WEBVTT
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I want you to picture a company.
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A big one.
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Annual revenue of$56 billion.
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One of the most recognized names in American medicine.
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A household name.
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Now I want you to picture that company making two decisions in the same year.
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Decision one, giving the chief executive a 75% pay raise, bringing his total compensation to$32.5 million.
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And decision two, cutting the research and development budget by 29%.
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The biggest single-year RD cut of any major pharmaceutical company in America.
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Same company, same year.
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75% raised for the man at the top.
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29% cut to the science at the bottom.
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That company is AV.
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The year was 2025.
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And the reason I'm leading with AV today is not because they are uniquely villainous.
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Though that combination of numbers is pretty remarkable.
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I am leading with AbV today because they are the clearest single example of the argument that this episode is going to make.
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All of it, where it actually goes, who actually benefits, and what the industry's behavior in 2025 tells us about the story they've been selling us for decades.
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If you've been with this show from the beginning, you know that we've talked a lot across multiple episodes about advertising, about how the 15 largest pharmaceutical companies over a 20-year period spent more on marketing than on research.
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That was a systemic problem documented in the BMJ across two decades of financial filings.
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We're not going to relitigate or re-argue that case today.
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What we are going to do today is zoom in on 2025, because 2025 was the year that the industry's behavior became, in my view, impossible to defend with a straight face.
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It was the year that the gap between what the industry said and what it did became so wide, so documented, and so specific that I think it changes the argument permanently.
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Just last episode, we talked about what happened to drug prices in 2025.
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862 price increases in the first two weeks of January of 2026.
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64 cancer drug hikes in the first week alone.
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47% of most favored nation deal signatories raising pricing on existing drugs while simultaneously launching new drugs at an average of$353,000 a year.
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We showed you where the price increases went.
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Today I'm going to show you where the rest of the money went: the$177 billion in profits, the$97 billion that was returned to shareholders, the$34 billion in buybacks.
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And specifically, we're going to follow two rivers of money that the industry would rather you didn't examine too carefully: the advertising budget and the executive compensation structure.
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Because when you put these two rivers alongside the RD cuts, alongside what AV and 11 other companies actually did with their research budgets in 2025, the innovation argument doesn't just weaken, it collapses totally.
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So let's start with something that most Americans don't know.
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And that's that the pharmaceutical industry spends considerable resources making sure that you don't think about it.
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The United States and New Zealand are the only two countries in the world that allow pharmaceutical companies to advertise prescription drugs directly to you on television.
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Directly to you.
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Two countries out of 195.
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The United Kingdom banned, Germany banned, France, Canada, Japan, Australia, Switzerland, every wealthy democracy with a functioning pharmaceutical market banned.
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They looked at the practice of drug companies running primetime television commercials, telling patients to ask their doctor for a specific medication, and they said, no, that's not the relationship we want between patient and physician, or patient, physician, and medicine.
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That's not what we should be doing.
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And America said, go ahead.
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And we said go ahead because in 1997 the FDA loosened a regulation governing how pharmaceutical companies could advertise on broadcast media.
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Before 1997, a drug company running a broadcast ad had to fully disclose every significant risk, which, for many drugs, is a long and frightening list that kills any advertising appeal.
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The 1997 change created what's called the Adequate Provision Standard.
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A company could run its ad and simply direct viewers to a website or toll-free number for the full risk information.
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The full warning list didn't have to be in the ad.
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A drug that can cause liver failure, suicidal ideas, or sudden cardiac events is permitted to run a prime time advertisement.
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The ad shows attractive people in sunlit fields.
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The voiceover rattles through side effects at a pace that makes it functionally incomprehensible, and it does it in a bare-toned voice that seems pleasing.
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And then it tells you to visit a website.
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The FDA decided in 1997 that this constituted adequate provision of safety information.
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And it has allowed this standard to stand for nearly 30 years.
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The result?
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In 2025, pharmaceutical companies spent$9 billion on direct-to-consumer advertising in the United States.
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$9 billion, up from$6 billion on television alone in 2024.
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The Bipartisan Policy Center found that roughly 31% of all growth in U.S.
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drug spending after 1997 traces directly to the introduction of this advertising.
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31 cents of every additional dollar Americans have spent on prescription drugs over the past 30 years is attributable by academic analysis to the decision to let pharmaceutical companies advertise on your TV.
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This is not educational.
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That is not disease awareness.
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That is demand engineering.
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And American patients are paying for it twice.
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Once in the tax deduction that lets companies write off advertising expenses, and once at the pharmacy counter, when the demand that those ads created drives prices upward.
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Now we have to be clear about something because the advertising argument deserves more than a surface observation that it costs a lot of money.
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It does.
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But when a consumer goods company advertises, when Ford runs a commercial for the F-150 or Apple runs an ad for the next iPhone, competition regulates the outcome.
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You see the ad, you go to the market, you compare Ford's truck to GM's truck, you compare the iPhone to the Android.
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And if Ford is overcharging you, competition pushes them towards a more defensible price.
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That creates demand.
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But competition disciplines what that demand can sustain in terms of price.
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Pharmaceutical advertising is categorically different.
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And the difference is this the person watching the ad can't choose their drug.
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Not really.
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They can go to their doctor and they can ask for a specific drug by name.
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And research shows that they consistently do, and that physicians often prescribe what patients ask for.
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But the patient cannot compare Humera to its biosimular.
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Really, in any meaningful price competitive sense, because the patent restrictions that we've documented across a couple episodes effectively remove competition from the equation.
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So what pharmaceutical advertising does is create demand for a specific branded product in a market where that product faces no meaningful price competition, which allows the company to capture that demand at whatever price it has chosen to set.
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Advertising creates pull.
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The patent wall removes push.
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The result is a one-way ratchet.
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Ad spending goes up, prescriptions go up, revenue goes up, and there's no market mechanism correcting the price downward.
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The Senate Help Committee cited Harvard researchers who examined the most heavily advertised drugs and found that the majority showed little to no therapeutic benefit compared to existing less expensive alternatives.
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The most advertised drugs are not the most effective drugs.
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They are the most profitable drugs, the ones where the gap between the cost of manufacturing and the price charged is largest, and therefore where advertising investment generates the greatest return.
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You are not being informed by these ads.
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You are being recruited into a demand pool for a high margin product.
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The physician is being nudged to prescribe that product by a patient who came in having seen the ad.
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And the insurance system is being navigated by company-provided copay assistance cards that make the drug feel affordable to the patient while insulating the list price from any downward pressure.
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The$9 billion spent on advertising in 2025 is not a marketing cost.
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It's a price maintenance mechanism.
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It generates demand that sustains prices that would otherwise be disciplined by competition.
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And it's entirely legal and entirely tax-deductible.
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And it's been running largely unchallenged since 1997.
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Now, here's where I get to give credit.
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And I'm going to give credit where it's genuinely due, because this administration, under Donald J.
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Trump's leadership, has done something about this that I think deserves to be recognized clearly and specifically.
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In September of 2025, Donald Trump signed an executive order titled Addressing Misleading Direct to Consumer Prescription Drug Advertisements.
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It was a direct acknowledgement that the 1997 framework, the adequate provision standard, had been a gift to the industry at patients' expense, and it directed the FDA to fix it.
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At the same time, the FDA moved with unusual speed and force.
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The agency sent thousands of warning letters to pharmaceutical companies regarding misleading advertisements, ads that overstated benefits and understated risks, or used imagery and framing that misrepresented what the drug actually did.
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It issued approximately 100 cease and desist orders, and it launched formal rulemaking to close the adequate provision loophole.
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After nearly 30 years, the agency is finally proposing to require that broadcast pharmaceutical ads meet a disclosure standard that would be recognizable as actual disclosure.
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Secretary Robert F.
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Kennedy Jr.
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stated it plainly, saying, pharmaceutical ads hooked this country on prescription drugs.
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We will shut down that pipeline of deception.
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I'm not going to adjudicate every position Secretary Kennedy has taken on pharmaceutical and public health policy.
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We could spend an entire podcast just doing that.
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There are legitimate debates there.
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But on this specific point, the corrupting influence of direct-to-consumer pharmaceutical advertising on American healthcare, he is right.
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And the administration's actions are the right actions, and they deserve to be applauded.
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So after saying all that, I'm going to give you a specific number.
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And this specific number tells you how badly enforcement had fallen off before this administration acted.
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In peak years of enforcement, the FDA sent more than 100 warning letters per year for misleading pharmaceutical advertisements.
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That number reflects an agency doing its job, monitoring the flow of drug advertising and catching the violations.
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In 2023, that number dropped to one.
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One warning letter.
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Zero.
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Zero enforcement actions in 2024 against an industry spending$6 billion on television ads alone.
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When the current administration says it's restoring enforcement, it's not spin.
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That is a return from zero to something.
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And that something matters, both because it changes what companies can say in their ads and because it signals that the regulatory environment has changed that we are living in today.
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The rulemaking to close the adequate provision loophole is the more structurally important move.
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If it survives legal challenge and congressional scrutiny, it will require pharmaceutical companies to actually disclose risks in their broadcast advertisements in a form that patients can comprehend.
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That will not eliminate pharmaceutical advertising, but it will make them honest.
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And more honest ads, ads that fully disclose that this drug can cause liver failure or suicidal thoughts will be significantly less effective at driving demand for higher margin products, which is exactly why the industry is fighting the rulemaking with every lobbying dollar it has.
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And they will continue to do so.
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Watch.
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Now let's get to the RD numbers because that is where this industry's story about advertising spending and the story where direct-to-consumer advertising ultimately serve innovation by generating revenue that funds research falls apart completely.
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In March of 2026, Biospace published an analysis of research and development spending at the 16 largest pharmaceutical companies for the full year of 2025.
