All too often the pharmaceutical industry flies under the media radar despite some examples of outrageous and greedy practices. A two-part series last week by Richard Anderson from BBC News took a deeper look at the industry’s focus on profits, and its old argument that R&D offsets much of what they take to the bank for owners and investors even while drug prices continue to soar.
Using data from Forbes, Anderson shows that some pharmaceutical companies made as much as a 42% profit last year. On average, their profit margins were on par with banks:
Drug companies justify the high prices they charge by arguing that their research and development (R&D) costs are huge. On average, only 3 in 10 drugs launched are profitable, with one of those going on to be a blockbuster with $1 billion plus in revenues per year. Many more do not even make it to market."
But ... drug companies spend far more on marketing drugs — in some cases twice as much — than on developing them. And besides, profit margins take into account R&D costs."
Anderson goes on to explain how drug companies have also been heavily fined for egregious unethical doings such as paying doctors, misbranding, marketing to minors and various counts of illegal advertising, just to name a few.
All of this may be changing, at least in the UK—or so Anderson speculates in his second piece on the matter. Factors include: expiring patents on some big-ticket money makers; the advancement of drug therapy which is moving away from broad band money makers towards patient-targeted drugs; growing concerns over antibiotic resistance; and more public awareness over how much drug companies are charging, and how they are neglecting to develop drugs that may help people in developing countries.
Anderson’s predictions on ways forward for the industry (more cooperation between companies, more public-private partnerships, more private sector foundation funding) seem a little too “business as usual” for us, but we are happy to see that change is afoot. While some some pharmaceuticals are very necessary—and life-saving—we are still dismayed by the drug industry’s egregious profit margins.
- Pharmaceutical industry gets high on fat profits via BBC News
- Pharmaceuticals industry facing fundamental change via BBC News