|Johnson & Johnson CEO Alex Gorsky|
We know how executive pay in pharma tends to shake out: U.S. corporate chiefs get paid more than their European counterparts; execs at big-cap drugmakers reliably earn $15 million or more; and these days, some aggressive biotechs shell out plenty of dough, too.
But how does pharma compare with the rest of healthcare? Forbes columnist Dan Munro decided to find out--and the answer is that drugmakers pay their top managers more than in any other slice of the healthcare industry.
The survey is rudimentary--it includes only 5 representative companies in each sector of healthcare--but illustrative nonetheless. The drugmakers include Johnson & Johnson ($JNJ), which handed out $66 million to its top 5 officers, including $25 million for CEO Alex Gorsky. That's at the high end. At the low end, Novartis ($NVS) shelled out $38 million total for 2014, with $13 million of that going to CEO Joe Jimenez. Total for the pharma top 5? $265 million.
For-profit hospital systems came in second for overall exec pay, with $197 million total. Third, insurers, with $186 million. Fourth, healthcare IT, at $147 million; and fifth, medical devices at $121 million. In fact, the highest-paid executive in medical devices was Medtronic ($MDT) CEO Omar Ishrak. At $12 million, his pay package would fall far short of FiercePharma's forthcoming top-paid CEOs list.
|Regeneron CEO Len Schleifer|
In fact, the pay disparities could be even bigger. Forbes left out some of the highest-paid executives in the industry, including 2014's highest-paid, Regeneron ($REGN) CEO Len Schleifer.
Why does pharma shell out so much more to its executive teams? Forbes suggests a couple of contributing factors: One, pharma market caps are higher than those in the rest of healthcare. Two, profit margins are way higher--18% and up among the 5 companies featured, compared with single digits most everywhere else.
And here's where high-paying drugmakers may be lining up for criticism. The shareholders lobbying against big pay packages might be joined by even louder critics, particularly as drug prices climb ever higher. Munro suggests a public debate, in fact. "Executive compensation needs to be a part of the cost debate at a time when increasing drug prices are clearly and directly affecting the cost of healthcare for every American," the Forbes column states. "It won't be easy--or popular--but it's gone well past unsustainable to unavoidable."
- see the Forbes column
Special Report: 15 Highest-Paid Biopharma CEOs of 2013 - Leonard "Len" Schleifer - Joe Jimenez - Alex Gorsky