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16 companies full year of their own financial filings.
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The finding that Biospace had, combined RD spending by those 16 companies, fell from 165 billion in 2024 to 159.1 billion in 2025.
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The 16 largest pharmaceutical companies in the world spent$5.9 billion less on research in 2025 than they had in the years before.
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Now, before I go further, I want to address the response the industry will have to that number because they have one ready and it isn't entirely without merit.
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I continue to tell you that they have smart teams running their lobbying shops.
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They have a way to come up with an answer for every argument.
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They will tell us that RD spending fluctuates year to year based on trial timelines, pipeline stages, and acquisition activity.
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A decline in one year doesn't mean a trend.
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It means a company finished expensive late-stage trials and is preparing the next generation of investments.
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The year-over-year number doesn't capture what is a multi-year, multi-billion dollar commitment to research.
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The argument is worth taking seriously.
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Clinical trial spending genuinely is expensive and lumpy.
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A company in the middle of a massive phase three program will spend more in that year than in the year after results are announced.
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You cannot look at a single year RD line item in isolation.
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But here's the problem.
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When applied to 2025 specifically, the industry raised$5.9 billion less than it had in research, and simultaneously raised prices on hundreds of drugs, returned$97 billion to shareholders, spent$34 billion on stock buybacks, and paid its top 20 executives more than$500 million in combined compensation.
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The year they cut research is the same year they maximized every other form of spending.
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If the RD decline were a pipeline timing artifact, you would expect it to be decoupled from profit distribution decisions, but it isn't.
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Now let's get to AV because AV is not a timing artifact.
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AV is a choice.
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AV cut its research and development spending by 29% last year.
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29.
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The steepest single company RD decline of any major pharmaceutical company in the sector.
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In the same year, AV CEO Robert Michael received total compensation of$32.5 million.
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$32.5 million.
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That's a pretty damn good year.
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A 75% increase from his first year as chief executive, the largest percentage pay raise of any major pharmaceutical CEO in 2025.
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And that's not a timing artifact.
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ABVI made a deliberate allocation decision.
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Research gets cut by nearly a third, and the chief executive gets a 75% raise.
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Those two decisions are made by the same board in the same year with the same pool of available capital.
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And AV was not alone in cutting research.
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Johnson Johnson cut RD spending by nearly 15%.
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Bristol Myers Squib cut by 11%.
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Merck cut by 12%.
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Pfizer by 4%.
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Of the 16 companies in the analysis, most cut research spending.
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In the year they raised prices on hundreds of drugs and returned nearly three-quarters of their profits to shareholders.
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Now, here's the implication that I want to make sure you take away with you, that you repeat to your friends and your family and to anyone within earshot that is willing to listen to you.
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The industry's defense of high drug prices, the one they repeat to every senator, to every congressman, to every journalist, to every patient advocate who asks, why are Americans paying more than anyone else in the world?
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Is because of innovation.
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High prices fund innovation.
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Constrain the prices, you constrain the science.
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But in 2025, they generated$177 billion in profit and they gave$97 billion of it back to shareholders.
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And they spent$5.9 billion less on research than the year before.
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The innovation argument is not what's happening here.
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What's happening is a choice, a very deliberate, very well-documented choice about who the profits serve.
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And the answer in 2025 case at least is that it's not the patient, it's shareholders, it's executives and it's advertisers.
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Now, I want to spend some time digging in on executive compensation specifically.
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Not because the numbers are shocking in isolation, even though they are, but because understanding the structure of executive pay explains why the industry behaves the way it does.
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In 2025, the top 20 pharmaceutical CEOs received combined compensation exceeding$500 million.
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Here are some of the individual numbers that have been publicly disclosed.
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Eli Lilly's David Ricks received$36.7 million, a 25% increase over 2024.
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This is the CEO of the company that makes Manjaro and Zetbound, the GLP1 drugs we discussed in earlier episodes, as well as insulin products that Americans pay up to 10 times the Canadian price for.
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AdV's Robert Michael,$32.5 million, up 75%, in only his second year as their CEO.
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Johnson ⁇ Johnson's CEO,$32.8 million, up 30%.
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Pfizer's CEO,$27.6 million, and a year when Pfizer's revenue declined by 2%.
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The Pfizer board's independent proxy advisors recommended voting against the CEO's pay package.
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The board approved it anyway.
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Now let me explain why these numbers are the size they are.
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Because it's not arbitrary.
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The majority of pharmaceutical CEO compensation, in most cases, 70 to 80 percent of the total, comes not from base salary, but from stock awards and stock options, equity that vests over time and is directly tied to the company's share price.
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When the stock goes up, the awards are worth more.
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When the stock goes down, they're worth less.
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This structure is supposed to align CEO incentives with shareholder interests.
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The theory is that if a CEO's pay depends on the stock price, the CEO will run the company away that grows the stock, which should, in theory, reflect genuine value creation.
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In a normal, competitive market, that theory mostly works.
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In a market where the primary driver of stock price appreciation is pricing power, the ability to charge more for drugs that face no meaningful competition, the theory produces perverse results.
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Because in the pharmaceutical market, the most reliable path to a higher stock price is not a scientific breakthrough.
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It's a price increase on an existing blockbuster.
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A price increase on a drug whose patent is protected generates immediate certain revenue increases with no additional costs.
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It flows directly to the bottom line, to earnings per share, to the stock price, and then to the CEO's equity-based compensation.
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Investing in long-term research, by contrast, is expensive today and uncertain in its return.
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It increases costs in near term, reduces earnings per share, and may not produce an approved drug for 10 years, long after the CEO's current equity awards have vested and been cashed out.
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So what does a rational CEO with equity-based compensation do?
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Not what's good for patients, not what's good for research, but what's good for the stock.
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And in the pharmaceutical market, that means pricing power, price increases, patent extensions, advertising to maintain demand, lobbying to protect exclusivity, acquisition of startups, whose science the internal labs can't replicate.
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The executive compensation structure doesn't just reward the industry's behavior, it requires it.
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A CEO who chooses to sacrifice pricing power for the sake of patient affordability would not remain a CEO for long.
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The board would replace them with someone who understood that the equity-based compensation structure demands stock performance.
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And stock performance in this market demands pricing power.
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This is not a moral failure of individual executives.
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This is a structural feature of the compensation system.
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And understanding it tells you why the industry will continue to behave this way until something outside the compensation structure, law, regulation, competition, forces them to stop.
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We're going to add one more layer to this picture.
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One more little happy tree in the painting, as Bob Ross would say.
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Because I've been talking about where the money goes: advertising, executive compensation, shareholder returns.
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I want to talk about something that happened in parallel to all of that.
00:25:24.079 --> 00:25:38.000
In 2025, 12 of the 17 largest pharmaceutical companies, each generating at least$20 billion in annual revenue, eliminated a combined total of more than 22,000 jobs.
00:25:38.240 --> 00:25:41.759
22,000 people were out of work.
00:25:42.319 --> 00:25:45.200
These are not companies struggling to make a payroll.
00:25:45.359 --> 00:25:49.279
These are companies with revenue the size of small economies.
00:25:49.680 --> 00:26:02.559
They are cutting workers because restructuring towards the next phase of their business cycle, managing the patent cliff, integrating acquisitions, repositioning pipelines requires them to lay off people.
00:26:02.799 --> 00:26:07.279
The human cost of that restructuring is borne by the workers.
00:26:07.759 --> 00:26:22.000
The financial benefit, reduced cost base, improved earnings per share, stronger stock performance, is captured by the shareholders and by the executives whose compensation is tied to that stock's performance.
00:26:23.359 --> 00:26:28.240
I'm going to put AB back into the frame one more time because AV belongs in this picture.
00:26:28.480 --> 00:26:33.279
ADV generated approximately$56 billion in revenue in 2025.
00:26:33.440 --> 00:26:35.920
And it cut research and development by 29%.
00:26:36.559 --> 00:26:39.279
And it gave its CEO a 75% raise.
00:26:39.359 --> 00:26:43.440
And it eliminated workers as part of an ongoing restructuring program.
00:26:44.480 --> 00:26:47.039
The workers doing the science get cut.
00:26:47.200 --> 00:26:49.279
The budget for the science gets cut.
00:26:49.440 --> 00:26:53.119
The executive managing the cutting gets a 75% raise.
00:26:53.200 --> 00:27:00.799
And the explanation offered every price increase on ABS drug is we need these margins to fund innovation.
00:27:01.519 --> 00:27:05.039
I'm not saying restructuring is never necessary.
00:27:05.200 --> 00:27:12.480
I'm not saying that pharmaceutical companies owe their employees jobs and perpetuity regardless of business conditions.
00:27:12.720 --> 00:27:15.519
I'm not making a labor argument here.
00:27:15.920 --> 00:27:31.680
What I am saying, when the same company that is cutting workers and cutting research is simultaneously giving its CEO a 75% raise and spending billions of dollars on advertising, the claim that the drug price exists to fund innovation is not a business argument.
00:27:31.759 --> 00:27:33.759
It's a bold face lie.
00:27:34.000 --> 00:27:35.440
It's a cover story.
00:27:35.599 --> 00:27:36.640
It is spin.
00:27:36.799 --> 00:27:40.240
It is what you read in the grocery store tabloid.
00:27:40.960 --> 00:27:42.960
The innovation is being cut.
00:27:43.200 --> 00:27:45.359
The advertising is being funded.
00:27:45.519 --> 00:27:47.519
The executive is being paid.
00:27:47.680 --> 00:27:54.480
And the patients are being charged for innovation that does not exist at the rates the prices imply.
00:27:56.480 --> 00:28:04.880
So we're going to pull up to that 35,000-foot view because the 2025 numbers, damning as they are, don't exist in isolation.
