"The pharmaceutical industry has been the most profitable industry in the U.S. for each of the past 10 years. In 2001, their profits represented an 18.5 percent return on revenue-nearly six times as large as the median return (3.3 percent) for Fortune 500 companies"
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Drug Company Profits Exceeded R&D Spending by 60 Percent
Executive Compensation and Deferred Stock Options Were Huge
From Families USA
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WASHINGTON--U.S. drug companies that market the 50 most often prescribed drugs to seniors spent almost two-and-one-half times as much on marketing, advertising, and administration as they spent on research and development (R&D) in 2001, according to an analysis released today. The report debunks President Bush's recent assertion, and drug companies' claims, that high and fast-rising drug prices are needed to support R&D.
The report was released as the United States Senate debates legislation that could add prescription drug coverage for America's seniors and could stimulate faster market entry of cheaper generic drugs.
According to the report, compiled by the consumer health organization Families USA, the nine U.S. publicly traded companies that market many of the most popular drugs to seniors spent a total of $45.4 billion on marketing, advertising, and administration and only $19.1 billion on R&D last year. Eight of the nine companies spent more than twice as much on marketing, advertising, and administration as they did on R&D.
Here they are listed by Company Name, % of Revenues Spent on Marketing/Advertising/Administration and % Spent on R&D:
Merck, 13%, 5%
Pfizer, 35%, 15%
Bristol-Myers Squibb, 27%, 12%
Abbott Laboratories, 23%, 10%
Wyeth, 37%, 13%
Pharmacia, 44%, 16%
Eli Lilly, 30%, 19%
Schering-Plough, 36%, 13%
Allergan, 42%, 15%
"At the same time that drug prices are skyrocketing, pharmaceutical companies are focusing more and more on marketing the most expensive drugs," said Ron Pollack, Families USA's executive director. "The result is a sky rocketing cost spiral that is making drugs increasingly unaffordable for America's seniors."
The Families USA report also demonstrated that drug companies pocketed much more in profits than they spent on R&D. The nine companies generated $30.6 billion in profits last year-more than 60 percent higher than their expenditures on R&D. Merck's profits, for example, were nearly three times the amount it spent on R&D in 2001. Bristol-Myers Squibb's profits were more than twice the amount it spent on R&D.
Drug company executives also received high compensation packages and held huge amounts of unexercised stock options, according to the Families USA report. The five highest-paid drug company executives received over $183 million in compensation, not including unexercised stock options. In 2001, the five highest-paid drug executives at the nine companies were:
C.A. Heimbold, Jr., Former Chairman & CEO, Bristol-Myers Squibb, $74.9 million
John R. Stafford, Chairman, Wyeth, $40.5 million
William C. Steere, Former Chairman, Pfizer, $28.3 million
Henry A. McKinnell, Chairman and CEO, Pfizer, $23.8 million
John F. Niblack,Vice Chairman, Pfizer, $15.9 million
For the nine companies, the five drug company executives with the highest amount in unexercised stock options held more than $332 million in such stock options in 2001. The executives with the largest stock options were:
Raymond V. Gilmartin; Chairman, President and CEO; Merck; $93.3 million
C.A. Heimbold, Jr.; Former Chairman and CEO; Bristol-Myers Squibb; $76.1 million
William C. Steere,Former Chairman, Pfizer, $60.2 million
Henry A. McKinnell, Chairman and CEO, Pfizer, $56.5 million
Sidney Taurel; Chairman, President and CEO; Eli Lilly; $46.2 million
The pharmaceutical industry has been the most profitable industry in the U.S. for each of the past 10 years. In 2001, their profits represented an 18.5 percent return on revenue-nearly six times as large as the median return (3.3 percent) for Fortune 500 companies.
"The drug industry should stop scaring America's seniors with false claims that drug price moderation will prevent research on new medicines," said Pollack. "In light of huge industry profits, enormous executive compensation packages, and big marketing budgets, those claims are both irresponsible and wrong."
The Families USA report analyzed the spending, profits, and executive compensation in each of the U.S. drug companies that market (or are the parent corporations of the companies that market) the top 50 drugs prescribed to seniors. The companies included in the report are: Merck & Company, Inc.; Pfizer, Inc.; Bristol-Myers Squibb Company; Abbott Laboratories; Wyeth; Pharmacia Corporation; Eli Lilly & Co.; Schering-Plough Corporation; and Allergan, Inc. All of the data in the report were drawn from the most recent filings to the Securities and Exchange Commission (SEC) by the companies.
The report is available on the Families USA Web site at, www.familiesusa.org.
Families USA is the national organization for health care consumers. It is nonprofit and nonpartisan and advocates for high-quality, affordable health care for all Americans. |
