In 2013, five pharmaceutical companies made a profit margin of 20% or more (Pfizer, Hoffmann-La Roche, AbbVie, GlaxoSmithKline, and Eli Lilly). Drug companies argue that high drug costs are to reclaim high R&D costs, yet the spend on marketing is often twice as much as is spent on R&D. It is also important to note that profit margins take into account R&D costs. Big Pharma also claims that drugs save money over the long term. While true, just because you can charge a high price for something doesn’t mean that you should. Pharmaceutical companies also have a limited time to make profit, and therefore attempt to extend patents via evergreening.
“Last year, US giant Pfizer, the world’s largest drug company by pharmaceutical revenue, made an eye-watering 42% profit margin. As one industry veteran understandably says: “I wouldn’t be able to justify [those kinds of margins].”
“In the UK, for example, there was widespread anger when the industry regulator predicted energy companies’ profit margins would grow from 4% to 8% this year.”
‘Dr Brian Druker, director of the Knight Cancer Institute and one of the signatories, has asked: “If you are making $3bn a year on [cancer drug] Gleevec, could you get by with $2bn? When do you cross the line from essential profits to profiteering?”’
“Indeed a recent study found that doctors in the US receiving payments from pharma companies were twice as likely to prescribe their drugs.”
“A recent study by Prescribing Analytics suggested that the UK’s National Health Service could save up to £1bn a year by doctors switching from branded to equally effective generic versions of the drugs.”
Source: Anderson, R. 2014. BBC News: Business. “Pharmaceutical Industry gets high on fat profits”. Retrieved March 27, 2016 from http://www.bbc.com/news/business-2821222