Healthcare executives sat comfortably atop their perch in the second year of the pandemic, cushioned more than ever by the rising fortunes of their stocks.
CEOs of about 300 healthcare companies took home more than $4.5 billion in 2021, according to an analysis of hundreds of financial records. Leonard Schleifer, CEO of Regeneron Pharmaceuticals, accounted for 10% of that total on his own, receiving a staggering $453 million.
While the $4.5 billion represents only 0.1% of the $4.3 trillion US health care economy, it still represents enormous wealth for a small class of executives who wield enormous control and influence over the health care system. The lavish pay packages — which have swelled over time as profits and stock prices have soared — rise above the median annual household income of about $67,000 and the relatively high salaries of health care workers. And while more than 100 CEOs raked in eight-figure paydays last year, the health care system forced millions into medical debt, forced patients to take drugs and swallowed more of everyone’s paychecks.
“Health care has become big business,” said Drew Altman, CEO of the Kaiser Family Foundation. “We have a lot of people making a lot of money in health care, and we still have a health care affordability crisis.”
For context, the $4.5 billion is seven times more than the Centers for Disease Control and Prevention was expected to spend on research, surveillance and management of emerging and zoonotic infectious diseases in 2021, when America approached 1 million cumulative deaths from Covid-19. . This money is also enough to cover the annual health insurance of approximately 580,000 people.
In other words, the amount is more than double the total pizza sales and other global revenue that flowed through pizza chain Papa John’s last year. That’s almost enough money to buy the Denver Broncos and more than enough money to make a bid for the amusement park and hotel chain Cedar Fair.
“The health care system is not working as well as it could or should for most people,” said Katie Martin, president of the Health Cost Institute and a former federal health official. “Does this compensation structure incentivize these people to make the system work better, or does it incentivize them to stay in the system — to keep it the way it is now?”
STAT analyzed executive compensation found in the annual proxy filings of nearly 300 companies across all healthcare sectors — drugmakers, health insurers, hospitals, other providers, medical device companies, health technology companies, biotechs, suppliers and more. The analysis focused on companies valued at least $1 billion in mid-March, based on data from markets and financial database providers Sentieo and FinViz.
The data showed nuances in each sector: The highest-paid CEOs often ran pharmaceutical companies and medical device companies — all of which develop new products and build their businesses around government-issued patents. CEOs of biotech and start-up medical device companies had relatively smaller compensation packages because their big paydays often come when they are bought out by larger companies.
Health insurers, hospitals and other service providers paid top executives big paydays, but the ranges were more variable and larger at established companies. Most, but not all, health tech CEOs were not among the top earners because their companies are still new to the public markets and therefore their stocks have had less time to grow. Similarly, CEOs who had been with their companies for a long time received the highest payouts.
One fact that hasn’t changed: Women rarely sit in the corner office, and when they do, they don’t make as much. Women made up less than 10% of healthcare CEOs, and the highest paid was Caren Mason of Staar Surgical, who earned $37.3 million, ranking 32nd in the analysis. Only six of the 100 highest paid CEOs were women.
Healthcare CEOs earned an average of $15.3 million last year, with a median of about $7 million. Several unusually large pay packages skewed the averages: 29 CEOs, all men, earned $40 million or more.
Wages accounted for less than 6% of wages. For example, Helmy Eltoukhy, co-CEO of the liquid biopsy company Guardant Health, was paid just $1. Vivek Garipalli, CEO of health insurer Clover Health, did not take a salary. Instead, the majority of executive pay came from equity. More than 80% of total group compensation came from stock awards and options, reflecting the colossal stock market gains in 2021.
Stock prices rise when profits and revenue are expected to grow, so tying a large portion of people’s pay to stocks also exposes the health care system’s long-term incentives: sell more drugs, open more facilities, do more procedures, adopt more technology, document. more medical codes, raise more prices, do more mergers – do more and earn more.
“There’s just a lot of evidence of misplaced priorities and incentives,” said Katherine Hempstead, a health policy expert at the Robert Wood Johnson Foundation. “While health care is heavily regulated, it’s not regulated in a way that prevents companies from doing all these things that don’t really seem to be in the public interest, whether it’s high CEO pay or different types of anti-competitive behavior, gambling or other rent-seeking activities.”
To calculate the actual amount of money raised by management in 2021, STAT reporters manually entered proxy data into an open-source tool developed by the Associated Press. The totals included actual realized gains on salaries, bonuses, benefits and executive stock awards and options, rather than the estimated fair value of shares issued during the year.
Executives are often given shares or stock to buy as part of their pay packages, and companies have to estimate how much those shares or options might be worth. It is the most frequently reported. But the amount of money executives ultimately collect from the exercise of vested stock awards and stock options, called “actual realized earnings,” often falls short of these fair value estimates and is a more accurate representation of someone’s compensation.
For example, Joe Hogan, CEO of Align Technology, maker of Invisalign teeth straighteners, earned $21.6 million last year, based on the fair value of his stock. But Hogan’s compensation was $113.4 million after accounting for the shares he actually vested and exercised last year — a difference of more than $90 million.
It also works the other way around. Clover Health’s Vivek Garipalli’s pay package last year was nearly $390 million, based on the fair value estimate of his stock. But he didn’t actually get a dime from it. The value of this stock is tied to estimates of how much the stock will be worth in the future, such as reaching certain prices by 2026. Given that Clover’s stock price has cratered since it went public in 2021, Garipalli’s compensation was nowhere near that headline. figure.
The 2021 crop of CEOs stood out with one particular outlier: Regeneron’s Schleifer, always one of the top earners. On paper, Schleifer is worth billions. Now a large part of his shares will acquire a significant amount.
In 2021, Schleifer’s harvest of nearly half a billion dollars was mainly due to exercised stock options. Since 2012, Schleifer has earned $1.3 billion. By comparison, the average worker at Regeneron earned just over $149,000 — about 3,500 times less than Schleifer.
Schleifer does not fly under the radar either personally or professionally. He owns estates in Martha’s Vineyard and Chappaqua, N.Y., and also helped fund his son Adam’s failed congressional campaign. He played golf with former President Trump at the latter’s country club in Westchester, N.Y.
His company has developed injectable drugs to treat cancer, eye and autoimmune diseases and has consistently been among the industry leaders in terms of profitability. He has also criticized his industry for raising prices and playing patent games. During the pandemic, Regeneron created an effective monoclonal antibody treatment for Covid-19 patients, including Trump, but that treatment stopped working against Omicron’s variant.
Regeneron did not make Schleifer available for an interview. Regeneron said in a statement that Schleifer is “Regeneron’s founder and one of the S&P 500’s longest-serving CEOs.” Regeneron added that “the company’s share price has increased more than 3,200% since our IPO, creating tremendous value for shareholders.”
“Your calculation largely reflects the exercise of Dr. Schleifer’s stock options, which increased in value over time with the value of the company and were scheduled to expire after a 10-year holding period,” Regeneron said in a statement.
Want to read more about the highest paid CEOs in the biotech, health tech, insurance, service provider and medical device industries? The links below will take you to STAT’s sector-by-sector analyses.
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