
Pfizer CEO gets 61% pay raise–to $27.9M–as drug prices continue to climb - derEitel
https://arstechnica.com/science/2018/03/amid-drug-price-increases-pfizer-ceo-gets-61-pay-raise-to-27-9-million/
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ams6110
His pay is salary of $1.96 million, and a $2.6 million bonus. The rest is in
equity of various packaging.

Look, this is pretty much clickbait/outrage-oriented reporting. Sure it sounds
ridiculous to most of us but the CEO salary is a drop in the bucket on
Pfizer's P&L and it is not the reason that drug prices are high/increasing.

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danbruc
Would there be an article talking about Pfizer raising drug prices if they
increased the hourly salary of every employee by $0.06? I seriously doubt it,
but that amounts to the same $10.3 million [1]. The amount is insignificant
when compared to the revenue of the company. The real story is how a certainly
class of people managed to convince all the relevant parties that their work
is a hundred times more valuable to the company than that of everyone else.

[1] 96,500 employees, 240 working days per year, 8 working hours per day

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ams6110
> how a certainly class of people managed to convince all the relevant parties
> that their work is a hundred times more valuable to the company than that of
> everyone else

Well, because that is the case.

A line worker in a Pfizer manufacturing plant, can (within reasonable limits)
be just about anyone, given necessary training.

The CEO can't be just anyone. Therefore he/she gets paid more.

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danbruc
That is the point that I doubt. Sure, it is certainly easier to find someone
for the production floor, but I see no evidence that CEOs have such
exceptional skill sets that there wouldn't still be millions of people who
could do the job.

But even if that would be the case and people with CEO skill sets would be
extremely rare, I would still have a problem with CEO compensation because
then their compensation would be, so I argue, based on demand and not value
provided for the company. The success of a company depends on all the people
working together, without CEO the people on the factory floor don't know what
to do, without the people on the factory floor the CEO doesn't get any product
out. Neither party gets to claim that they are a hundred times more important
than the other one.

Even if you agree that the compensation is mostly driven by scarcity, you will
of course tell me that that is just how markets work, if good CEOs are rare
and in high demand, then I will obviously have to offer a lot of money to get
a good one. And I agree with that insofar, that this is how it currently
works, but I consider it flawed. I would like to see, at least in some
situations, prices not influenced by scarcity. If you now want to point out
that this would ruin market mechanisms, that without scarcity increasing
prices we would lose an important signal hopefully increasing supply, I also
agree with this.

If I had a finished solution, I would have written it up and collected my
Nobel prize in economics years ago. But that doesn't change the fact, at least
in my opinion and at least in some situations, that prices are used for both,
to measure the value something provides as well as how scarce something is,
and that this link is sometimes desirable and sometimes not.

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aries1980
It is hard to see what is happening behind the scenes. Such a mega corp needs
top officials with good political connections around the globe and wide range
of network with corporations at such size. Such relationship is the scarcity,
not the character business or industry vision.

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greenleafjacob
Article states that the board needed an incentive to keep the CEO on since he
was going to retire at 65 otherwise. Wasn’t this an entirely foreseeable
outcome? I mean what will be different next year for example? I looked for
some market force or exigency that would force the board’s hand but didn’t see
any in the article.

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gameswithgo
Perhaps the board is made up of other extremely high paid CEOs who have a hard
time believing other people could do their jobs, for far less?

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greenleafjacob
That certainly was/is my initial bias.

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replicatorblog
I understand the frustration with profit-making companies in a space where
human lives hang in the balance. I would prefer instead of attacking the CEOs
of these companies, the entrepreneurial sorts who hang out on these boards
start competing companies.

I don't expect them to compete with Pfizer at the start, Martin Shkreli showed
how its possible to get into the drug business for relatively small sums. But
instead of jacking up the prices, this new class of founder could show how
it's possible to drive costs down using better management and less greedy
business models.

Bonus points if these startups could release new drugs at OTC prices. My guess
is after a few years, founders will start to understand the pressures that
guide pharma in a more sympathetic light. What was once seen as wasteful
marketing might more charitably seen as cross-subsidy of new drug development.

There's a decent amount of waste in the pharma business, but it's also the
closest thing modern society has to a goose that lays golden eggs. Sovaldi is
going to transform what it means to live with Hepatitis-C. It's incredibly
expensive now, but in a decade when the patents expire, there will be a race
to the bottom, price-wise.

If you don't believe this is the kind of problem that can be solved by
startups, perhaps we should consider alternative arrangements. E.g. Could
Harvard, with its world class science, business, and law departments turn
their talents and $30B endowments towards developing new drugs? Maybe, maybe
not, but I'd prefer we build up new models for regularly producing wonder
drugs before we tear the old one down.

