Profiting from Pain: Where Prescription Drug Dollars Go

Publication Date: July 2002

Publisher: Families USA

Author(s): Dee Mahan

Research Area: Health; Manufacturing and industry

Type: Report

Abstract:

As public concern mounts about the explosion in prescription drug costs, the pharmaceutical industry argues that high drug prices are necessary. High prices are needed, the industry repeatedly contends, to finance research and development (R&D) so manufacturers can bring newer, better drugs to market. If steps are taken to rein in drug prices, so the industry argument goes, manufacturers will be forced to slash R&D. This report belies that argument. Data gathered by Families USA demonstrate that the major pharmaceutical companies spend significantly more on marketing, advertising, and administration than they spend on R&D. The pharmaceutical industry has been the most profitable industry in America for each of the past 10 years and, in 2001, was five-and-one-half times more profitable than the average for Fortune 500 companies. The industry is also very generous to its top executives, offering them millions of dollars in annual pay, supplemented by even larger company stock options. This is the second in a series of reports prepared by Families USA that looks at spending and profits in each of the U.S. drug companies that market (or are the parent company of the company that markets) the top 50 drugs prescribed to seniors.1 In order of size based on annual revenue, the companies included in this report are 1) Merck & Company; 2) Pfizer, Inc.; 3) Bristol-Myers Squibb Company; 4) Abbott Laboratories; 5) Wyeth; 6) Pharmacia Corporation; 7) Eli Lilly & Co.; 8) Schering-Plough Corporation; and 9) Allergan, Inc.