Over and above

Excess in the pharmaceutical industry

By Marcia Angell - CMAJ December 7, 2004 vol. 171 no. 12 doi: 10.1503/cmaj.1041594

The main point about excess in the pharmaceutical industry is how much there is of it. Here I can touch on only a few specifics about this altogether over-the-top business.

PROFITS

Although the pharmaceutical industry claims to be a high-risk business, year after year drug companies enjoy higher profits than any other industry. In 2002, for example, the top 10 drug companies in the United States had a median profit margin of 17%, compared with only 3.1% for all the other industries on the Fortune 500 list.1 Indeed, subtracting losses from gains, those 10 companies made more in profits that year than the other 490 companies put together.

“Me-too” drugs

The main output of the big drug companies is “me-too” drugs: minor variations of highly profitable pharmaceuticals already on the market.5 Some me-too drugs are gimmicks to extend monopoly rights on an older blockbuster. For example, the antacid Nexium was AstraZeneca's virtually identical replacement for Prilosec when its exclusive rights on the older drug expired.

Marketing

Closely tied to excess me-too drugs are excessive marketing expenditures. For decades, the big drug companies have spent far more on “marketing and administration” (companies have slightly different names for this budgetary item) than on anything else. Throughout the 1990s, for example, the top 10 drug companies in the world consistently spent about 35% of sales on marketing and administration, and only 11% to 14% on R&D.7 (For that decade, they took in profits of 19% to 25% of sales.) Just looking at the top 10 US companies in 2002, expenditures for marketing and administration were 31% of sales, compared with only 14% for R&D.1 That comes to an astonishing $67 billion dollars of their $217 billion in sales.

Influence on the medical profession

The medical profession has largely abdicated its responsibility to educate medical students and doctors in the use of prescription drugs. Drug companies now support most continuing medical education, medical conferences and meetings of professional associations.10 Although they call it education, the billions of dollars they put into it comes out of their marketing budgets.

Influence on government

The pharmaceutical industry has the largest lobby in Washington, DC — there are more pharmaceutical lobbyists there than members of Congress — and it gives copiously to political campaigns.11 As a result, the prescription drug legislation and policies that come out of Washington are usually made to order for the industry.

Source to full story: http://canadianmedicaljournal.ca/content/171/12/1451.full