00:28:05.039 --> 00:28:08.079
They are the product of a decade of choices.
00:28:08.240 --> 00:28:25.200
And we have a way to examine that decade specifically because the head of pharma, the pharmaceutical industry's principal trade group, and one of the most powerful lobbying organizations in Washington, DC, recently announced after a decade of leadership that he would step down.
00:28:27.839 --> 00:28:28.480
Wow.
00:28:29.279 --> 00:28:31.440
I want to audit that decade.
00:28:32.559 --> 00:28:35.119
When this leadership era began, total U.S.
00:28:35.200 --> 00:28:40.480
prescription drug spending was approximately$500 billion per year.
00:28:40.720 --> 00:28:52.640
By the end of 2025, it had crossed$800 billion a year, a 60% increase faster than inflation, faster than GDP growth, faster than wage growth for workers buying the drugs.
00:28:52.799 --> 00:28:57.279
Over that decade, pharma spent$305 million on federal lobbying.
00:28:57.440 --> 00:29:09.519
That is an average of$30.5 million per year, targeted at the specific members of Congress who write the rules governing pharmaceutical pricing, patent law, and Medicare coverage.
00:29:09.680 --> 00:29:15.759
In 2025 alone, a record year for pharma spending, the organization spent$38 million.
00:29:16.559 --> 00:29:30.640
Over that decade, pharmaceutical direct-to-consumer advertising tripled from roughly$12 billion in total industry advertising spent in 2015 to approximately$39 billion by 2025.
00:29:30.799 --> 00:29:38.480
The industry did not just maintain its advertising investment, it built an entirely different scale of promotional machine.
00:29:38.720 --> 00:29:47.599
Over that decade, the revolving door between the FDA and the pharmaceutical industry, which we have documented on a previous episode, continued to spin.
00:29:47.759 --> 00:29:51.759
Senior regulators left government and went to work for the companies they had regulated.
00:29:51.920 --> 00:29:57.680
The institutional boundary between the watchdog and the watch became progressively more porous.
00:29:57.920 --> 00:30:06.640
And over that decade, the innovation story, the justification of it all, became progressively less defensible against the data.
00:30:06.880 --> 00:30:11.599
The BMJ found that the largest companies spend more on marketing than they do on research.
00:30:11.920 --> 00:30:16.240
JAMA found no correlation between drug pricing and development cost.
00:30:16.640 --> 00:30:22.079
JAMA found no correlation between cancer drug prices and clinical effectiveness.
00:30:22.960 --> 00:30:34.079
Another analysis found that 60% of genuinely new drugs come from small, unprofitable startups, not from the large companies driving the lobbying and the advertising efforts.
00:30:34.400 --> 00:30:35.839
That's one decade.
00:30:36.720 --> 00:30:46.960
More spending, more lobbying, more advertising, more executive compensation, and a research to pricing relationship that the data consistently fails to support.
00:30:47.359 --> 00:30:50.400
New leadership at Pharma changes nothing by itself.
00:30:50.640 --> 00:31:07.599
The structural incentives, the equity-based CEO pay, the patent system, the advertising framework, the revolving door between the industry and government do not change because someone new is at the top of the trade association that represents the industry.
00:31:07.759 --> 00:31:17.759
What changes the structure is legislation, enforcement, competition, the specific things this administration, led by Donald J.
00:31:17.920 --> 00:31:21.599
Trump, has started and that Congress needs to finish.
00:31:22.319 --> 00:31:26.240
We all know what pharma's argument is going to be in defense of this practice.
00:31:26.480 --> 00:31:30.799
One, drug development is genuinely expensive and genuinely risky.
00:31:30.960 --> 00:31:35.039
The failure rate for drugs entering clinical trials is over 90%.
00:31:35.599 --> 00:31:42.799
For every drug that reaches a patient, nine or more were developed, tested, and abandoned at enormous cost.
00:31:42.960 --> 00:31:49.839
The companies that succeed have to recoup not just the cost of the successful drug, but the cost of everything that failed.
00:31:50.000 --> 00:31:56.960
High prices on successful drugs cross-subsidize the failures that produce the knowledge that made the next success possible.
00:31:57.359 --> 00:32:04.079
Two, the advertising, as objectionable as it looks, generates the revenue that funds the research.
00:32:04.319 --> 00:32:14.640
Remove the advertising, demand falls, revenue falls, research budgets fall, innovation slows, and the system is more integrated than critics acknowledge.
00:32:15.200 --> 00:32:25.519
Three, executive compensation at these levels is necessary to attract and retain the management talent capable of running multi-billion dollar global organizations.
00:32:25.920 --> 00:32:31.519
Underpay the CEO, lose the CEO to a competitor, and the company underperforms.
00:32:31.759 --> 00:32:34.799
The compensation is a competitive necessity.
00:32:35.440 --> 00:32:40.559
Four, the 22,000 job cuts are not evidence of industry dysfunction.
00:32:40.720 --> 00:32:43.440
They are evidence of appropriate reallocation.
00:32:43.599 --> 00:32:49.519
Companies shedding roles that are no longer strategically necessary to fund roles that are.
00:32:50.799 --> 00:32:56.559
The industry is still employing hundreds of thousands of people and investing billions of dollars into science.
00:32:56.799 --> 00:32:58.960
That's the honest version of their argument.
00:32:59.680 --> 00:33:01.119
But here's where it fails.
00:33:01.359 --> 00:33:10.880
The first argument that high prices cross-subsidized failures would be compelling if there were any evidence that drug prices bore a relationship to development costs.
00:33:11.119 --> 00:33:12.160
There isn't, though.
00:33:12.400 --> 00:33:18.319
The JAMA study that we reviewed a few episodes ago found no such relationship across 63 drugs.
00:33:18.640 --> 00:33:24.720
Prices are set based on what the market will bear, not what the research costs.
00:33:24.880 --> 00:33:30.640
So the cross-subsidation story, even if it describes what should happen, doesn't describe what does happen.
00:33:30.880 --> 00:33:36.079
The second argument, advertising funds research, was directly falsified in 2025.
00:33:36.240 --> 00:33:44.319
In the year the industry spent$9 billion on advertising, it cut$5.9 billion from combined research budgets.
00:33:44.559 --> 00:33:49.519
The revenue generated by advertising supported demand did not go to research.
00:33:49.599 --> 00:33:52.079
It went to shareholders and to executives.
00:33:52.240 --> 00:33:58.319
The 2025 data isn't consistent with the advertising funds research story.
00:33:58.640 --> 00:34:11.039
The third argument, that executive pay is a competitive necessity, cannot explain a 75% raise in a year when the company cut its research by 29% and fired workers.
00:34:11.280 --> 00:34:14.559
A competitive necessity pays a fair market rate.
00:34:14.719 --> 00:34:28.079
It doesn't pay 75% above last year's rate while simultaneously cutting the activities that are supposed to justify the prices, especially when those are the prices that are generating revenue that pays the compensation.
00:34:28.960 --> 00:34:37.280
The fourth argument: job cuts or strategic reallocation might be more credible if that reallocation showed up in research hiring, but it doesn't.
00:34:37.519 --> 00:34:39.440
The research budgets went down.
00:34:39.679 --> 00:34:41.840
The executive compensation went up.
00:34:42.079 --> 00:34:44.239
The advertising budgets went up.
00:34:44.480 --> 00:34:51.360
If 22,000 workers were cut to fund strategic reallocation, the strategic priority being funded was not innovation.
00:34:51.599 --> 00:34:52.719
It was advertising.
00:34:52.880 --> 00:34:54.079
It was executives.
00:34:54.320 --> 00:34:56.000
It was the bottom line.
00:34:56.239 --> 00:34:57.920
It was profitability.
00:34:58.159 --> 00:35:02.559
I'm not saying pharmaceutical executives are lying when they are making these arguments.
00:35:02.800 --> 00:35:06.239
Some of them may genuinely believe what they're trying to sell.
00:35:06.400 --> 00:35:08.159
But belief is not evidence.
00:35:08.320 --> 00:35:18.079
In the financial filings, the documents companies are legally required to file accurately tell a story that is inconsistent with the argument being made in Washington, DC.
00:35:18.719 --> 00:35:21.119
So what can we actually change?
00:35:21.920 --> 00:35:26.079
Because this show is not about identifying problems.
00:35:26.800 --> 00:35:28.800
It's about finding solutions.
00:35:29.039 --> 00:35:34.639
Reform number one, remove the tax deduction for direct-to-consumer pharmaceutical advertising.
00:35:34.800 --> 00:35:36.719
This is not a ban on advertising.
00:35:36.880 --> 00:35:38.880
Companies can run whatever ads they want.
00:35:39.039 --> 00:35:43.920
They simply can't deduct the cost of those ads against their federal tax liability.
00:35:44.239 --> 00:35:49.679
This single change would immediately alter the economics of pharmaceutical advertising.
00:35:49.920 --> 00:35:57.920
The$9 billion currently running through the system carries a substantial implicit federal subsidy via the deduction.
00:35:58.079 --> 00:36:02.159
Remove that and you reduce the incentive to advertise aggressively.
00:36:02.400 --> 00:36:08.400
Bipartisan legislation, the No Handouts for Drug Advertisements Act has been introduced in Congress.
00:36:08.480 --> 00:36:10.000
It deserves a vote.
00:36:10.239 --> 00:36:17.039
Reform number two, close the adequate provision loophole permanently through statute, not just through rulemaking.
00:36:17.280 --> 00:36:26.000
The FDA's September of 2025 rulemaking is the right action, but rulemaking can be reversed by the next administration.
