Facts about Pharamaceutical Companies

Today I was just completing some random readings and I found a very interesting powerpoint on the Doctors Reform Society website by Dr Tracy Schrader  called Future of the PBS in the Global Market (2003). Very interesting read but what I found very interesting was some facts that she had quoted about the pharmaceutical industry – revenue, profits and how they choose to use their influence. I know it is a few years old … but it is worth reading. I would also definitely recommending reading the whole presentation. Very insightful

US pharmaceutical industry has been described as  the largest lobby group, the most profitable industry & the most generous campaign contributor in the world

• companies are not especially large in terms of revenues, but are very profitable
• one of the biggest spenders in lobbying government
• lightly taxed & heavily subsidised

Baker, B.K., PhRMA’s Relentless Drive for Profits Explains US Trade Negotiations., inHealth GAP, 10 December. 2002.

Profits:

• 2001 Pfizer - 127th in the world for total revenue, 7thin terms of profit & the 18th largest market entity,bigger than many countries, including South Africa & South Korea
• every year since 1982, the pharmaceutical industry has been the most profitable in the US
• returns on revenue (profit as % sales) have averaged about 3 times the average for all other industries represented in the Global Fortune 500
• top Global Fortune 500 industry sectors’ average profit margin 2.4%, pharmaceuticals industry 16% in 2001

Henry, D. and J. Lexchin, The pharmaceutical industry as a medicines provider. The Lancet,2002. 360(9345): p. 1590-1595.
Global 500, Top performing companies and industries, top companies: highest profits. 2002, Fortune Magazine http://www.fortune.com/lists/6500/g500_topperf-co-highprofit.html.

Research & Development (R&D)

• pharmaceutical industry spends significantly more on marketing, advertising & administration than on R&D

A report by Families USA of nine US drug companies that market the top 50 drugs prescribed to seniors found:

• in 2001 profits exceeded R&D spending for six of the nine
• all nine companies spent considerably more on marketing, advertising, & administration than R&D
• no company spent as much as 20% of revenue on R&D, whereas every company except Merck spent > 20% of revenue on marketing, advertising & administration
• Pfizer allocated 35% of revenue to marketing, advertising, & administration, 15% on R&D with 24% Profit (Net Income)
• Merck & Co allocated 13% of revenue to marketing, advertising, & administration, 5% on R&D with 15% Profit (Net Income)
• Pharmacia Corporation allocated 44% of revenue to marketing, advertising, & administration, 16% on R&D with 11% Profit (Net Income)

Mahan, D., Profiting from Pain: Where Prescription Drug Dollars Go. 2002, Families USA Foundation: Washington DC.

• average cost of R&D for an innovative drug estimated tobe approx. US $400 million over 8 to 12 years
• annual revenues at least US $1 billion for up to 20 years
• most new drugs on the market are replacements for cheaper generic versions
• A report in US from the National Institute for Health CareManagement found that relatively few of the new drugs approved during 1989 to 2000 were highly innovative
• modified versions of older medications ( ‘me-too’ drugs)were becoming increasingly dominant

Inouye, B., Unpacking the Pharma Biotech Engines: How the leading pharmaceutical corporations are driving the biotech agenda. 2002, Polaris Institute: Ottawa.
NIHCM, Changing Patterns of Pharmaceutical Innovation. 2002, National Institute for HealthCare Management: Washington, DC.

• major part of drug R&D & an even larger portion of truly innovative R&D is due to government subsidisation
• due to favourable tax treatment &/or direct government investment in research

Arno, P.S. and M.H. Davis, Why don’t we enforce existing drug price controls?, in Tulane Law Review. 2001, Social Science research Network Electronic Library.

• around 3/4 of final pharmaceutical expenditure is publicly reimbursed in the majority of OECD countries

Jacobzone, S., Pharmaceutical Policies in OECD Countries: Reconciling social and industrial goals. 2000, Organisation for Economic Co-operation and Development (OECD): Paris.

• a US internal National Institutes of Health study found taxpayer-funded scientists & O/S universities conducted85% of published research studies, tests & trials leading to the discovery & development of five innovative drugs

NIH, NIH Contribution to Pharmaceutical Development. 2000, Administrative Document,National Institutes of Health (NIH): Bethesda, Maryland.

Lobbying

Pharmaceutical Research & Manufacturers of America (PhRMA):

• powerful trade association representing US pharmaceutical manufacturers & subsidiaries
• biggest pharmaceutical industry lobby group in the US

Medicines Australia:

• national association representing the prescriptionAustralian medicines industry
• represents over 90% of the prescription market in Australia

[Prior to 2002 known as the Australian PharmaceuticalManufacturers Association (APMA)]

•  1999-2000 election campaign in the US, pharmaceuticalcorporations spent over US $177 million on lobbying
• greater than the expenditures of the oil & gas, tobacco,automobile & food processing corporations combined

Inouye, B., Unpacking the Pharma Biotech Engines: How the leading pharmaceuticalcorporations are driving the biotech agenda. 2002, Polaris Institute: Ottawa.

Tax & subsidies

• low tax levels due to tax credits – effective tax rate isabout 40% less than the average for all otherindustries in US
• research subsidies
• patent extensions

Young, B. and M. Surrusco, RX R&D Myths: The Case Against the Drug Industry’s ‘R&DScare Card’. 2001, Congress Watch, Public Citizen: Washington DC

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4. Health: It just a matter of priorities
5. PBS and the world’s most expensive drugs