There are thousands of horror stories of consumers being overcharged for pharmaceuticals. Unsuspecting customers arrive at the pharmacy only to find that the medicine which will make them better comes to a total bill in the thousands. People die every day not because there is no cure for what disease or ailment that they might have, but because they simply can’t afford the proper medical care or treatment. This makes the recent comments of a big pharmaceutical executive even more disgusting when he stated that he has a “moral requirement” to hike prices upwards of 400%. The executive attempted to defend his bold remarks by stating that even at this now quadrupled price, his company is able to offer the drug at the lowest possible price on the market. He goes on to say that in a capitalistic society such as the United States, they must raise prices and make additional revenue wherever possible in order to stay in business. But do pharmaceutical companies need that much money to stay in business? Many believe this simply isn’t the case. So let’s take a look at just how much money the big pharmaceutical companies of the world are bringing in and see how that money is being put to use.
- What Is The Average Annual Revenue Of The Pharmaceutical Industry?
- What Percent Of The Pharmaceutical Industry Revenue Goes To Lobbying?
- What Percent Of The Pharmaceutical Industry Revenue Goes To Advertising?
- What Percent Of The Pharmaceutical Industry Revenue Goes To Research And Development?
- How Much Does The Pharmaceutical Industry Donate To Campaigns Each Year?
What Is The Average Annual Revenue Of The Pharmaceutical Industry?
In 2017, there were 23 pharmaceutical companies that reported revenues of more than $10 billion. Added up, these companies accounted for more than $712 billion of revenue combined. Of this revenue form the 23 companies, the top five companies in terms of revenue in 2017 made up an astounding 40% of this total revenue. While bringing a drug to market is certainly an expensive process, these massive revenues are clearly more than enough to get the job done. Even the idea that pharmaceutical companies need to raise the price of drugs to make up for low revenue levels is just blatantly false.
What Percent Of The Pharmaceutical Industry Revenue Goes To Lobbying?
In the last ten years alone, more than $2.3 billion has been spent on aggressive lobbying efforts. This means that on average, $230 million has been spent on lobbying every year since the year 2008. Of course, this number will be slightly higher during big election years, but this is still an immense of influence being bought every year. Lobbyists seek to persuade politicians to pass bills that will give pharmaceutical companies more control over the price points they are allowed to set, the minimum standards which drugs must meet, and a variety of other policy matters that allow them to grow their revenue year over year. Any industry that can afford to spend billions on lobbying alone over a decade is clearly not hurting for funds.
What Percent Of The Pharmaceutical Industry Revenue Goes To Advertising?
It is estimated that more than 90% of all big pharmaceutical companies have a larger advertising budget than they do for research and development of new life saving drugs. Companies speak with their dollars and this message couldn’t be more clearly received. This disparity in spending shows that these companies would much rather sell consumers existing drugs than develop new drugs which can potentially save more lives every year. The top five advertising pharmaceutical companies spent an average of $12.5 billion on marketing techniques and advertising last year. This is money that could instead be used for the betterment of existing drugs and development of new drugs. Some nations have even gone so far as to ban advertising for pharmaceuticals altogether.
What Percent Of The Pharmaceutical Industry Revenue Goes To Research And Development?
The R&D budget is what brings a new drug to market with the hopes of saving more lives. You would think that this is an overwhelming portion of a total business budget but research shows that only roughly 17% of the pharmaceutical industry’s revenue goes back into R&D. When comparing the expenses of those same top five pharmaceutical advertising spenders, it should be noted that their average R&D budgets are only about $7.5 billion which represents 40% less funding. With R&D budgets so small, it is difficult to believe the sentiment that big pharmaceutical companies have the well being of consumers in mind when developing their annual budgets.
How Much Does The Pharmaceutical Industry Donate To Campaigns Each Year?
Politics plays a huge role in determining the final price of drugs to consumers. Some nations have put laws into place that limit pharmaceutical companies from artificially raising the cost of drugs when there is no need to do so. The biggest drug lobby in the united states goes by the name PhRMA. It is estimated that this group alone spent more than $57 million in lead up to the 2016 election alone. This was largely to convince the general population that the pharmaceutical industry has their best interests in mind. While this may be the case in a few select cases, it is well documented that big pharmaceutical companies needlessly raise prices simply for their own financial gain. If the executive quoted earlier would have a say in the way all companies were run, they would consistently raise prices to maximize their profits.
It’s more than clear that the pharmaceutical industry is not short on cash. One simple glance at their advertising budget will tell you that. The big pharmaceutical executive who made this comment may truly believe that it is his “moral requirement” to raise the price of lifesaving drugs by more than four times over. It should be noted, however, that this “moral requirement” is certainly not to the average consumer who will need to pay more out of pocket to fund their own well being and survival.