00:36:26.239 --> 00:36:40.480
Congress should codify the requirements that broadcast pharmaceutical advertisements meet a genuine disclosure standard, one that a patient can actually comprehend through legislation that does not depend on who controls the FDA.
00:36:41.199 --> 00:37:00.320
Reform number three, require that pharmaceutical executive compensation structures include specific, weighted incentives tied directly to RD productivity, not just stock price performance, not just revenue growth, actual outcomes that reflect genuine research output.
00:37:00.639 --> 00:37:19.440
Drugs reaching patients, clinical trial enrollments, approved novel treatments, the current compensation structure tied almost entirely to stock performance in a market where pricing power drives stock performance is a machine designed to produce exactly the behavior we just documented from 2025.
00:37:19.679 --> 00:37:22.559
Change the input and you change the output.
00:37:23.119 --> 00:37:30.800
Now I'm going to anticipate the objection to reform number three, because it's the most unconventional of the three.
00:37:31.199 --> 00:37:41.280
The pharmaceutical industry will say government has no business dictating how corporations structure their executive compensation, that it's a private matter for boards and shareholders only.
00:37:41.440 --> 00:37:44.159
And normally I would agree with that argument.
00:37:44.320 --> 00:37:45.760
I believe in limited government.
00:37:45.920 --> 00:37:47.679
I believe in private sector governance.
00:37:47.840 --> 00:37:53.599
I believe boards of directors should have the leeway and latitude to run their companies as they see fit.
00:37:53.920 --> 00:37:57.760
But I'm not talking about a normally functioning private market.
00:37:57.920 --> 00:38:06.079
I'm talking about a market whose pricing power is derived almost entirely from government-granted patent monopolies.
00:38:06.639 --> 00:38:29.360
Where the consumer is often a person with a life-threatening illness who cannot shop for alternatives, and where the current compensation structure is producing documented harm in the form of research and development cuts, price increases in advertising spending, that the market mechanism cannot correct because the market mechanism has been disabled by that same patent system.
00:38:30.000 --> 00:38:50.639
When the market cannot discipline behavior because the government has disabled competition through patent protections, the government has a legitimate interest in ensuring that the compensation structure of the protected companies does not reward behavior that harms the public who those patents are supposed to serve.
00:38:51.280 --> 00:38:53.599
That is not anti-capitalist.
00:38:53.840 --> 00:39:01.119
That is the logical consequence of asking the public to support a patent system that exists for the public's benefit.
00:39:03.519 --> 00:39:08.320
So let's end where we started with AVI in 2025.
00:39:09.280 --> 00:39:11.679
75% raise for the CEO.
00:39:12.719 --> 00:39:31.199
29% cut to research, workers being laid off, advertisement budget intact, price increases on existing drugs, patients still paying AVU prices, which remain, as we've documented across this series, multiples of what patients in other countries pay for the same medication.
00:39:31.519 --> 00:39:34.880
That is the system in one company in one year.
00:39:35.039 --> 00:39:37.440
And ADV is not uniquely bad.
00:39:37.679 --> 00:39:39.760
They're simply uniquely clear.
00:39:40.000 --> 00:39:59.840
The same story in varying proportions is playing out across the 16 companies that shook President Trump's hand on most favored nation pricing, raised prices on 872 drugs, cut$5.9 billion of combined research, and collected$500 million in executive compensation.
00:40:00.800 --> 00:40:05.119
The advertisement during your evening news is part of the system.
00:40:05.440 --> 00:40:10.559
The$36.7 million CEO salary is part of the system.
00:40:10.800 --> 00:40:14.719
The$9 billion advertisement budget is part of the system.
00:40:14.880 --> 00:40:20.800
The$305 million in pharma lobbying over the last decade is part of the system.
00:40:21.679 --> 00:40:31.920
And the innovation argument, the argument that all of this is necessary to fund the next breakthrough is the story the system tells about itself to sell itself.
00:40:32.239 --> 00:40:34.480
But it's not supported by data.
00:40:35.119 --> 00:40:39.039
And it's not supported by data across an entire decade.
00:40:39.199 --> 00:40:40.960
The system needs to change.
00:40:41.280 --> 00:40:44.079
The advertising framework needs to change.
00:40:44.320 --> 00:40:46.480
The tax deduction needs to end.
00:40:46.719 --> 00:40:49.199
The compensation structure needs to be reformed.
00:40:49.360 --> 00:40:51.519
The rulemaking needs to be codified.
00:40:51.599 --> 00:40:54.960
And the innovation argument needs to stop being treated as fact.
00:40:56.000 --> 00:40:57.119
It's a defense.
00:40:57.519 --> 00:41:01.519
And it's been examined on the merits by the numbers, and it doesn't hold.
00:41:02.239 --> 00:41:03.199
And it never will.
00:41:03.760 --> 00:41:05.119
This is Bust Big Pharma.
00:41:05.599 --> 00:41:06.800
I'm Rob Burgess.
00:41:07.119 --> 00:41:08.159
I'll see you next week.
00:00:08.160 --> 00:00:09.839
I want you to picture a company.
00:00:10.800 --> 00:00:11.599
A big one.
00:00:12.240 --> 00:00:14.640
Annual revenue of$56 billion.
00:00:14.880 --> 00:00:18.480
One of the most recognized names in American medicine.
00:00:18.800 --> 00:00:20.079
A household name.
00:00:21.039 --> 00:00:25.199
Now I want you to picture that company making two decisions in the same year.
00:00:26.480 --> 00:00:37.920
Decision one, giving the chief executive a 75% pay raise, bringing his total compensation to$32.5 million.
00:00:39.119 --> 00:00:44.159
And decision two, cutting the research and development budget by 29%.
00:00:45.039 --> 00:00:51.200
The biggest single-year RD cut of any major pharmaceutical company in America.
00:00:52.079 --> 00:00:54.719
Same company, same year.
00:00:55.600 --> 00:00:58.479
75% raised for the man at the top.
00:00:59.119 --> 00:01:02.159
29% cut to the science at the bottom.
00:01:03.359 --> 00:01:05.200
That company is AV.
00:01:07.200 --> 00:01:09.040
The year was 2025.
00:01:10.159 --> 00:01:15.359
And the reason I'm leading with AV today is not because they are uniquely villainous.
00:01:16.959 --> 00:01:20.480
Though that combination of numbers is pretty remarkable.
00:01:21.439 --> 00:01:29.359
I am leading with AbV today because they are the clearest single example of the argument that this episode is going to make.
00:01:59.439 --> 00:02:08.800
All of it, where it actually goes, who actually benefits, and what the industry's behavior in 2025 tells us about the story they've been selling us for decades.
00:02:24.639 --> 00:02:39.439
If you've been with this show from the beginning, you know that we've talked a lot across multiple episodes about advertising, about how the 15 largest pharmaceutical companies over a 20-year period spent more on marketing than on research.
00:02:39.759 --> 00:02:46.159
That was a systemic problem documented in the BMJ across two decades of financial filings.
00:02:46.319 --> 00:02:49.199
We're not going to relitigate or re-argue that case today.
00:02:49.439 --> 00:03:01.360
What we are going to do today is zoom in on 2025, because 2025 was the year that the industry's behavior became, in my view, impossible to defend with a straight face.
00:03:01.599 --> 00:03:14.080
It was the year that the gap between what the industry said and what it did became so wide, so documented, and so specific that I think it changes the argument permanently.
00:03:14.960 --> 00:03:19.520
Just last episode, we talked about what happened to drug prices in 2025.
00:03:19.840 --> 00:03:25.360
862 price increases in the first two weeks of January of 2026.
00:03:25.919 --> 00:03:29.680
64 cancer drug hikes in the first week alone.
00:03:29.919 --> 00:03:43.599
47% of most favored nation deal signatories raising pricing on existing drugs while simultaneously launching new drugs at an average of$353,000 a year.
00:03:43.919 --> 00:03:46.879
We showed you where the price increases went.
00:03:46.960 --> 00:03:58.960
Today I'm going to show you where the rest of the money went: the$177 billion in profits, the$97 billion that was returned to shareholders, the$34 billion in buybacks.
00:03:59.840 --> 00:04:10.479
And specifically, we're going to follow two rivers of money that the industry would rather you didn't examine too carefully: the advertising budget and the executive compensation structure.
00:04:10.879 --> 00:04:25.920
Because when you put these two rivers alongside the RD cuts, alongside what AV and 11 other companies actually did with their research budgets in 2025, the innovation argument doesn't just weaken, it collapses totally.
00:04:26.639 --> 00:04:29.920
So let's start with something that most Americans don't know.
00:04:30.399 --> 00:04:36.639
And that's that the pharmaceutical industry spends considerable resources making sure that you don't think about it.
00:04:37.279 --> 00:04:48.399
The United States and New Zealand are the only two countries in the world that allow pharmaceutical companies to advertise prescription drugs directly to you on television.
00:04:49.600 --> 00:04:51.120
Directly to you.
00:04:51.360 --> 00:04:54.000
Two countries out of 195.
00:04:54.560 --> 00:05:05.199
The United Kingdom banned, Germany banned, France, Canada, Japan, Australia, Switzerland, every wealthy democracy with a functioning pharmaceutical market banned.
00:05:05.360 --> 00:05:22.959
They looked at the practice of drug companies running primetime television commercials, telling patients to ask their doctor for a specific medication, and they said, no, that's not the relationship we want between patient and physician, or patient, physician, and medicine.
00:05:23.279 --> 00:05:25.519
That's not what we should be doing.
00:05:25.759 --> 00:05:28.160
And America said, go ahead.
00:05:28.800 --> 00:05:38.160
And we said go ahead because in 1997 the FDA loosened a regulation governing how pharmaceutical companies could advertise on broadcast media.
