WHAT’S WRONG WITH THE PHARMACEUTICAL INDUSTRY?
From The Truth About the Drug Companies: How They
Deceive Us And What To Do About It, by Marcia Angell, M.D.
The pharmaceutical industry is staggeringly profitable. In
2002, top ten American drug companies in the Fortune 500 list had an
average profit margin of 17% of sales—far above the returns of any other
industry. In fact, drug companies made over 5 times as much in profits as all
the other companies on the list!
These profits are the result of the fact that Americans pay
higher prices for prescription drugs than anyone else in the world. The United
States is the only developed nation that does not regulate drug prices in some
way. So where does the $200 billion that Americans spend on drugs each year
- R & D?: The drug companies claim that the high
prices we pay are vital for funding the high research and development costs
required to bring new drugs to the market. But in 2002, only 14% of sales
was spent on R & D. A large portion of the research behind any new drug is
done at publicly-funded institutions such as universities and the National
Institutes of Health—meaning we’re already paying for it through taxes.
Furthermore, most of the business of drug companies is “me-too” drugs—minor
variations of drugs already available, designed to bring in money, not
advance the treatment of disease.
- Marketing & Administration: The pharmaceutical
industry spends more than twice as much on marketing as they do on R & D—a
whopping 35% of sales in 2001. So what is the 30% markup we pay for
marketing being spent on? Free samples to get consumers hooked on the most
expensive drugs; “gifts” to doctors (who, as the ones who write the
prescriptions, are vital to a drug’s success); and direct-to-consumer
advertising to convince people of their need, not only for medication, but
for the newest, priciest variety. And the money spent on administration
includes the legal costs of manipulating patent rights, to eliminate—or at
least postpone—cheaper, generic brand competition. In other words, we’re
paying extra to keep prices high.
- Influence: The huge amount of sway that the
pharmaceutical industry holds in Congress and throughout government is no
coincidence. The industry spends over $90 million a year on lobbying, and
maintains many well-placed connections. Additionally, during the 1999-2000
election cycle, drug companies gave some $85 million in direct campaign
contributions and “soft” money. Why is there so much protective legislation
surrounding the most profitable industry in the country? It’s a result of
the “death grip” that the pharmaceutical industry holds on Congress.
High drug prices are bad for everyone. Ironically, the
people who can least afford them—those without insurance—pay the highest prices,
since they have no bargaining power. Already there is the beginning of a
backlash, particularly at the state and local level, as drug costs for
public-sector employees and Medicaid recipients eat ever-larger portions of
budgets. One Massachusetts city attempted to control costs by sanctioning the
(currently illegal) re-importation of price-regulated drugs from Canada.
Another attempted solution is Maine’s “Maine Rx” law, which empowered the state
to bargain with drug companies, and cap prices if they did not come down
Clearly, the pharmaceutical industry is in need of a
radical makeover. But there are several things you can do help ensure that
these changes get made.
- Be an informed consumer. When prescribed a new
drug, find out whether it’s really an improvement over alternative courses
of treatment, and make sure your information is not coming from the drug
companies or anyone on their payroll. Find out if your doctor has any
financial ties with the drug companies; if so, consider finding a new
doctor. Ignore direct-to-consumer advertisements for prescription drugs.
- Pressure Congress for change. Ask your
senators and representatives if they receive contributions from the
pharmaceutical industry, and if so, how much. It’s time to put a stop to
the industry’s interests taking precedence over yours.
Angell, Marcia, The Truth About Drug Companies: How They Deceive Us and
What To Do About It, Random House, 2004. Prepared by
DPE Research Department
Contact: Pamela Wilson,