Dr. Billionaire, Meet Dr. Salk
Dr. Patrick Soon-Shiong has helped make a little medical history. The good doctor holds over 95 patents. He pulled off the first pig-to-human cell transplant to treat diabetes. And one of the drugs he designed and developed, Abraxane, keeps cancerous cells from dividing.
How much of a personal reward does Dr. Soon-Shiong merit for contributions like these? No one, of course, can definitively say. How much in personal rewards has Dr. Soon-Shiong actually collected over the course of his medical career? That figure we can pin down.
Dr. Soon-Shiong, the wealth trackers at Bloomberg tell us, has amassed a personal fortune worth $9.7 billion. And plenty more is coming. Dr. Soon-Shiong currently serves as the CEO of NantKwest, a San Diego cancer research firm. The pay deal he cut last year, we’ve just learned from required filings, will bring him at least $148 million for his CEO labors — and maybe as much as $330 million.
These sums strike you as a tad excessive? Fans of Dr. Soon-Shiong don’t see things that way at all. Medical progress, they believe, requires lush rewards. The possibility of hitting it spectacularly rich, their argument goes, gives physicians like Dr. Soon-Shiong an incentive to work ever harder to conquer cancer and whatever else might ail us.
But brilliant doctors, the historical record shows, don’t need the incentive of becoming fabulously rich to make their medical breakthrough. Dr. Jonas Salk certainly didn’t.
Back in the 1950s, Salk developed the first successful vaccine against polio, the disease that terrified young American families in the years right after World War II. In 1952, the polio epidemic’s peak year, U.S. health officials counted 58,000 cases, with children making up most of the victims. Over 3,100 died from polio that year. Many thousands more faced lives in “iron lungs.”
Salk’s dogged research brought families real hope. In 1954, a massive field trial of his new vaccine passed with flying colors. Mass inoculations began in 1955.
Within a few short years, polio had virtually disappeared. The chairman of the American Medical Association board would go on to label this momentous achievement “one of the greatest events in the history of medicine.” No one disagreed.
And how many millions did Dr. Jonas Salk reap from his striking medical success? Not one. Salk, the son of a New York City garment worker, didn’t feel he had any right to make a fortune off his research. He never filed for a patent that would have “monetized” the vaccine for him.
Salk would explain why in a live national interview with his era’s most famous news broadcaster, Edward R. Murrow.
“Who owns the patent on this vaccine?” Murrow asked the newly famous doctor.
“Well, the people, I would say,” Salk replied. “There is no patent. Could you patent the sun?”
Salk could have been mega rich if he had patented his vaccine.
How much did Salk’s public-spirited approach to the drive against polio cost him personally? A Forbes analysis in 2012 concluded that Salk “would have been richer by $7 billion” if he had patented his vaccine.
Some might argue that we ought to see Salk as a special case, the sort of saintly figure who only comes around once a millennium or so. We shouldn’t consider his example, this perspective holds, a realistic precedent for how we should expect medical researchers to behave.
But Salk, in his day, hardly rated as wildly unique. His chief medical competitor, Albert Sabin, also developed a powerful and effective polio vaccine in the 1950s. Sabin never patented his work for personal profit either.
Mid-20th-century America seems to have abounded with public-spirited talents like Salk and Sabin. That shouldn’t surprise us. The rules of the economic game in mid-20th-century America encouraged public-spirited behavior.
Much of that encouraging came from the federal tax code. In the 1950s, tax rates actively discouraged greed and grasping. Income over $400,000 — about $3.5 million in today’s dollars — faced a 91 percent tax rate.
This steep tax rate on top-bracket income sent a clear social message: Some things matter more than making tons of money. Our contemporary tax rates, by contrast, send no such message. Today’s super rich — Americans who routinely take in over $100 million a year — seldom pay over 25 percent of their overall incomes in federal tax.
Tax bites this gentle encourage today’s medical entrepreneurs to go for the gold at every opportunity. Consider the gold that awaits Joseph Papa, the new CEO at Valeant Pharmaceuticals. Papa’s new pay deal, notes Fortune magazine, will hand him a stunning $500 million if Valeant’s stock price hits $270 per share, the company’s share price territory last July.
Gentile tax bites encourage today’s medical entrepreneurs to go for the gold.
The prospect of a windfall this incredibly huge gives Papa an enormous incentive — to hike Valeant’s share price by whatever means necessary. The greater the profit he can squeeze out of the drugs that Valeant markets, the greater the personal windfall he gets to pocket and keep.
Valeant is already squeezing at a phenomenal pace. The company specializes in buying up drug patents, then quickly raising the prices of its new drugs to whatever the market can bear.
Under current patent rules, this strategy makes eminent business sense. The returns can be other-worldly. Since 2013, for instance, Valeant has hiked the price of Cuprimine, a drug for one rare condition, by 5,787 percent!
The resulting profits have made Valeant a hedge fund favorite. Patients and their families — and the doctors who feel a real professional responsibility to them — have less reason to cheer.
“We spend a lot of time with our patients talking about options based on what they can and can’t afford,” explains Dr. Richy Agajanian, a California oncologist. “As doctors, we are constantly juggling what’s best for patients versus what they can afford.”
How can we go beyond all this juggling? Having more public-spirited Dr. Salks and Dr. Sabins around would help. But what we need even more: egalitarian-minded rules for our economy — on everything from patents to taxes — that make public spiritedness the only logical choice.
Sam Pizzigati, an Institute for Policy Studies associate fellow, co-edits Inequality.org. His most recent book: The Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle Class, 1900–1970 (Seven Stories Press). Follow him on Twitter @Too_Much_Online.