00:05:38.399 --> 00:05:51.759
Before 1997, a drug company running a broadcast ad had to fully disclose every significant risk, which, for many drugs, is a long and frightening list that kills any advertising appeal.
00:05:52.160 --> 00:05:57.439
The 1997 change created what's called the Adequate Provision Standard.
00:05:57.680 --> 00:06:04.639
A company could run its ad and simply direct viewers to a website or toll-free number for the full risk information.
00:06:04.800 --> 00:06:07.839
The full warning list didn't have to be in the ad.
00:06:12.639 --> 00:06:21.600
A drug that can cause liver failure, suicidal ideas, or sudden cardiac events is permitted to run a prime time advertisement.
00:06:21.759 --> 00:06:24.800
The ad shows attractive people in sunlit fields.
00:06:24.959 --> 00:06:34.319
The voiceover rattles through side effects at a pace that makes it functionally incomprehensible, and it does it in a bare-toned voice that seems pleasing.
00:06:34.480 --> 00:06:37.360
And then it tells you to visit a website.
00:06:37.839 --> 00:06:44.560
The FDA decided in 1997 that this constituted adequate provision of safety information.
00:06:44.800 --> 00:06:48.639
And it has allowed this standard to stand for nearly 30 years.
00:06:48.879 --> 00:06:49.519
The result?
00:06:50.560 --> 00:06:57.600
In 2025, pharmaceutical companies spent$9 billion on direct-to-consumer advertising in the United States.
00:06:58.000 --> 00:07:03.839
$9 billion, up from$6 billion on television alone in 2024.
00:07:04.560 --> 00:07:10.720
The Bipartisan Policy Center found that roughly 31% of all growth in U.S.
00:07:10.879 --> 00:07:17.920
drug spending after 1997 traces directly to the introduction of this advertising.
00:07:18.240 --> 00:07:33.439
31 cents of every additional dollar Americans have spent on prescription drugs over the past 30 years is attributable by academic analysis to the decision to let pharmaceutical companies advertise on your TV.
00:07:34.959 --> 00:07:36.800
This is not educational.
00:07:37.519 --> 00:07:39.600
That is not disease awareness.
00:07:39.759 --> 00:07:41.920
That is demand engineering.
00:07:42.480 --> 00:07:45.360
And American patients are paying for it twice.
00:07:45.759 --> 00:07:55.279
Once in the tax deduction that lets companies write off advertising expenses, and once at the pharmacy counter, when the demand that those ads created drives prices upward.
00:07:56.959 --> 00:08:04.639
Now we have to be clear about something because the advertising argument deserves more than a surface observation that it costs a lot of money.
00:08:04.879 --> 00:08:05.839
It does.
00:08:06.560 --> 00:08:16.480
But when a consumer goods company advertises, when Ford runs a commercial for the F-150 or Apple runs an ad for the next iPhone, competition regulates the outcome.
00:08:16.639 --> 00:08:24.399
You see the ad, you go to the market, you compare Ford's truck to GM's truck, you compare the iPhone to the Android.
00:08:24.560 --> 00:08:30.399
And if Ford is overcharging you, competition pushes them towards a more defensible price.
00:08:30.639 --> 00:08:32.000
That creates demand.
00:08:32.240 --> 00:08:37.600
But competition disciplines what that demand can sustain in terms of price.
00:08:37.840 --> 00:08:40.559
Pharmaceutical advertising is categorically different.
00:08:40.639 --> 00:08:44.879
And the difference is this the person watching the ad can't choose their drug.
00:08:45.519 --> 00:08:46.399
Not really.
00:08:46.799 --> 00:08:50.720
They can go to their doctor and they can ask for a specific drug by name.
00:08:50.879 --> 00:08:57.440
And research shows that they consistently do, and that physicians often prescribe what patients ask for.
00:08:57.600 --> 00:09:01.840
But the patient cannot compare Humera to its biosimular.
00:09:02.399 --> 00:09:14.559
Really, in any meaningful price competitive sense, because the patent restrictions that we've documented across a couple episodes effectively remove competition from the equation.
00:09:15.440 --> 00:09:30.559
So what pharmaceutical advertising does is create demand for a specific branded product in a market where that product faces no meaningful price competition, which allows the company to capture that demand at whatever price it has chosen to set.
00:09:31.200 --> 00:09:33.279
Advertising creates pull.
00:09:33.440 --> 00:09:35.440
The patent wall removes push.
00:09:35.679 --> 00:09:38.000
The result is a one-way ratchet.
00:09:38.240 --> 00:09:46.720
Ad spending goes up, prescriptions go up, revenue goes up, and there's no market mechanism correcting the price downward.
00:09:47.039 --> 00:10:01.120
The Senate Help Committee cited Harvard researchers who examined the most heavily advertised drugs and found that the majority showed little to no therapeutic benefit compared to existing less expensive alternatives.
00:10:01.360 --> 00:10:04.799
The most advertised drugs are not the most effective drugs.
00:10:04.960 --> 00:10:17.440
They are the most profitable drugs, the ones where the gap between the cost of manufacturing and the price charged is largest, and therefore where advertising investment generates the greatest return.
00:10:17.759 --> 00:10:20.720
You are not being informed by these ads.
00:10:20.960 --> 00:10:26.639
You are being recruited into a demand pool for a high margin product.
00:10:26.879 --> 00:10:33.120
The physician is being nudged to prescribe that product by a patient who came in having seen the ad.
00:10:33.200 --> 00:10:45.759
And the insurance system is being navigated by company-provided copay assistance cards that make the drug feel affordable to the patient while insulating the list price from any downward pressure.
00:10:46.720 --> 00:10:52.159
The$9 billion spent on advertising in 2025 is not a marketing cost.
00:10:53.200 --> 00:10:55.519
It's a price maintenance mechanism.
00:10:55.759 --> 00:11:01.360
It generates demand that sustains prices that would otherwise be disciplined by competition.
00:11:02.000 --> 00:11:06.799
And it's entirely legal and entirely tax-deductible.
00:11:06.960 --> 00:11:11.440
And it's been running largely unchallenged since 1997.
00:11:12.080 --> 00:11:14.000
Now, here's where I get to give credit.
00:11:14.159 --> 00:11:19.200
And I'm going to give credit where it's genuinely due, because this administration, under Donald J.
00:11:19.360 --> 00:11:25.679
Trump's leadership, has done something about this that I think deserves to be recognized clearly and specifically.
00:11:25.919 --> 00:11:35.200
In September of 2025, Donald Trump signed an executive order titled Addressing Misleading Direct to Consumer Prescription Drug Advertisements.
00:11:35.360 --> 00:11:46.720
It was a direct acknowledgement that the 1997 framework, the adequate provision standard, had been a gift to the industry at patients' expense, and it directed the FDA to fix it.
00:11:47.120 --> 00:11:50.799
At the same time, the FDA moved with unusual speed and force.
00:11:50.960 --> 00:12:05.120
The agency sent thousands of warning letters to pharmaceutical companies regarding misleading advertisements, ads that overstated benefits and understated risks, or used imagery and framing that misrepresented what the drug actually did.
00:12:05.360 --> 00:12:13.840
It issued approximately 100 cease and desist orders, and it launched formal rulemaking to close the adequate provision loophole.
00:12:14.080 --> 00:12:26.320
After nearly 30 years, the agency is finally proposing to require that broadcast pharmaceutical ads meet a disclosure standard that would be recognizable as actual disclosure.
00:12:27.039 --> 00:12:28.399
Secretary Robert F.
00:12:28.480 --> 00:12:29.120
Kennedy Jr.
00:12:29.279 --> 00:12:34.480
stated it plainly, saying, pharmaceutical ads hooked this country on prescription drugs.
00:12:34.639 --> 00:12:37.840
We will shut down that pipeline of deception.
00:12:38.639 --> 00:12:44.480
I'm not going to adjudicate every position Secretary Kennedy has taken on pharmaceutical and public health policy.
00:12:44.639 --> 00:12:47.519
We could spend an entire podcast just doing that.
00:12:47.679 --> 00:12:49.440
There are legitimate debates there.
00:12:49.600 --> 00:12:58.639
But on this specific point, the corrupting influence of direct-to-consumer pharmaceutical advertising on American healthcare, he is right.
00:12:58.799 --> 00:13:04.320
And the administration's actions are the right actions, and they deserve to be applauded.
00:13:06.000 --> 00:13:10.000
So after saying all that, I'm going to give you a specific number.
00:13:10.080 --> 00:13:16.240
And this specific number tells you how badly enforcement had fallen off before this administration acted.
00:13:16.480 --> 00:13:25.039
In peak years of enforcement, the FDA sent more than 100 warning letters per year for misleading pharmaceutical advertisements.
00:13:25.279 --> 00:13:33.039
That number reflects an agency doing its job, monitoring the flow of drug advertising and catching the violations.
00:13:34.320 --> 00:13:38.799
In 2023, that number dropped to one.
00:13:39.840 --> 00:13:41.279
One warning letter.
00:13:49.360 --> 00:13:50.000
Zero.
00:13:50.399 --> 00:13:57.360
Zero enforcement actions in 2024 against an industry spending$6 billion on television ads alone.
00:13:58.159 --> 00:14:02.799
When the current administration says it's restoring enforcement, it's not spin.
00:14:03.360 --> 00:14:06.240
That is a return from zero to something.
00:14:06.559 --> 00:14:17.120
And that something matters, both because it changes what companies can say in their ads and because it signals that the regulatory environment has changed that we are living in today.
00:14:17.360 --> 00:14:23.600
The rulemaking to close the adequate provision loophole is the more structurally important move.
00:14:23.840 --> 00:14:35.039
If it survives legal challenge and congressional scrutiny, it will require pharmaceutical companies to actually disclose risks in their broadcast advertisements in a form that patients can comprehend.
