Drug Industry Profits

Despite on-going drug industry hype, lies, misrepresentations and exaggerations which claim that the newest medication is better than what is already available, the fact is that brand name drug companies rarely, if ever, produce a new, safe, “breakthrough” medication that actually works better than what already exists. The drug companies tell Americans that they spend $800 million on R&D for every new medication that receives FDA approval. Let it be known that any drug company representative who tells this $800 million dollar distortion of reality needs to start taking medications to make their imaginary voices go away.

For every medication that receives FDA approval, drug companies spend only a few pennies on the dollar for research, but they spend billions and billions on drug representatives, public relations, executive salaries, marketing, lobbying, advertising, packaging and promotions. Make no mistake, the brand name drug industry is not in the business to help people, nor are they in the business to make "real" medicines that have "real" value to "real" human beings. The brand name pharmaceutical industry clearly has just one goal, one mission, one purpose, and one agenda… do whatever it takes to make higher profits.

Compared to the average American product or service with 100% markup, many brand name medicines have more than a 1,000% markup and some pills are marked up by more than 300,000%. In comparison to most other major businesses that earn on average 4.4% profits, many brand name pharmaceutical manufacturers are averaging in excess of 18% profits.

Table 1 - Partial list of the pharmaceutical manufacturers price mark up for popular medicines sold in the U.S. after the costs of paying for the active ingredients.

Source. Faloon, William, The FDA vs. The American Consumer, Life Extension Magazine; Oct 2002.

Median profit as a percentage of revenue. Source: Public Citizen update of Stephen Schondelmeyer calculation. Competition and Pricing Issues In the Pharmaceutical Market, PRIME Institute, University of Minnesota, based on data found in Fortune magazine, 1958 to 1999; Fortune Magazine, April 17, 2003.

Table 3 - Comparative prices of drugs purchased in the U.S., Europe and Canada

Source. Faloon, William, The FDA vs. The American Consumer, Life Extension Magazine; Oct 2002.

Modern day drug industry robber barons are receiving unbelievably large and ever increasing levels of compensation. These ill gotten gains are taken at the the expense of millions of American seniors on fixed incomes who literally are forced to choose between paying for their medications and buying food. The medication prices paid by Americans are on average 50% higher than prices paid by people in other industrialized nations. U.S. prices of medications are increasing at twice the rate of physicians and hospitals. Unlike all other government purchased products and services, Washington politicians have made it illegal for government entities to negotiate with drug companies to get lower medication prices. Brand name pharmaceutical manufacturers have one of the lowest corporate tax rates of any other industry, and contrary to industry propaganda, in the last ten years the industry has been significantly decreasing the numbers of new breakthrough medications in favor of producing more profitable me-too medications (i.e. medications that are similar to medications already available).

The pharmaceutical companies use millions of dollars in advertising to create inappropriate consumer demand for products that are often more costly, more deadly and less effective than existing medications already available. Brand name pharmaceutical companies build their fortunes on the backs of the poor, the elderly, the sick and the disabled. Their riches continue to increase exponentially as they are determined to make more money simply for the sake of making more money. Overall profits of all Fortune 500 companies declined 53% in 2001.The same year, the top ten pharmaceutical manufacturers increased profits by 32%. Fortune Magazine reported that the drug industry’s 18.5 percent profits led all U.S. industries.

Pfizer is one of the world’s richest and most profitable companies. As one small example of the company’s unbelievable wealth, in 2003, Pfizer acquired Pharmacia Corporation for $56 billion.

To ensure their continued extremely high profitability, in the second quarter of 2004 Pfizer deliberately cut off supplies to Canadian sources who re-imported lower priced medications to low income U.S. seniors. After cutting off American seniors' , on July 21, 2004, Reuters News reported that Pfizer, Inc., the world’s largest drug company, posted a second quarter net profit of $2.86 billion. By forcing and creating an artificial international monopoly specifically based on maintaining higher U.S. prices and gouging Americans, the rich get richer!

There is little hope for change. Unfortunately, there are no more American champions available to ride up on a white horse and save the day. America's poor, sick, disabled and elderly have been ignored, abandoned and discarded because the pharmaceutical manufacturers have paid off most of the Washington politicians and top level FDA bureaucrats to stand by and do nothing. It is a sad day in American history.