Compared to high drug prices, rising executive compensation at biotechnology and pharmaceutical companies has passed without as much scrutiny, even as CEOs benefit handsomely from the sector's steady growth.

The median CEO of the drug companies analyzed by BioPharma Dive earned about 50% more last year than in 2017, a leap that outpaced the more modest pay gains of their employees.

The upswing was broad-based, driven both by sharply higher pay among leaders of smaller, research-focused biotechs, as well as by healthy increases for those at more sizable companies.

BioPharma Dive's findings were drawn from total compensation figures reported in regulatory filings this year by some 230 drugmakers — a group that represents many of the publicly traded biotechs and prominent pharmaceutical firms like Johnson & Johnson, Pfizer and Merck & Co.

The recent gains in pay for industry CEOs have come during a period in which biotech stocks reached record levels. Measured from a five-year low in February 2016, the S&P Biotech index rose 160% to set an all-time high in late July this year. The story is similar, if not as dramatic, for a Nasdaq index of the sector.

Biotech and pharmaceutical company shares had tumbled downwards with the broader market in March and April, as the coronavirus pandemic shook the global economy. But they've since gained back more than they lost as progress on treatments and vaccines has raised the industry's profile.

Surging share prices are good for executive pay, which is largely composed of stock grants designed to align executives' interests with shareholders. These grants can be quite large, particularly for newly installed CEOs or when employment contracts are renewed.

UroGen CEO Elizabeth Barrett, for instance, was granted 317,000 shares in the company and an option to purchase 277,000 more as a one-time "sign-on" award valued at roughly $24 million — 35 times her base salary. Both the shares and the options vest over three years.

Pay packages for many CEOs, therefore, are often lumpy, growing by millions or tens of millions of dollars one year, and falling the next.

The sums that companies report paying their CEOs don't always reflect the value executives might gain in a given year, either. Stock granted in the past may vest in waves, or a CEO may buy new shares by exercising options awarded previously. If share prices have increased since the original award, a CEO could earn much more than originally cited by their companies.

Companies report these totals on an annual basis as well, calculating the value "realized" by an executive. For long-tenured CEOs who've accrued stock and option awards year after year, these figures can be much larger than a year's total compensation.

Regeneron CEO Leonard Schleifer, for example, last year exercised previously granted options to acquire nearly 313,000 shares in the biotech, worth some $111 million.

Compared to top CEOs in other industries, biopharmaceutical executives aren't necessarily outliers, however. The best compensated biotech CEO by total annual pay in 2019, United Therapeutics' Martine Rothblatt, would rank 7th among all chief executives in the S&P 500, according to data compiled by The Wall Street Journal.

The 10th best paid drugmaker CEO in BioPharma Dive's data set, Amgen's Robert Bradway, ranks 83rd.

Yet, unlike in other business sectors, the gap between CEO and median employee compensation is generally much more modest at all but the largest pharmas. That's because biotech workforces, particularly those filled with scientists and researchers, are well paid: median compensation topped $200,000 at nearly half of the 124 companies reporting data.

Higher employee pay among biotech companies means CEO compensation in the industry is comparatively less stark. (The CEO of Starbucks, to use one notable example, made 1,675 times what the median barista earned last year.)

Roy Saliba, head of product and compensation business at ISS Corporate Solutions, said companies will compare their ratio against their peers or track them over time, but rarely do they make decisions off the ratio alone.

"It's hard to compare across companies," Saliba said. "Even when they're comparable, what's the conclusion? The conversations have shifted more to pay equity, racial and gender equity."

While those issues may be drawing more attention than before, the company leaders working to address them in the drug industry remain mostly white and male. Just 21 of the 231 companies analyzed by BioPharma Dive were led by a woman in 2019 — a situation little changed from previous years despite ambitious goals set by industry trade group BIO.

On an average basis, compensation among the 21 female CEOs is actually higher than in the broader group due to the outlier pay packages for United's Rothblatt and UroGen's Barrett. Measured at the median, female CEO compensation last year was 8% lower, although the comparison is limited by the imbalance in group size.

When biotech and pharmaceutical CEOs have been scrutinized for their pay packages, it's often been tied to questions of whether drug price increases play a role.

A hot-button issue for years, price hikes have made the industry among the most disliked by the general public, and earned its top companies repeat trips to face angry lawmakers in Washington, D.C.

Early last year, for example, Democratic Senator Ron Wyden of Oregon grilled AbbVie CEO Richard Gonzalez on whether the executive would make more money if the company raised the price of its topseller, the anti-inflammatory medicine Humira.

Sales of the drug had previously factored in AbbVie's calculations for determining short-term bonuses for its executives, including Gonzalez. For 2019, the company removed explicit mention of the drug from its methodology.

Direct references to individual drugs in executives' performance targets is relatively rare. A few others besides AbbVie, such as Incyte and Seattle Genetics, have benchmarked pay against specific product sales. Most, though, use broader financial metrics that make the relationship between higher revenue from one drug, and higher incentive pay, less direct.

For the past three years, the Interfaith Center for Corporate Responsibility has pressed a handful of the top drugmakers on this issue. A coalition of some 300 advocacy groups and investors, ICCR views drugmaker reliance on increasing prices as a major risk to the companies' sustainable long-term growth.

Through shareholder proposals by its members, ICCR has sought greater disclosure around drug prices and whether executives benefit financially when prices rise.

This year, Johnson & Johnson and Biogen both noted in proxy statements that their directors would consider how executive incentives might influence decisions on drug pricing. Each had previously recommended against ICCR-supported proposals asking for a detailed report on the issue.

"This isn't necessarily targeting one company in particular, but it is an industry problem," said Meg Jones-Monteiro, a program director at ICCR.

More companies, she said, are now setting expectations that growth will come from higher volumes of their drugs being prescribed, rather than from higher prices. The changes made by J&J, Biogen and AbbVie, meanwhile, suggest some acknowledgement of the role incentives might play in encouraging aggressive pricing.

Whether or not drugmakers adjust their approach, the trend to higher CEO pay seems likely to continue. Strong biotech stock performance should help earn executives sizable pay packages in 2021, and will lift the value of stock awards.

More simply, the ways by which companies benchmark compensation can encourage ever higher pay.

"Companies target the median of their peers," said Saliba of ISS Corporate Solutions. "But everyone is targeting it, so the median invariably moves up and up."