Epilepsy Talk

BIG Pharma’s Outsized Profits | October 18, 2021

Just how profitable is the pharmaceutical industry?

A study from the Center for Integration of Science and Industry at Bentley University is the first to critically examine the profitability of the companies that are responsible for the development, manufacturing, marketing and sale of most medicines.

It indicates that the profits gained by drug developers outpaced those of other publicly-traded companies by a wide margin over an 18-year period.

Merck & Co., long a standard bearer for the U.S. pharmaceutical industry, earned $10 billion in profits last year. Pfizer, its larger peer, booked even more: $16 billion.

Some of the most valuable innovations known to medicine have come from the pharmaceutical industry.

Yet, the cost of those innovations places new drugs out of reach for many patients and significantly burdens others.

Are pharmaceutical companies earning too much? Deciding whether pharmaceutical companies earn too much money is complicated.

Across the top ranks of drugmakers, profits regularly add up to billions of dollars, if not tens of billions, making the sector one of the most lucrative in business.

Scrutiny of profits and prices has fueled much of the criticism faced by drugmakers, dragging Americans’ regard for the industry to a two-decade low.

The results may inform policies to ensure both the affordability and availability of essential medicines now and in the future.

Not surprisingly, an article published in March 2020 in the journal JAMA which was written in the context of public opinion surveys, showed that 80% of respondents believe the profits made by pharmaceutical companies are a major factor contributing to the price of prescription drugs.

“While there is extensive research on the health impacts of unaffordable drugs, there has been little research on the profitability of pharmaceutical companies,” said Dr. Fred Ledley, director of the Center for Integration of Science and Industry, and the senior author of the study.

“Developing policies to assure the affordability of essential medicines will also require an understanding of how reducing drug prices may impact the industry that makes these drugs available.”

The study team noted that 35 large pharmaceutical companies, while they were not identified in the abstract, earned a cumulative revenue of $11.5 trillion over the 18-year study period.

When looking at the other profit measures, the companies had gross profit of $8.6 trillion.

Most new medicines have come from research conducted by for-profit pharmaceuticals, especially the large firms – a whopping 73% of all approved drugs come from the top 25 drug companies in the US.

While such companies need to maintain adequate profit margins to satisfy their stockholders, they should also ensure that patients can afford their medicines.

The pharmaceutical industry was rated the worst of 25 industries by members of the American public in a 2019 Gallup opinion poll—people surveyed were more than twice as likely to give it a negative rating (58 percent) than a positive rating (27 percent).

And, the profitability study explored the costs of developing a new drug.

That study revealed that the median cost to bring a new drug to market is nearly $1 billion.

After examining data from 2009 to 2018, the researchers discovered that the estimated median capitalized research and development cost per therapeutic product was $985 million.

This is important because it indicates the potential (or lack thereof) to reduce drug prices while sustaining competitive and innovative drug development and marketing.

Pharma executives are quick to argue both points.

Sizable profits, they counter, are needed to recoup the high expense for developing a new medicine, while rebates offered to insurers mean prices are growing slower than they might appear.

“Perhaps nothing has galvanized the current groundswell of populist outrage more than the money patients must pay for their prescription drugs in retail pharmacies,” Merck CEO Ken Frazier wrote.

The veteran executive, who is viewed as one of the industry’s most prominent leaders, acknowledged the public anger drugmakers face, but also criticized insurers for pushing costs onto patients.

“The biopharmaceutical industry is adjusting its business model in response to concerns about affordable access to medicines,” he said, while offering support for rebate reform and caps to out-of-pocket spending.

Merck’s Frazier argues the new research shows an industry attempting to self-correct. The question is whether that will be enough.

Once again, it comes down to money vs. drugs. The difference is that people need drugs to live. And money to buy them.

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Resources:

https://www.news-medical.net/news/20200303/Big-Pharma-more-profitable-than-most-other-large-public-firms.aspx

https://www.biospace.com/article/how-profitable-is-the-pharma-industry-a-new-report-shows-the-industry-is-more-profitable-than-most-other-large-companies/

https://www.biospace.com/article/median-cost-of-bringing-a-new-drug-to-market-985-million/

https://www.eurekalert.org/news-releases/589423

https://www.hks.harvard.edu/centers/mrcbg/programs/growthpolicy/are-pharmaceutical-companies-earning-too-much

https://www.biopharmadive.com/news/pharma-prices-profits-too-high-jama-study/573376/


3 Comments »

  1. Reblogged this on Ken's Devotions.

    Like

    Comment by Kenneth — October 18, 2021 @ 10:53 AM

  2. With the prohibitive cost of medicines worldwide it means that some countries have no option but to restrict those lifesaving drugs to its citizens. IN NZ for example, the medicine buying agency (Pharmac) scouts for best price deals, often to the expense of the user. If a medicine is too expensive then it will not be bought and so people die earlier than is necessary. Another problem arises when branded medicines become too expensive and generic brands are sourced. In NZ, during an epilepsy medication switch, six people (possibly/probably?) died of SUDEP.
    An interesting book to read on the pharmaceutical industry is ” Bottle of Lies”, which is a ‘shocking look at corporate greed, arrogance and eagerness to exploit the weak for profit.’ (by Katherine Eban)

    Thank you for your wonderful thought-provoking articles!

    Liked by 1 person

    Comment by Maria Lowe — October 18, 2021 @ 4:22 PM

  3. Maria, corporations test drugs on third world volunteers who are happy to be guinea pigs for a pence.

    Not that they are the target audience. No. They are just there, willing and able.

    These bogus tests are then approved by the FDA (often without the requisite clinical trial protocol) and the drugs are up and running.

    Then the corporations happily pass along the expense in the name of Research and Development. And if there are some casualties along the way, obviously they did
    not read the million disclaimers in mouse type on the insert.

    Thanks for your tip on “Bottle of Lies”. It sounds like it will make compelling reading.

    Like

    Comment by Phylis Feiner Johnson — October 18, 2021 @ 5:25 PM


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    About the author

    Phylis Feiner Johnson

    Phylis Feiner Johnson

    I've been a professional copywriter for over 35 years. I also had epilepsy for decades. My mission is advocacy; to increase education, awareness and funding for epilepsy research. Together, we can make a huge difference. If not changing the world, at least helping each other, with wisdom, compassion and sharing.

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