00:14:35.279 --> 00:14:40.320
That will not eliminate pharmaceutical advertising, but it will make them honest.
00:14:40.559 --> 00:14:57.679
And more honest ads, ads that fully disclose that this drug can cause liver failure or suicidal thoughts will be significantly less effective at driving demand for higher margin products, which is exactly why the industry is fighting the rulemaking with every lobbying dollar it has.
00:14:58.080 --> 00:14:59.759
And they will continue to do so.
00:15:00.000 --> 00:15:00.799
Watch.
00:15:03.360 --> 00:15:18.960
Now let's get to the RD numbers because that is where this industry's story about advertising spending and the story where direct-to-consumer advertising ultimately serve innovation by generating revenue that funds research falls apart completely.
00:15:19.440 --> 00:15:29.039
In March of 2026, Biospace published an analysis of research and development spending at the 16 largest pharmaceutical companies for the full year of 2025.
00:15:29.279 --> 00:15:32.960
16 companies full year of their own financial filings.
00:15:33.200 --> 00:15:47.679
The finding that Biospace had, combined RD spending by those 16 companies, fell from 165 billion in 2024 to 159.1 billion in 2025.
00:15:48.399 --> 00:15:59.200
The 16 largest pharmaceutical companies in the world spent$5.9 billion less on research in 2025 than they had in the years before.
00:15:59.519 --> 00:16:08.639
Now, before I go further, I want to address the response the industry will have to that number because they have one ready and it isn't entirely without merit.
00:16:08.799 --> 00:16:13.679
I continue to tell you that they have smart teams running their lobbying shops.
00:16:13.840 --> 00:16:17.919
They have a way to come up with an answer for every argument.
00:16:18.159 --> 00:16:26.720
They will tell us that RD spending fluctuates year to year based on trial timelines, pipeline stages, and acquisition activity.
00:16:26.879 --> 00:16:29.759
A decline in one year doesn't mean a trend.
00:16:29.919 --> 00:16:36.960
It means a company finished expensive late-stage trials and is preparing the next generation of investments.
00:16:37.440 --> 00:16:44.559
The year-over-year number doesn't capture what is a multi-year, multi-billion dollar commitment to research.
00:16:44.799 --> 00:16:47.279
The argument is worth taking seriously.
00:16:47.519 --> 00:16:51.519
Clinical trial spending genuinely is expensive and lumpy.
00:16:51.759 --> 00:16:59.200
A company in the middle of a massive phase three program will spend more in that year than in the year after results are announced.
00:16:59.519 --> 00:17:04.480
You cannot look at a single year RD line item in isolation.
00:17:04.720 --> 00:17:06.240
But here's the problem.
00:17:06.960 --> 00:17:33.440
When applied to 2025 specifically, the industry raised$5.9 billion less than it had in research, and simultaneously raised prices on hundreds of drugs, returned$97 billion to shareholders, spent$34 billion on stock buybacks, and paid its top 20 executives more than$500 million in combined compensation.
00:17:34.400 --> 00:17:40.079
The year they cut research is the same year they maximized every other form of spending.
00:17:40.319 --> 00:17:50.640
If the RD decline were a pipeline timing artifact, you would expect it to be decoupled from profit distribution decisions, but it isn't.
00:17:51.279 --> 00:17:56.400
Now let's get to AV because AV is not a timing artifact.
00:17:56.640 --> 00:17:58.160
AV is a choice.
00:17:58.480 --> 00:18:03.519
AV cut its research and development spending by 29% last year.
00:18:03.759 --> 00:18:04.480
29.
00:18:05.039 --> 00:18:11.519
The steepest single company RD decline of any major pharmaceutical company in the sector.
00:18:11.839 --> 00:18:19.680
In the same year, AV CEO Robert Michael received total compensation of$32.5 million.
00:18:20.400 --> 00:18:22.000
$32.5 million.
00:18:22.559 --> 00:18:24.559
That's a pretty damn good year.
00:18:24.799 --> 00:18:35.279
A 75% increase from his first year as chief executive, the largest percentage pay raise of any major pharmaceutical CEO in 2025.
00:18:36.480 --> 00:18:38.319
And that's not a timing artifact.
00:18:38.559 --> 00:18:41.039
ABVI made a deliberate allocation decision.
00:18:41.200 --> 00:18:46.559
Research gets cut by nearly a third, and the chief executive gets a 75% raise.
00:18:46.720 --> 00:18:54.079
Those two decisions are made by the same board in the same year with the same pool of available capital.
00:18:54.640 --> 00:18:57.200
And AV was not alone in cutting research.
00:18:57.359 --> 00:19:00.640
Johnson Johnson cut RD spending by nearly 15%.
00:19:01.200 --> 00:19:04.079
Bristol Myers Squib cut by 11%.
00:19:04.720 --> 00:19:06.079
Merck cut by 12%.
00:19:06.480 --> 00:19:07.839
Pfizer by 4%.
00:19:08.400 --> 00:19:13.119
Of the 16 companies in the analysis, most cut research spending.
00:19:13.279 --> 00:19:20.640
In the year they raised prices on hundreds of drugs and returned nearly three-quarters of their profits to shareholders.
00:19:22.480 --> 00:19:33.599
Now, here's the implication that I want to make sure you take away with you, that you repeat to your friends and your family and to anyone within earshot that is willing to listen to you.
00:19:33.920 --> 00:19:46.319
The industry's defense of high drug prices, the one they repeat to every senator, to every congressman, to every journalist, to every patient advocate who asks, why are Americans paying more than anyone else in the world?
00:19:46.720 --> 00:19:48.240
Is because of innovation.
00:19:48.960 --> 00:19:51.119
High prices fund innovation.
00:19:51.440 --> 00:19:54.240
Constrain the prices, you constrain the science.
00:19:56.000 --> 00:20:05.279
But in 2025, they generated$177 billion in profit and they gave$97 billion of it back to shareholders.
00:20:07.359 --> 00:20:11.359
And they spent$5.9 billion less on research than the year before.
00:20:12.079 --> 00:20:14.640
The innovation argument is not what's happening here.
00:20:14.799 --> 00:20:21.759
What's happening is a choice, a very deliberate, very well-documented choice about who the profits serve.
00:20:21.920 --> 00:20:31.839
And the answer in 2025 case at least is that it's not the patient, it's shareholders, it's executives and it's advertisers.
00:20:32.720 --> 00:20:38.079
Now, I want to spend some time digging in on executive compensation specifically.
00:20:38.319 --> 00:20:48.559
Not because the numbers are shocking in isolation, even though they are, but because understanding the structure of executive pay explains why the industry behaves the way it does.
00:20:49.119 --> 00:20:57.519
In 2025, the top 20 pharmaceutical CEOs received combined compensation exceeding$500 million.
00:20:58.960 --> 00:21:02.960
Here are some of the individual numbers that have been publicly disclosed.
00:21:03.279 --> 00:21:11.279
Eli Lilly's David Ricks received$36.7 million, a 25% increase over 2024.
00:21:12.480 --> 00:21:24.799
This is the CEO of the company that makes Manjaro and Zetbound, the GLP1 drugs we discussed in earlier episodes, as well as insulin products that Americans pay up to 10 times the Canadian price for.
00:21:25.119 --> 00:21:33.519
AdV's Robert Michael,$32.5 million, up 75%, in only his second year as their CEO.
00:21:34.400 --> 00:21:39.279
Johnson ⁇ Johnson's CEO,$32.8 million, up 30%.
00:21:39.839 --> 00:21:46.240
Pfizer's CEO,$27.6 million, and a year when Pfizer's revenue declined by 2%.
00:21:46.960 --> 00:21:53.359
The Pfizer board's independent proxy advisors recommended voting against the CEO's pay package.
00:21:53.599 --> 00:21:55.519
The board approved it anyway.
00:21:57.119 --> 00:21:59.759
Now let me explain why these numbers are the size they are.
00:22:00.640 --> 00:22:02.400
Because it's not arbitrary.
00:22:02.640 --> 00:22:19.759
The majority of pharmaceutical CEO compensation, in most cases, 70 to 80 percent of the total, comes not from base salary, but from stock awards and stock options, equity that vests over time and is directly tied to the company's share price.
00:22:19.920 --> 00:22:23.440
When the stock goes up, the awards are worth more.
00:22:23.599 --> 00:22:26.079
When the stock goes down, they're worth less.
00:22:26.319 --> 00:22:30.799
This structure is supposed to align CEO incentives with shareholder interests.
00:22:31.039 --> 00:22:42.160
The theory is that if a CEO's pay depends on the stock price, the CEO will run the company away that grows the stock, which should, in theory, reflect genuine value creation.
00:22:42.880 --> 00:22:46.559
In a normal, competitive market, that theory mostly works.
00:22:46.799 --> 00:23:00.160
In a market where the primary driver of stock price appreciation is pricing power, the ability to charge more for drugs that face no meaningful competition, the theory produces perverse results.
00:23:00.400 --> 00:23:06.559
Because in the pharmaceutical market, the most reliable path to a higher stock price is not a scientific breakthrough.
00:23:06.640 --> 00:23:09.599
It's a price increase on an existing blockbuster.
00:23:09.839 --> 00:23:16.880
A price increase on a drug whose patent is protected generates immediate certain revenue increases with no additional costs.
00:23:17.039 --> 00:23:26.079
It flows directly to the bottom line, to earnings per share, to the stock price, and then to the CEO's equity-based compensation.
00:23:26.559 --> 00:23:32.319
Investing in long-term research, by contrast, is expensive today and uncertain in its return.
