Pharmaceutical Companies Spend More on Marketing Than R&D, Families USA Report Says

Pharmaceutical companies often spend twice as much on overhead, marketing, advertising and promotion than they spend on research and development of new drugs, according to a report released yesterday by the consumer health advocacy group Families USA, the Los Angeles Times reports (White, Los Angeles Times, 7/18). Examining reports filed by drug makers with the federal Securities and Exchange Commission, the group found that nine "major" U.S. drug companies last year spent $45.4 billion on marketing, advertising and administration costs for the 50 most-prescribed drugs to seniors, compared to $19.1 billion in research and development (MacDonald, Hartford Courant, 7/18). According to Ron Pollack, executive director of Families USA, the findings run counter to President Bush's and pharmaceutical companies' assertion that the industry "needs high prices to fund the search for new and better drugs" (Rovner, Congress Daily, 7/17). Pollack added, "The drug industry should stop scaring America's seniors with false claims that price moderation will prevent research on new medicines" (Hartford Courant, 7/18).

The report also alleges that drug makers' R&D dollars are more focused on "life cycle" spending -- which seeks ways to extend drug patents or make slight modifications to older drugs to prevent generic competition -- than on "breakthrough science" to develop new treatments. However, some drug companies and Wall Street analysts have said that the figures in the report are "dated, specious or simplistic," the Times reports. The Pharmaceutical Research and Manufacturers of America issued a statement saying, "The only way [Families USA is] able to get" their figures "is to lump in 'administrative costs' with advertising and promotion. ... [Administrative expenses] are the operating costs that every business in America has to pay" (Los Angeles Times, 7/18). The full report is available online Note: You will need Adobe Acrobat Reader to view this report.

In related news, the Kaiser Family Foundation recently released a report on how the "federal government influences the availability and cost of prescription drugs." The report, prepared by Michael Gluck of the Georgetown University Institute for Health Care Research and Policy, examines intellectual property protection, like the Hatch-Waxman Act; federal support for drug research and development; federal tax subsidies through various tax credits available to pharmaceutical firms; and reimportation from other countries of drugs produced in the United States (KFF Web site, 7/18). The full report is available online Note: You will need Adobe Acrobat Reader to view this report.