Pharma is raking in the cash

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  • Pharma profits are very healthyResearchers writing in the Journal of the American Medical Association (JAMA) found that in the years between 2000 and 2018, 35 big drug companies received a combined revenue of $11.5 trillion, with a gross profit of $8.6 trillion.
  • The median net income margin reported by 35 pharma companies between 2000 and 2018 was almost twice as high as it was for the 357 non-pharma companies in the S&P 500 investigated by the study’s authors-13.7 percent versus 7.7 percent.
  • Meanwhile, GOP lawmakers are holding up a bipartisan emergency funding bill to provide treatment and research for coronavirus. The main reason? They object to a provision that prevents drug manufacturers from overcharging the government for any vaccines or other treatments.

Jack Welch, who just passed away, put shareholder value above everything and, in the process, laid off thousands of people and destroyed their lives. Even when he retired Mr. Welch still collected a huge compensation package with free use of the company jet and several thousands of dollars for flowers in his penthouse. Pharma seems to believe that’s the right path.

Researchers writing in the Journal of the American Medical Association (JAMA) investigated the financial balances of pharma companies dealing in the business of developing, manufacturing, marketing and selling drugs. Their calculations found that in the years between 2000 and 2018, 35 big drug companies received a combined revenue of $11.5 trillion, with a gross profit of $8.6 trillion.

The median net income margin reported by 35 pharma companies between 2000 and 2018 was almost twice as high as it was for the 357 non-pharma companies in the S&P 500 investigated by the study’s authors-13.7 percent versus 7.7 percent. Though they add the difference was less pronounced when company size, year, or research and development expenses were taken into account.

“They look very much like other innovation-driven, research-driven companies,” lead author Professor Fred Ledley, Director of the Center for Integration of Science and Industry at Bentley University, told Newsweek. “The pharmaceutical companies’ profits are really indistinguishable, statistically, from those of technology companies.”

“The difference is that people need drugs to live.”

Newsweek

What are we supposed to believe? Well here are some facts:

1ne: According to a JAMA study, which included 63 of 355 new therapeutic drugs and biologic agents approved by the US Food and Drug Administration between 2009 and 2018, the estimated median capitalized research and development cost per product was $985 million, counting expenditures on failed trials. Data were mainly accessible for smaller firms, products in certain therapeutic areas, orphan drugs, first-in-class drugs, therapeutic agents that received accelerated approval, and products approved between 2014 and 2018.

2wo: Politico reported that GOP lawmakers are holding up a bipartisan emergency funding bill to provide treatment and research for coronavirus. The main reason? They object to a provision that prevents drug manufacturers from overcharging the government for any vaccines or other treatments.

3hree: From 2000 to 2018, 35 large pharmaceutical companies reported cumulative revenue of $11.5 trillion, gross profit of $8.6 trillion, EBITDA of $3.7 trillion, and net income of $1.9 trillion, while 357 S&P 500 companies reported cumulative revenue of $130.5 trillion, gross profit of $42.1 trillion, EBITDA of $22.8 trillion, and net income of $9.4 trillion.

4our: From 2007 to 2018, list prices on 602 medicines rose by 159%, or 9% per year. However, after accounting for rebates and discounts, net prices for the same drugs increased by 60%, or 4.5% per year. Overall, discounts offset an estimated 62% of list price increases, although this varied substantially among different types of drugs.

5ive: 44% of respondents in a new online poll say that within the last year, they did not purchase at least one medically necessary prescription because of cost. That’s according to an online flash poll of over 1,000 U.S. adults conducted by PawnGuru ​, an online marketplace that conducts regular surveys on a range of topics affecting low-income and under-banked Americans.

6ix: The chief executives of 177 health care companies collectively made $2.6 billion in 2018 — roughly $700 million more than what the National Institutes of Health spent researching Alzheimer’s disease last year, according to a new Axios analysis of financial filings. Pharmaceutical CEOs represented 11 of the 25 highest compensation amounts last year.

7even: Pharmaceutical and health product industry spent $4.7 billion, an average of $233 million per year, on lobbying the US federal government; $414 million on contributions to presidential and congressional electoral candidates, national party committees, and outside spending groups; and $877 million on contributions to state candidates and committees. Contributions were targeted at senior legislators in Congress involved in drafting health care laws and state committees that opposed or supported key referenda on drug pricing and regulation.

8ight: In 2018, the year the Republican tax law went into full effect, 12 of the largest pharmaceutical companies spent more money buying back their stock than they spent on drug research and development. Over the entire four-year period, stock buybacks for these 12 companies totaled $183 billion, and research expenses were $251 billion. They’re sitting another $47 billion that has been earmarked for stock buybacks.

It very much looks like pharma prescribes to the Jack Welch school of management. Please don’t try me that the JAMA studies are flawed because when all the above are all taken together it clearly shows that profits are more important.

Originally published at https://worldofdtcmarketing.com on March 5, 2020.

Marketing contrarian with over 15 years of developing leading edge and award winning digital marketing initiatives.

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