Jim O’Neill argues that "Big Pharma should redirect funds allocated toward share buybacks into research"
Writing for Project Syndicate, Jim O’Neill – who is currently Chairing a formal Review into antimicrobial resistance (AMR) – argues that “Big Pharma should redirect funds allocated toward share buybacks into research.”
Jim argues that if left unaddressed, the problem of AMR could be responsible by 2050 for the deaths of some ten million people a year, along with over $100 trillion in economic damage. However, provided that adequate resources are made available, he believes that there is much we can do to mitigate the threat.
One important avenue to pursue, Jim advises, is the development of new drugs. However, a common argument made by drug companies is that they “need to be guaranteed a reward if they are to invest in developing medicines that are unlikely to deliver the kind of returns that other investments may provide.” Despite this, Jim notes that there is a good reason why pharmaceutical companies should provide financing for early-stage research into solving the problem of antimicrobial resistance: enlightened self-interest.
Drawing from his years at Goldman Sachs, Jim demonstrates that “if the banking industry had shown greater leadership on issues – for example, excessive executive pay – they would have found themselves in a much more favourable environment today.” Similarly, whilst share buybacks in the pharmaceutical industry can sometimes be legitimate, on other occasions they do not seem justified – especially when considered from the standpoint of enlightened self-interest.
He goes on to show how dubious buybacks are not confined to the pharmaceutical industry, and comments that “companies’ ability to minimise their global tax burden, while boosting their earnings per share through buybacks – in some cases financed with debt – does not strike me as a stable trend.” Instead, “industry leaders should begin asking themselves how they can contribute to averting the crises of the future.”
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