00:23:32.559 --> 00:23:45.359
It increases costs in near term, reduces earnings per share, and may not produce an approved drug for 10 years, long after the CEO's current equity awards have vested and been cashed out.
00:23:47.279 --> 00:23:51.680
So what does a rational CEO with equity-based compensation do?
00:23:52.880 --> 00:23:59.519
Not what's good for patients, not what's good for research, but what's good for the stock.
00:23:59.680 --> 00:24:16.720
And in the pharmaceutical market, that means pricing power, price increases, patent extensions, advertising to maintain demand, lobbying to protect exclusivity, acquisition of startups, whose science the internal labs can't replicate.
00:24:17.440 --> 00:24:23.920
The executive compensation structure doesn't just reward the industry's behavior, it requires it.
00:24:24.720 --> 00:24:31.920
A CEO who chooses to sacrifice pricing power for the sake of patient affordability would not remain a CEO for long.
00:24:32.079 --> 00:24:40.000
The board would replace them with someone who understood that the equity-based compensation structure demands stock performance.
00:24:40.319 --> 00:24:44.240
And stock performance in this market demands pricing power.
00:24:44.799 --> 00:24:48.160
This is not a moral failure of individual executives.
00:24:48.240 --> 00:24:51.359
This is a structural feature of the compensation system.
00:24:51.599 --> 00:25:04.480
And understanding it tells you why the industry will continue to behave this way until something outside the compensation structure, law, regulation, competition, forces them to stop.
00:25:06.400 --> 00:25:09.119
We're going to add one more layer to this picture.
00:25:09.359 --> 00:25:13.119
One more little happy tree in the painting, as Bob Ross would say.
00:25:13.279 --> 00:25:19.839
Because I've been talking about where the money goes: advertising, executive compensation, shareholder returns.
00:25:20.000 --> 00:25:23.440
I want to talk about something that happened in parallel to all of that.
00:25:24.079 --> 00:25:38.000
In 2025, 12 of the 17 largest pharmaceutical companies, each generating at least$20 billion in annual revenue, eliminated a combined total of more than 22,000 jobs.
00:25:38.240 --> 00:25:41.759
22,000 people were out of work.
00:25:42.319 --> 00:25:45.200
These are not companies struggling to make a payroll.
00:25:45.359 --> 00:25:49.279
These are companies with revenue the size of small economies.
00:25:49.680 --> 00:26:02.559
They are cutting workers because restructuring towards the next phase of their business cycle, managing the patent cliff, integrating acquisitions, repositioning pipelines requires them to lay off people.
00:26:02.799 --> 00:26:07.279
The human cost of that restructuring is borne by the workers.
00:26:07.759 --> 00:26:22.000
The financial benefit, reduced cost base, improved earnings per share, stronger stock performance, is captured by the shareholders and by the executives whose compensation is tied to that stock's performance.
00:26:23.359 --> 00:26:28.240
I'm going to put AB back into the frame one more time because AV belongs in this picture.
00:26:28.480 --> 00:26:33.279
ADV generated approximately$56 billion in revenue in 2025.
00:26:33.440 --> 00:26:35.920
And it cut research and development by 29%.
00:26:36.559 --> 00:26:39.279
And it gave its CEO a 75% raise.
00:26:39.359 --> 00:26:43.440
And it eliminated workers as part of an ongoing restructuring program.
00:26:44.480 --> 00:26:47.039
The workers doing the science get cut.
00:26:47.200 --> 00:26:49.279
The budget for the science gets cut.
00:26:49.440 --> 00:26:53.119
The executive managing the cutting gets a 75% raise.
00:26:53.200 --> 00:27:00.799
And the explanation offered every price increase on ABS drug is we need these margins to fund innovation.
00:27:01.519 --> 00:27:05.039
I'm not saying restructuring is never necessary.
00:27:05.200 --> 00:27:12.480
I'm not saying that pharmaceutical companies owe their employees jobs and perpetuity regardless of business conditions.
00:27:12.720 --> 00:27:15.519
I'm not making a labor argument here.
00:27:15.920 --> 00:27:31.680
What I am saying, when the same company that is cutting workers and cutting research is simultaneously giving its CEO a 75% raise and spending billions of dollars on advertising, the claim that the drug price exists to fund innovation is not a business argument.
00:27:31.759 --> 00:27:33.759
It's a bold face lie.
00:27:34.000 --> 00:27:35.440
It's a cover story.
00:27:35.599 --> 00:27:36.640
It is spin.
00:27:36.799 --> 00:27:40.240
It is what you read in the grocery store tabloid.
00:27:40.960 --> 00:27:42.960
The innovation is being cut.
00:27:43.200 --> 00:27:45.359
The advertising is being funded.
00:27:45.519 --> 00:27:47.519
The executive is being paid.
00:27:47.680 --> 00:27:54.480
And the patients are being charged for innovation that does not exist at the rates the prices imply.
00:27:56.480 --> 00:28:04.880
So we're going to pull up to that 35,000-foot view because the 2025 numbers, damning as they are, don't exist in isolation.
00:28:05.039 --> 00:28:08.079
They are the product of a decade of choices.
00:28:08.240 --> 00:28:25.200
And we have a way to examine that decade specifically because the head of pharma, the pharmaceutical industry's principal trade group, and one of the most powerful lobbying organizations in Washington, DC, recently announced after a decade of leadership that he would step down.
00:28:27.839 --> 00:28:28.480
Wow.
00:28:29.279 --> 00:28:31.440
I want to audit that decade.
00:28:32.559 --> 00:28:35.119
When this leadership era began, total U.S.
00:28:35.200 --> 00:28:40.480
prescription drug spending was approximately$500 billion per year.
00:28:40.720 --> 00:28:52.640
By the end of 2025, it had crossed$800 billion a year, a 60% increase faster than inflation, faster than GDP growth, faster than wage growth for workers buying the drugs.
00:28:52.799 --> 00:28:57.279
Over that decade, pharma spent$305 million on federal lobbying.
00:28:57.440 --> 00:29:09.519
That is an average of$30.5 million per year, targeted at the specific members of Congress who write the rules governing pharmaceutical pricing, patent law, and Medicare coverage.
00:29:09.680 --> 00:29:15.759
In 2025 alone, a record year for pharma spending, the organization spent$38 million.
00:29:16.559 --> 00:29:30.640
Over that decade, pharmaceutical direct-to-consumer advertising tripled from roughly$12 billion in total industry advertising spent in 2015 to approximately$39 billion by 2025.
00:29:30.799 --> 00:29:38.480
The industry did not just maintain its advertising investment, it built an entirely different scale of promotional machine.
00:29:38.720 --> 00:29:47.599
Over that decade, the revolving door between the FDA and the pharmaceutical industry, which we have documented on a previous episode, continued to spin.
00:29:47.759 --> 00:29:51.759
Senior regulators left government and went to work for the companies they had regulated.
00:29:51.920 --> 00:29:57.680
The institutional boundary between the watchdog and the watch became progressively more porous.
00:29:57.920 --> 00:30:06.640
And over that decade, the innovation story, the justification of it all, became progressively less defensible against the data.
00:30:06.880 --> 00:30:11.599
The BMJ found that the largest companies spend more on marketing than they do on research.
00:30:11.920 --> 00:30:16.240
JAMA found no correlation between drug pricing and development cost.
00:30:16.640 --> 00:30:22.079
JAMA found no correlation between cancer drug prices and clinical effectiveness.
00:30:22.960 --> 00:30:34.079
Another analysis found that 60% of genuinely new drugs come from small, unprofitable startups, not from the large companies driving the lobbying and the advertising efforts.
00:30:34.400 --> 00:30:35.839
That's one decade.
00:30:36.720 --> 00:30:46.960
More spending, more lobbying, more advertising, more executive compensation, and a research to pricing relationship that the data consistently fails to support.
00:30:47.359 --> 00:30:50.400
New leadership at Pharma changes nothing by itself.
00:30:50.640 --> 00:31:07.599
The structural incentives, the equity-based CEO pay, the patent system, the advertising framework, the revolving door between the industry and government do not change because someone new is at the top of the trade association that represents the industry.
00:31:07.759 --> 00:31:17.759
What changes the structure is legislation, enforcement, competition, the specific things this administration, led by Donald J.
00:31:17.920 --> 00:31:21.599
Trump, has started and that Congress needs to finish.
00:31:22.319 --> 00:31:26.240
We all know what pharma's argument is going to be in defense of this practice.
00:31:26.480 --> 00:31:30.799
One, drug development is genuinely expensive and genuinely risky.
00:31:30.960 --> 00:31:35.039
The failure rate for drugs entering clinical trials is over 90%.
00:31:35.599 --> 00:31:42.799
For every drug that reaches a patient, nine or more were developed, tested, and abandoned at enormous cost.
00:31:42.960 --> 00:31:49.839
The companies that succeed have to recoup not just the cost of the successful drug, but the cost of everything that failed.
00:31:50.000 --> 00:31:56.960
High prices on successful drugs cross-subsidize the failures that produce the knowledge that made the next success possible.
00:31:57.359 --> 00:32:04.079
Two, the advertising, as objectionable as it looks, generates the revenue that funds the research.
00:32:04.319 --> 00:32:14.640
Remove the advertising, demand falls, revenue falls, research budgets fall, innovation slows, and the system is more integrated than critics acknowledge.
00:32:15.200 --> 00:32:25.519
Three, executive compensation at these levels is necessary to attract and retain the management talent capable of running multi-billion dollar global organizations.
00:32:25.920 --> 00:32:31.519
Underpay the CEO, lose the CEO to a competitor, and the company underperforms.
00:32:31.759 --> 00:32:34.799
The compensation is a competitive necessity.
00:32:35.440 --> 00:32:40.559
Four, the 22,000 job cuts are not evidence of industry dysfunction.
