As healthcare costs rise, a new study reveals that major healthcare companies are sending nearly all their profits to investors instead of using the money to lower costs, improve services, or fund medical advancements.
Research published in JAMA Internal Medicine reveals that major healthcare companies listed on the S&P 500 have funneled an astonishing 95% of their profits to shareholders over the past two decades. In 2022 alone, these companies paid out $170.2 billion in dividends and stock buybacks—more than triple the amount from 2001.
To put this into perspective, the United States spent $5 trillion on healthcare in 2023, accounting for 17% of the country’s total GDP. A significant portion of this spending—approximately 70%—comes from taxpayer dollars through Medicare, Medicaid, and subsidies for employer-sponsored insurance. However, rather than using their earnings to lower patient costs, expand medical services, or invest in groundbreaking treatments, these companies have been prioritizing shareholder returns.
Over the past two decades, 92 of the largest healthcare companies have paid a staggering $2.6 trillion to shareholders. These distributions come primarily through two methods: dividends, which are regular profit-sharing payments sent to investors who hold stock in the company, and stock buybacks, where a company purchases its shares, reducing the number available on the market and increasing the value of the remaining stock. Both strategies direct corporate earnings to investors instead of reinvesting in medical services, research, or affordability.
Pharmaceutical companies led the charge, directing a total of $1.2 trillion to investors between 2001 and 2022. Biotechnology firms followed, paying out $394.4 billion, while managed healthcare companies, which include insurance providers, distributed $376.7 billion. Medical equipment and supply manufacturers added another $341.9 billion in shareholder payouts.
The most revealing aspect of the study is not just the massive total of shareholder payouts, but the proportion of corporate profits being distributed. Across the healthcare sector, these companies allocated 95% of their net income to shareholders. Some even went beyond their earnings, paying out more money than they made by dipping into cash reserves or borrowing.
Healthcare facilities, healthcare distributors, and pharmaceutical companies all exceeded 100% payout ratios, meaning they sent more to investors than they earned in profits. These figures raise serious questions about whether financial priorities in the healthcare industry are misaligned with the needs of patients.
With shareholders expecting ever-growing payouts, companies have strong incentives to keep prices high. Lead researcher Dr. Victor Roy stated that one of the ways healthcare companies maintain their earnings is by keeping prices high or raising them.
With about 70% of U.S. healthcare spending coming from taxpayers, these massive shareholder payouts are effectively being subsidized by public funds. Medicare, Medicaid, and other government health programs are funded by taxes, yet a significant portion of this money appears to be enriching investors rather than directly benefiting patients.
The rapid growth of these payouts is another point of concern. In 2001, S&P 500 healthcare companies distributed $54 billion to shareholders. By 2022, that figure had soared to $170.2 billion, a 315% increase. Even more striking, just 19 companies, about one-fifth of those studied, were responsible for over 80% of all shareholder distributions, concentrating this wealth among a small number of firms.
This level of financial consolidation can have broad consequences. Similar to other industries where a few major players dominate the market, competition suffers and prices tend to rise. If healthcare companies are prioritizing stock market performance over reinvestment in services, the result could be higher drug prices, increased insurance premiums, and limited patient options.
Some argue that since these are private, for-profit companies, maximizing shareholder returns is simply how the system works. But others point out that healthcare is not a typical consumer industry. As study co-author Dr. Cary Gross put it, you can choose when to buy a car, but you can’t choose to have a heart attack.
With healthcare costs already a top concern, the question remains: should corporations focus almost entirely on shareholder profits, or reinvest in more affordable care?
Unless companies shift priorities, rising costs will continue to burden American families—especially those reliant on taxpayer-supported programs.