Because the pandemic raged, CEOs’ earnings surged

Health care’s high executives sat comfortably atop their perch in the course of the second yr of the pandemic, cushioned greater than ever by the rising fortunes of their inventory possession.

The CEOs of roughly 300 well being care firms collectively took residence greater than $4.5 billion in 2021, based on a STAT evaluation of a whole lot of monetary filings. Regeneron Prescription drugs CEO Leonard Schleifer represented 10% of that complete on his personal, pulling in an astounding $453 million.

Though $4.5 billion is simply 0.1% of the $4.3 trillion U.S. well being care financial system, it nonetheless represents an enormous quantity of wealth for a small class of executives that wields monumental management and affect over the well being care system. The lavish pay packages — which have swollen over time, as income and inventory costs have soared — tower above the common annual family revenue of round $67,000, in addition to the comparatively excessive salaries of well being care’s rank and file. And whereas greater than 100 CEOs collected eight-figure paydays final yr, the well being care system pushed tens of millions of individuals into medical debt, spurred sufferers to ration medicines, and devoured extra of everybody’s paychecks.


“Well being care has turn out to be massive enterprise,” stated Drew Altman, CEO of the Kaiser Household Basis. “We’ve got lots of people making some huge cash in well being care, and we nonetheless have an affordability disaster in well being care.”

For context, that $4.5 billion is seven instances what the Facilities for Illness Management and Prevention needed to spend on finding out, surveilling, and managing emerging and zoonotic infectious diseases in 2021, a yr by which America approached 1 million cumulative deaths on account of Covid-19. It’s additionally sufficient cash to cowl the annual health insurance of roughly 580,000 particular person individuals.

Put one other means, that quantity is greater than twice the quantity of all pizza gross sales and different international income that flowed via pizza chain Papa John’s final yr. It’s virtually sufficient cash to buy the Denver Broncos and greater than sufficient cash to bid on the Cedar Fair chain of amusement parks and accommodations.


J. Emory Parker/STAT
Sources: STAT evaluation of SEC filings, US Census Bureau, St. Louis Federal Reserve, Tesla, Guardian Jet, Apple, Inc., Faculty Board

“The well being care system isn’t working in addition to it may or ought to for most individuals,” stated Katie Martin, president of the Well being Care Price Institute and a former federal well being official. “Does this compensation construction incentivize these people to make the system work higher, or does it incentivize them to maintain the system the identical — preserve it chugging alongside because it does now?”

STAT analyzed govt compensation discovered within the annual proxy filings of almost 300 firms throughout all well being care sectors — drugmakers, well being insurers, hospitals, different suppliers, medical gadget companies, well being tech firms, biotechs, suppliers, and extra. The evaluation targeted on firms that had been price a minimum of $1 billion in mid-March, based mostly on knowledge from markets and monetary database suppliers Sentieo and FinViz.

The information revealed nuances inside every sector: The very best-paid CEOs typically led pharmaceutical firms and medical gadget companies — all of which develop new merchandise and construct their companies round government-granted patents. CEOs of biotechs and startup medical gadget companies had comparatively smaller compensation packages, as their massive paydays typically come when bigger firms purchase them out.

Well being insurers, hospitals, and different suppliers minted sizable paydays for high executives, however the ranges had been extra variable and had been bigger at extra established firms. Most, however not all, CEOs of well being tech firms weren’t among the many highest earners as a result of their firms are nonetheless new to the general public markets, and subsequently their inventory has had much less time to develop. Alongside those self same strains, CEOs who’ve been at their firms for a very long time had a number of the largest payouts.

One proven fact that hasn’t modified: Girls not often sit within the nook workplace, and after they do, they don’t make as a lot. Girls comprised lower than 10% of well being care CEOs, and the highest-paid was Caren Mason of Staar Surgical, who made $37.3 million — Thirty second-highest inside the evaluation. Out of the 100 highest-paid CEOs, simply six had been ladies.

Well being care CEOs made a mean of $15.3 million final yr, whereas the median was round $7 million. A number of inordinately massive pay packages skewed the averages: 29 CEOs, all males, revamped $40 million or extra.

Salaries made up lower than 6% of pay. Helmy Eltoukhy, co-CEO of liquid biopsy agency Guardant Well being, for instance, took a wage of simply $1. Vivek Garipalli, CEO of well being insurer Clover Well being, didn’t take any wage. As a substitute, the majority of executives’ pay stemmed from fairness. Greater than 80% of the general group’s compensation got here from inventory awards and choices, which mirrored the stock market’s colossal gains in 2021.

