Cummings and Sanders Release New GAO Report Showing Skyrocketing Profits for Drug Companies as GOP Passes Bill to Approve Massive Corporate Tax Cut
Washington, D.C. (Dec. 21, 2017)—Today, Senator Bernie Sanders (I-VT) and Rep. Elijah E. Cummings (D-MD), the Ranking Member of the House Committee on Oversight and Government Reform, released a new report by the nonpartisan Government Accountability Office (GAO) detailing how drug company profits have skyrocketed over the past decade as prescription drug prices have continued to escalate for American consumers.
The Members are releasing the new report this week as Republicans in Congress push through one of the largest corporate tax cuts in history, including landmark tax breaks for drug companies, their executives, and their shareholders. According to a separate report issued by the Senate Budget Committee Democratic staff, Pfizer would receive a $38.79 billion tax break, Johnson & Johnson would get a $12.9 billion tax cut, and Eli Lilly would receive a $5.46 billion tax cut.
In 2015, Cummings and Sanders asked GAO to examine the profits of drug companies, the rising prices of prescription drugs, and their impacts on consumers and federal spending. The findings in GAO’s new report are stark:
- Skyrocketing Revenues and Profits.
GAO reported that from 2006 to 2015, drug company sales revenues increased from $534 billion to $775 billion. Approximately 67% of drug companies saw increases to their annual average profit margins, and average profit margins were between 15% and 20% per year among the 25 largest drug companies. In comparison, average profits for the largest 500 global corporations averaged between 4% and 9% per year.
- Mergers and Acquisitions Associated with Higher Prices.
GAO reported that research indicates that fewer competitors in the drug industry are associated with higher prices—particularly for generic drugs—as well as varied impacts on R&D spending, patent approvals, drug approvals, and innovation. From 2006 to 2015, the number of mergers and acquisitions involving one of the largest 25 drug companies increased from 29 to 61.
- Despite Massive Profits, Corporate R&D Funding Relatively Stagnant.
GAO reported that from 2008 to 2014, corporate R&D funding increased only from $82 billion to $89 billion, “most of which went to drug development (rather than research).”
Cummings and Sanders also sent a letter to President Donald Trump conveying the new GAO report and calling on him to fulfill the promises he made during the campaign to take on the pharmaceutical industry and lower prescription drug prices.
“During the presidential campaign, as well as after you were elected, you promised repeatedly that you would take strong and decisive action to bring down the rising costs of prescription drugs,” the Members wrote. “To date, however, you have done little to fulfill your promise. Instead, you have taken steps that appear to contradict your promise. For example, documents developed as part of your Administration’s Drug Pricing and Innovation Working Group have been characterized as “cribbed directly from policy papers published by the pharmaceutical industry’s powerful lobby.”
“Likewise, your nomination of Alex Azar, a pharmaceutical company insider, to lead the Department of Health and Human Services is very troubling,” the Members added. “You also have failed to support any legislation—including ours—to implement your campaign promise to take on Pharma and lower drug prices.”
Click here to read the new GAO report.
Click here to read the original request from Cummings and Sanders to GAO.
Click here to read the letter to President Trump.