Study: Drug Companies Spend Much More on Ad Spending Than on R&D

American pharmaceutical companies spend more on advertising, marketing and administration than on the research and development of new drugs, according to a report released this week by consumer health organization Families USA.

The organization analyzed the annual reports for 2000 of nine leading pharmaceutical companies: Merck & Co., Pfizer Inc., Bristol-Myers Squibb, Pharmacia, Abbott Laboratories, American Home Products, Eli Lilly, Schering-Plough and Allergan. The study concluded that eight of the companies spent more than twice as much on marketing, advertising and administration than they did on R&D. Eli Lilly last year spent about one-and-a-half times as much on advertising and marketing than it did on R&D, the study noted.

Families USA said it undertook the study in reaction to the pharmaceutical industry's claim that high drug prices are needed to sustain the industry's expensive R&D efforts. The consumer group said that last year prices for the 50 drugs prescribed most often for seniors rose at more than twice the rate of inflation.

The pharmaceutical industry said the study was unfair and offers a distorted view of the money spent on R&D.

Ron Pollack, executive director at Families USA and the study's author, said, “Pharmaceutical companies charging skyrocketing drug prices like to sugarcoat the pain by saying those prices are needed for research and development. Drug companies' commitments to research and development are dwarfed by those companies' expenditures for marketing, advertising and administration.”

He added, “If meaningful steps are taken to ameliorate fast-growing drug prices and costs, it is corporate profits — expenditures on marketing, advertising and administration — and executive compensation that are more likely to be affected, not R&D spending.”

Pharmaceutical research is expected to top $26 billion industrywide this year, according to the Pharmaceutical Research and Manufacturers of America, a trade group based in Washington. Almost $16 billion was spent on pharmaceutical marketing in 2000, the group said.

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