Inventory costs go up when revenue and income development are anticipated, so tying that a lot of an individual’s pay to shares additionally reveals the longstanding incentives of the well being care system: Promote extra medicine, open extra amenities, carry out extra procedures, undertake extra know-how, doc extra medical codes, increase extra costs, conduct extra mergers — do extra, and also you earn extra.

“There’s simply a variety of proof of misplaced priorities and incentives,” stated Katherine Hempstead, a well being coverage professional on the Robert Wooden Johnson Basis. “Regardless that well being care is closely regulated, it’s not regulated in ways in which forestall firms from doing all these items that don’t actually appear to be within the public curiosity, whether or not it’s excessive CEO pay or completely different sorts of anticompetitive conduct or gaming or completely different sorts of rent-seeking actions.”

To calculate the true amount of cash an govt amassed in 2021, STAT reporters manually entered data from proxy filings into an open-source tool developed by the Related Press. The totals included salaries, bonuses, perks, and the precise realized positive factors of executives’ inventory awards and choices — not the estimated honest worth of shares handed out in a given yr.

Executives are sometimes given inventory — or the chance to purchase inventory — as a part of their pay packages, and firms are required to estimate how a lot these shares or choices is likely to be price. That is what’s mostly reported. However the amount of cash that executives finally gather from exercising vested inventory awards and inventory choices, referred to as “precise realized positive factors,” typically dwarfs these fair-value estimates and is a extra correct illustration of somebody’s compensation.

For instance, Joe Hogan, CEO of Align Expertise, the maker of Invisalign tooth straighteners, made $21.6 million final yr based mostly on the fair-value estimate of his inventory. However Hogan’s compensation was $113.4 million after calculating his inventory that truly vested and was exercised final yr — a distinction of greater than $90 million.

This works the opposite means, too. Vivek Garipalli of Clover Well being had a pay package deal of just about $390 million final yr based mostly on the fair-value estimate of his inventory. However in actuality, he didn’t get a dime of that. That inventory’s worth is tied to guesses of how a lot the inventory might be price sooner or later, like hitting sure costs by 2026. On condition that Clover’s inventory value has cratered because it went public in 2021, Garipalli’s compensation wasn’t remotely near that headline determine.

The 2021 crop of CEOs stood out for one specific outlier: Regeneron’s Schleifer, who’s all the time among the many highest earners. On paper, Schleifer is price billions. Now, a variety of his fairness is beginning to vest, to important levels.

In 2021, Schleifer’s haul of just about a half-billion {dollars} principally stemmed from realized inventory choices. Since 2012, Schleifer has made $1.3 billion. By comparability, the median worker at Regeneron made just a little greater than $149,000 — about 3,500 instances lower than Schleifer. Nevertheless, Regeneron workers equally get inventory like Schleifer, however there isn’t a disclosure about what inventory has vested or was exercised, and subsequently the true worth is unknown.

Schleifer isn’t one to fly underneath the radar, both personally or professionally. He owns mansions on Martha’s Winery and Chappaqua, N.Y., and in addition helped fund his son Adam’s failed congressional campaign. He used to golf with former President Trump on the latter’s nation membership in Westchester, N.Y.

His firm has developed injectable remedies for most cancers, eye, and autoimmune illnesses, and has persistently ranked among the many business leaders in profitability. He’s additionally criticized his personal business for elevating costs and enjoying patent video games. In the course of the pandemic, Regeneron created an efficient monoclonal antibody therapy for Covid-19 sufferers, together with Trump, however that remedy stopped working towards the Omicron variant.

Regeneron didn’t make Schleifer out there for an interview. In a press release, Regeneron stated Schleifer is “the founding father of Regeneron and one of many longest-serving CEOs within the S&P 500.” Regeneron added “the corporate’s inventory value has elevated over 3,200% since our IPO, creating immense worth for shareholders.”

“Your calculation largely displays Dr. Schleifer’s train of inventory choices that elevated in worth alongside the worth of the corporate over time and that had been about to run out after a 10-year holding interval,” Regeneron stated in its assertion.

Wish to learn extra concerning the highest-paid CEOs within the biotech, well being tech, insurance coverage, suppliers, and medical gadget industries? The hyperlinks beneath will take you to STAT’s sector-by-sector analyses.