reach.
- see the Reuters story
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