Drug company executives faced tough questions from Congress on Tuesday as they attempted to explain why, thanks to high drug prices, per capita spending on pharmaceuticals in the United States is double the average of other advanced countries. For decades, American drug makers have justified these high prices by asserting that the higher profits they generate fund research that accelerates the development of new medicines. Our data shows, however, that these companies spend every penny of their profits on distributions to shareholders in the forms of cash dividends and stock buybacks.

Because the greater part of management compensation is linked to stock price, the prime beneficiaries of this abuse of corporate profits are the executives who claim that high drug prices redound to the common good. At the same time, drug giants such as Merck and Pfizer seem to have become focused more on buying companies with successful new drugs rather than developing their own.

Congress has been raising alarms over drug prices for years. In 1985, Representative Henry Waxman, a California Democrat who was chairman of the House health subcommittee, accused the pharmaceutical industry of “gouging the American public,” driven by “greed on a massive scale.” But the escalation of drug prices has only gotten worse, as documented in various Senate investigations.

Despite their claims, the big American drug companies have not been using profits from high prices to ramp up investment in drug development. Our research shows that for 2008 through 2017, 17 pharmaceutical companies in the S. & P. 500 distributed just over 100 percent of their combined profits to shareholders, $300 billion as buybacks and $290 billion as dividends. These distributions were 12 percent greater than what these companies spent on research and development.

With most of their compensation coming from exercising stock options and stock awards, senior executives benefit immensely. We gathered data on the 500 highest-paid executives in the United States from 2008 through 2017. The number who came from the drug industry ranged from 21 (in 2008 and 2011) to 42 (in 2014). The total compensation of those 42 executives averaged about $73 million, compared with an average of an already over-the-top $32 million for all 500 in 2014.

A total of 88 percent of the 2014 compensation was based on stock. In 2017, 28 drug executives in the top 500 averaged more than $41 million in total compensation, with 83 percent stock-based. By jacking up product prices and distributing the increased profits to shareholders, executives lift stock prices and their take-home pay.

Our research for the Institute for New Economic Thinking demonstrates that these companies, even when they show substantial R. & D. spending on their books, do not have much to show for it.

For example, Merck distributed 133 percent of its profits to shareholders from 2008 to 2017, and Pfizer 107 percent. Although both companies recorded large sums spent on R. & D. — Merck $80 billion and Pfizer $81 billion over the decade — these companies generated most of their revenues by acquiring companies with patented drugs on the market, rather than by developing their own new drugs. Since 2001, by our analysis, Pfizer has had significant revenues from only four internally originated and developed products. Since Merck’s merger with Schering-Plough in 2009, it has had only two blockbuster drugs, of which only one was the result of its own research.

The public foots the bill for this behavior. Not only do we pay high drug prices, our tax dollars supply more than $30 billion per year for life-sciences research through the National Institutes of Health. Yet, like most American companies, the drug industry claims that its corporations need to pay lower corporate taxes to remain competitive globally.

European pharmaceutical companies such as Roche and AstraZeneca, on the other hand, have used the same American drug ecosystem — profits from high drug prices and scientific advances resulting from government research funding — to become leaders in medical innovation. Roche dominates the market for specialty drugs in oncology and immunotherapy, while AstraZeneca has a strong pipeline in the latest phases of development. Merck and Pfizer, in comparison, have fallen seriously behind.

Congress should put an end to this madness. The government funds medical research and grants the patents and other intellectual property protections that make the pharmaceutical industry’s products financially viable. It should therefore regulate drug prices.

The United States should also redesign executive pay to reward drug company leaders who actually bring new innovations to market, and ban most forms of stock buybacks, which are nothing but a manipulation of the stock market that makes the rich even richer. Reinvesting the hundreds of billions of dollars that American drug companies are squandering on buybacks would be a big step on the path to affordable health care for all.

William Lazonick, emeritus professor of economics at the University of Massachusetts, Lowell, is the president of the Academic-Industry Research Network, where Öner Tulum, a postdoctoral fellow at SOAS, University of London, is a senior researcher.

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