00:32:40.720 --> 00:32:43.440
They are evidence of appropriate reallocation.
00:32:43.599 --> 00:32:49.519
Companies shedding roles that are no longer strategically necessary to fund roles that are.
00:32:50.799 --> 00:32:56.559
The industry is still employing hundreds of thousands of people and investing billions of dollars into science.
00:32:56.799 --> 00:32:58.960
That's the honest version of their argument.
00:32:59.680 --> 00:33:01.119
But here's where it fails.
00:33:01.359 --> 00:33:10.880
The first argument that high prices cross-subsidized failures would be compelling if there were any evidence that drug prices bore a relationship to development costs.
00:33:11.119 --> 00:33:12.160
There isn't, though.
00:33:12.400 --> 00:33:18.319
The JAMA study that we reviewed a few episodes ago found no such relationship across 63 drugs.
00:33:18.640 --> 00:33:24.720
Prices are set based on what the market will bear, not what the research costs.
00:33:24.880 --> 00:33:30.640
So the cross-subsidation story, even if it describes what should happen, doesn't describe what does happen.
00:33:30.880 --> 00:33:36.079
The second argument, advertising funds research, was directly falsified in 2025.
00:33:36.240 --> 00:33:44.319
In the year the industry spent$9 billion on advertising, it cut$5.9 billion from combined research budgets.
00:33:44.559 --> 00:33:49.519
The revenue generated by advertising supported demand did not go to research.
00:33:49.599 --> 00:33:52.079
It went to shareholders and to executives.
00:33:52.240 --> 00:33:58.319
The 2025 data isn't consistent with the advertising funds research story.
00:33:58.640 --> 00:34:11.039
The third argument, that executive pay is a competitive necessity, cannot explain a 75% raise in a year when the company cut its research by 29% and fired workers.
00:34:11.280 --> 00:34:14.559
A competitive necessity pays a fair market rate.
00:34:14.719 --> 00:34:28.079
It doesn't pay 75% above last year's rate while simultaneously cutting the activities that are supposed to justify the prices, especially when those are the prices that are generating revenue that pays the compensation.
00:34:28.960 --> 00:34:37.280
The fourth argument: job cuts or strategic reallocation might be more credible if that reallocation showed up in research hiring, but it doesn't.
00:34:37.519 --> 00:34:39.440
The research budgets went down.
00:34:39.679 --> 00:34:41.840
The executive compensation went up.
00:34:42.079 --> 00:34:44.239
The advertising budgets went up.
00:34:44.480 --> 00:34:51.360
If 22,000 workers were cut to fund strategic reallocation, the strategic priority being funded was not innovation.
00:34:51.599 --> 00:34:52.719
It was advertising.
00:34:52.880 --> 00:34:54.079
It was executives.
00:34:54.320 --> 00:34:56.000
It was the bottom line.
00:34:56.239 --> 00:34:57.920
It was profitability.
00:34:58.159 --> 00:35:02.559
I'm not saying pharmaceutical executives are lying when they are making these arguments.
00:35:02.800 --> 00:35:06.239
Some of them may genuinely believe what they're trying to sell.
00:35:06.400 --> 00:35:08.159
But belief is not evidence.
00:35:08.320 --> 00:35:18.079
In the financial filings, the documents companies are legally required to file accurately tell a story that is inconsistent with the argument being made in Washington, DC.
00:35:18.719 --> 00:35:21.119
So what can we actually change?
00:35:21.920 --> 00:35:26.079
Because this show is not about identifying problems.
00:35:26.800 --> 00:35:28.800
It's about finding solutions.
00:35:29.039 --> 00:35:34.639
Reform number one, remove the tax deduction for direct-to-consumer pharmaceutical advertising.
00:35:34.800 --> 00:35:36.719
This is not a ban on advertising.
00:35:36.880 --> 00:35:38.880
Companies can run whatever ads they want.
00:35:39.039 --> 00:35:43.920
They simply can't deduct the cost of those ads against their federal tax liability.
00:35:44.239 --> 00:35:49.679
This single change would immediately alter the economics of pharmaceutical advertising.
00:35:49.920 --> 00:35:57.920
The$9 billion currently running through the system carries a substantial implicit federal subsidy via the deduction.
00:35:58.079 --> 00:36:02.159
Remove that and you reduce the incentive to advertise aggressively.
00:36:02.400 --> 00:36:08.400
Bipartisan legislation, the No Handouts for Drug Advertisements Act has been introduced in Congress.
00:36:08.480 --> 00:36:10.000
It deserves a vote.
00:36:10.239 --> 00:36:17.039
Reform number two, close the adequate provision loophole permanently through statute, not just through rulemaking.
00:36:17.280 --> 00:36:26.000
The FDA's September of 2025 rulemaking is the right action, but rulemaking can be reversed by the next administration.
00:36:26.239 --> 00:36:40.480
Congress should codify the requirements that broadcast pharmaceutical advertisements meet a genuine disclosure standard, one that a patient can actually comprehend through legislation that does not depend on who controls the FDA.
00:36:41.199 --> 00:37:00.320
Reform number three, require that pharmaceutical executive compensation structures include specific, weighted incentives tied directly to RD productivity, not just stock price performance, not just revenue growth, actual outcomes that reflect genuine research output.
00:37:00.639 --> 00:37:19.440
Drugs reaching patients, clinical trial enrollments, approved novel treatments, the current compensation structure tied almost entirely to stock performance in a market where pricing power drives stock performance is a machine designed to produce exactly the behavior we just documented from 2025.
00:37:19.679 --> 00:37:22.559
Change the input and you change the output.
00:37:23.119 --> 00:37:30.800
Now I'm going to anticipate the objection to reform number three, because it's the most unconventional of the three.
00:37:31.199 --> 00:37:41.280
The pharmaceutical industry will say government has no business dictating how corporations structure their executive compensation, that it's a private matter for boards and shareholders only.
00:37:41.440 --> 00:37:44.159
And normally I would agree with that argument.
00:37:44.320 --> 00:37:45.760
I believe in limited government.
00:37:45.920 --> 00:37:47.679
I believe in private sector governance.
00:37:47.840 --> 00:37:53.599
I believe boards of directors should have the leeway and latitude to run their companies as they see fit.
00:37:53.920 --> 00:37:57.760
But I'm not talking about a normally functioning private market.
00:37:57.920 --> 00:38:06.079
I'm talking about a market whose pricing power is derived almost entirely from government-granted patent monopolies.
00:38:06.639 --> 00:38:29.360
Where the consumer is often a person with a life-threatening illness who cannot shop for alternatives, and where the current compensation structure is producing documented harm in the form of research and development cuts, price increases in advertising spending, that the market mechanism cannot correct because the market mechanism has been disabled by that same patent system.
00:38:30.000 --> 00:38:50.639
When the market cannot discipline behavior because the government has disabled competition through patent protections, the government has a legitimate interest in ensuring that the compensation structure of the protected companies does not reward behavior that harms the public who those patents are supposed to serve.
00:38:51.280 --> 00:38:53.599
That is not anti-capitalist.
00:38:53.840 --> 00:39:01.119
That is the logical consequence of asking the public to support a patent system that exists for the public's benefit.
00:39:03.519 --> 00:39:08.320
So let's end where we started with AVI in 2025.
00:39:09.280 --> 00:39:11.679
75% raise for the CEO.
00:39:12.719 --> 00:39:31.199
29% cut to research, workers being laid off, advertisement budget intact, price increases on existing drugs, patients still paying AVU prices, which remain, as we've documented across this series, multiples of what patients in other countries pay for the same medication.
00:39:31.519 --> 00:39:34.880
That is the system in one company in one year.
00:39:35.039 --> 00:39:37.440
And ADV is not uniquely bad.
00:39:37.679 --> 00:39:39.760
They're simply uniquely clear.
00:39:40.000 --> 00:39:59.840
The same story in varying proportions is playing out across the 16 companies that shook President Trump's hand on most favored nation pricing, raised prices on 872 drugs, cut$5.9 billion of combined research, and collected$500 million in executive compensation.
00:40:00.800 --> 00:40:05.119
The advertisement during your evening news is part of the system.
00:40:05.440 --> 00:40:10.559
The$36.7 million CEO salary is part of the system.
00:40:10.800 --> 00:40:14.719
The$9 billion advertisement budget is part of the system.
00:40:14.880 --> 00:40:20.800
The$305 million in pharma lobbying over the last decade is part of the system.
00:40:21.679 --> 00:40:31.920
And the innovation argument, the argument that all of this is necessary to fund the next breakthrough is the story the system tells about itself to sell itself.
00:40:32.239 --> 00:40:34.480
But it's not supported by data.
00:40:35.119 --> 00:40:39.039
And it's not supported by data across an entire decade.
00:40:39.199 --> 00:40:40.960
The system needs to change.
00:40:41.280 --> 00:40:44.079
The advertising framework needs to change.
00:40:44.320 --> 00:40:46.480
The tax deduction needs to end.
00:40:46.719 --> 00:40:49.199
The compensation structure needs to be reformed.
00:40:49.360 --> 00:40:51.519
The rulemaking needs to be codified.
00:40:51.599 --> 00:40:54.960
And the innovation argument needs to stop being treated as fact.
00:40:56.000 --> 00:40:57.119
It's a defense.
00:40:57.519 --> 00:41:01.519
And it's been examined on the merits by the numbers, and it doesn't hold.
00:41:02.239 --> 00:41:03.199
And it never will.
00:41:03.760 --> 00:41:05.119
This is Bust Big Pharma.
00:41:05.599 --> 00:41:06.800
I'm Rob Burgess.
00:41:07.119 --> 00:41:08.159
I'll see you next week.
