Australian Lefty on Politics, Governance, Science and Info Management

BigPharma – dodgy figures

Posted by Dave Bath on 2008-02-03

For those interested in health policy, and the way Big Pharma markets itself to governments as being big on research rather than marketing, comes a new study reported in PLoS Medicine Policy Forum: "The Cost of Pushing Pills: A New Estimate of Pharmaceutical Promotion Expenditures in the United States" (2008-01-03).

It’s a good read, deconstructing the expenditure on promotions as reported by industry (via an "intelligence" company, IMS) that are considered as gospel by governments, (e.g. the US General Accounting Office) and then the paper suggests better estimation methods.  The data used by the US GAO support Big Pharma’s claims to spending more on research than promotions.  The authors, Canadian academics, showed such claims were wrong, and easily shown to contradict other industry-supplied data.

Finally, IMS data seem inconsistent with estimates based on the information in the annual reports of pharmaceutical companies.  For example, in an accounting study based on the annual reports of ten of the largest global pharmaceutical firms, Lauzon and Hasbani showed that between 1996 and 2005, these firms globally spent a total of US$739 billion on "marketing and administration."  In comparison, these same firms spent US$699 billion in manufacturing costs, US$288 billion in R&D, and had a net investment in property and equipment of US$43 billion, while receiving US$558 billion in profits.

Let’s remember, a lot of the marketing is for drugs that have only marginally more effect that established, and much cheaper drugs, and that through membership of the committees that approve PBS subsidies by our government (thanks to Howard and Co), these companies can effectively write their own cheques.

Here’s the conclusion.  I’d hope the mathematics used in BigPharma’s research on drug effectiveness and the incidence of side effects is better than the more simpler mathematics of adding up dollars…

From this new estimate, it appears that pharmaceutical companies spend almost twice as much on promotion as they do on R&D.  These numbers clearly show how promotion predominates over R&D in the pharmaceutical industry, contrary to the industry’s claim.  While the amount spent on promotion is not in itself a confirmation of Kefauver’s depiction of the pharmaceutical industry, it confirms the public image of a marketing-driven industry and provides an important argument to petition in favor of transforming the workings of the industry in the direction of more research and less promotion.

By the looks of these figures, the industry should be socialized, with funds currently used for promoting products reassigned to R&D and manufacturing.  If BigPharma spent more on R&D developing better products, they would have to market them so aggressively.



3 Responses to “BigPharma – dodgy figures”

  1. swandiver said

    I’ll bet when you factor in the large amount of taxpayer money that BigPharma gets for the development of this marginally effective drugs, the R&D/Marketing ration skews even more.

    The amount of money spent advertising does not concern me so much as the huge amount of corporate welfare it receives with from the government without even wanting us to negotiate better prices for the very drugs we have made possible for them to create.

  2. Dave Bath said

    Swandiver – yep, yep yep.

    The corporate welfare is probably deeper than you realize… often companies pay token fees to government-funded universities to do the research, and get near-exclusive use of the results, or cherry-pick the best research (and researchers).

    It’s also worth remembering how the once-government-owned Commonwealth Serum Laboratories used to develop antisera for our nasty snakes and spiders, but, now privatized, concentrates on higher volume products for the world market rather than on specific Australian needs.

  3. Bruce said

    I think it’s about time that the tide swung, rather than US Pharmas attacking Australia’s PBS, the World needs to lobby against US Pharma’s and point out how the American consumer is being conned out of the benefits that it has already paid for by way of tax dollars spent on research. The tide needs to be turned, enough is enough.

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