Drug Companies

In an effort to develop an even greater understanding of the issues involving

healthcare financing and delivery, the following list of websites is being provided for you

to access for additional information. They are excellent resources and provide

information on all aspects of the discussion.

In an effort to develop an even greater understanding of the issues involving

healthcare financing and delivery, the following list of websites is being provided for you

to access for additional information. They are excellent resources and provide

information on all aspects of the discussion.

The pharmaceutical industry is made up of numerous multi-national companies. They have discovered and brought to market thousands of drugs that have extended life and reduced the suffering for hundreds of millions of people world wide. The time to bring a chemical to market can be about 15 years and can cost in excess of $800 million. These drugs are patented for many years to allow the companies to recoup the money spent on research and development and to make a profit that will allow them to spend some of that money on the next miracle drug. Once the patent expires, other companies can produce the drug and sell it as a generic at a much lower price since they have not spent the huge sums of money on research and development.

Things to consider:

A recent study of the seven largest pharmaceutical companies in the US revealed they had aggregate revenues of $193 billion in 2004.
They spent 32% on marketing, advertising, and administration; earned 18% profit, and spent 14% on research.
Drug companies had profits that were 3-5 times those of the median Fortune 500 companies.
Total marketing expenses were 1.5 times higher than Research and Development (R and D), and profit was 30% higher than R and D.
$28 billion was spent on marketing.
CEO salaries averaged $13 million per year.
The top 36 executives earned $188 million in salaries and $296 million in stock options.
Most other industrialized countries have pricing per unit of drug that is 50-60% of the US pricing.
Other industrialized countries negotiate pricing for the entire country as a whole thereby giving them immense negotiating power.
Many countries engage in "parallel trade", whereby they purchase pharmaceuticals from other countries that have better pricing than they can get from the manufacturer.
The number of prescriptions purchased in the US increased by 71% from 1994 to 2005 and increased from 7.9 to 12.3 per person per year. These increases are, in general, as a consequence of clinical research that has shown benefit from the increased use of combinations of medications. The likelihood is that this trend will continue, making control of the pricing all the more important.