Drug Companies Spend More on Ads than Research

A July 12, 2001 report issued by Families USA, a Washington, DC-based healthcare consumers' group says that leading pharmaceutical companies spend more than twice as much on advertising and marketing as they do on research.

Consumer group's arguments to curtail skyrocketing drug costs often come up against arguments from the drug industry that any effort to curtail these profits will cause fewer dollars to be available for research.

The report says that this argument doesn't hold water since the drug companies are not spending current profits on research, choosing instead to spend more than twice the amount on expensive direct-to-consumer advertising than they do on research.

The report, based on information from the drug companies own financial disclosures to the Securities and Exchange Commission (SEC), also says that the largest drug companies continue to pay their top executives tens of millions per year. They also typically sell the same products in other countries for much less than they do in the U.S.

Last year for example, Pfizer, Inc. reported $30 billion in revenues. 39% of that was spent on advertising, marketing and administration. Only 15% of revenue went to research and 13% went to profits. Chairman William C. Steere was paid more than $40 million in salary and bonuses in 2000.

"The industry is hiding behind research and development as a way of increasing prices and therefore increasing profits," said Ron Pollack, executive director of Families USA. "The research and development mantra they use is clearly extremely misleading."