Report Attacks Drug Companies’ Ad Spending

The top U.S. drug companies spend twice as much on advertising, marketing and administration as they do on research and development, according to a report issued on Wednesday.

WASHINGTON (Reuters) — The top U.S. drug companies spend twice as much on advertising, marketing and administration as they do on research and development, according to a report issued on Wednesday.

Families USA, a nonprofit healthcare advocacy group, said their analysis rebutted drug company arguments that lowering drug prices and promoting the use of cheaper, generic drugs would cut into their ability to develop new medicines.

“Drug companies are spending much more on advertising and marketing than they are spending on research and development,” Ron Pollack, executive director of Families USA, told a news conference.

“The drug industry should stop scaring American seniors by saying that moderating prices will limit the development of new drugs. These claims are both irresponsible and wrong.”

Senators said the report showed the need for a prescription drug benefit plan for seniors.

“These numbers … are absolutely astonishing. It is worse than obscene,” said Georgia Democratic Sen. Zell Miller, who is co-sponsoring a bill that would encourage the use of cheaper generic drugs by Medicare, the state-federal health insurance plan for the elderly. The bill is up for debate this week.

The group’s report, which uses numbers from the annual reports of nine leading drug companies, shows, for instance, that Merck and Co. Inc., which reported $47.7 billion in revenue in 2001, spent $6.22 billion or 13 percent of that on marketing, advertising and administration.

Merck reported a net income, or profit, of $7.28 billion — 15 percent of revenue, or triple the $2.46 billion it spent on research and development, Families USA pointed out.

Pfizer, which makes the blockbuster Viagra impotence pill, spent 35 percent of its $32.2 billion in revenue on marketing, advertising and administration and 15 percent on research and development.

Richard Smith, vice president of policy and research for the Pharmaceutical Research and Manufacturers of America, which represents drug companies, defended the industry record.

“Last year, PhRMA member companies spent $30.3 billion on new drug research and development,” he said.

“In contrast, according to IMS Health (which provides healthcare information to drug companies), the industry spent about $9 billion on promotion to consumers and doctors and about $10 billion on free drug samples,” Smith said.

“When Families USA attacks our promotional spending, they are really attacking the $10 billion in free drug samples that we give away each year to doctors who often use these free medicines to help needy patients.”

But Pollack said the numbers, available in each company’s annual report, speak for themselves. “At the same time drug prices are skyrocketing, drug companies are spending more and more promoting their drugs,” he said.

Michigan Democratic Sen. Deborah Stabenow noted that drug companies get a tax break for research and development costs, and also get to use, for free, the results of basic research done at taxpayer expense by the National Institutes of Health.

“They get the write-off. Then we give them a 20-year patent,” Stabenow said. “We protect them from competition for 20 years. And what do we get in the end, the American taxpayers? The highest (drug) prices in the world.”

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News Service: Reuters

URL: http://www.cnn.com/2002/HEALTH/07/18/drug.company.ads.reut/index.html