By: Dennis Cauchon, USA TODAY
industrialized Country - Except the United States
- imposes some form of price controls
on prescription drugs. As the lone holdout, the
United States pays the price, literally. U.S. consumers subsidize
research and development for the world as well as the pharmaceutical industries
substantial profits. Fortune magazine ranked the pharmaceutical
business as the most profitable of all industries last year when measured by returns on
equity, sales and assets.
companies use the U.S. as their safety valve," says Alan Sager, head of the Access
and Affordability Project at Boston University's School of Public Health. "If other
countries negotiate or regulate to win lower prices, drug-makers raise their prices on the
hapless American consumer. Our pockets are being picked."
In a typical
price-control program, pharmaceutical companies are required to report what they charge in
certain countries. Then the government demands the average or the lowest price charged in
the comparison countries. This policy of linking prices among countries has resulted in a
quasi-international price for most drugs - and a separate U.S. Price.
"It's quite a
different mindset over here in Europe than in the U.S.," says Richard Marsh, head of
the American Pharmaceutical Group, a London based trade group that represents U.S.
companies. "It's two different worlds."
Drug Industry Most
Profitable, Survey Finds.
Updated: Nov 29 7:02 PM EST
By Maggie Fox, Health and Science
WASHINGTON (Reuters) - The drug industry, which
spends more than any other industry on consumer advertising, is also the most profitable,
researchers said on Thursday.
The Kaiser Family Foundation, a non-profit organization that does research into
health and family issues, said Americans are buying more and more drugs and are spending
more and more for them. "Compared to other industries, the pharmaceutical sector
continues to earn the highest profit rates," the report, available online at http://www.kff.org, reads.
"Profits as a percent of revenues for the pharmaceutical industry have been more
than four times the median rate for all Fortune 500 firms in the late 1990s (18.6 percent
of revenues compared to 4.5 percent for all Fortune 500 firms in 2000.)"
The foundation's Larry Levitt, who helped direct the study, said Americans fill 3
billion prescriptions a year, or 11 per person on average. "We now spend $117 billion
a year on drugs," Levitt told a news conference. "We are taking more
drugs," he added. Meanwhile, pharmaceutical companies are developing more and more
prescription drugs. "As these new drugs come on the market, the average prices of
drugs continues to go up," Levitt said. He said all 20 top-selling drugs are
brand name. "The result is the average price of a prescription is now $45 -- double
what it was 10 years ago."
This is triple the average generic price. "So efforts to encourage the use of
generics have not helped a great deal and in fact may have failed in reducing costs,"
Levitt said. Costs may be increasing due in part to the huge amount that companies spend
advertising their drugs to potential patients and promoting them to doctors, Levitt said.
"Since 1996 the amount spent on drug ads has more than tripled," he said.
He said drug companies spent $15.7 billion promoting drugs in 2000, or 14 percent of
revenues. That compared to 3.7 percent of sales revenues spent on promotion by department
stores, 3.9 percent for tobacco products, 10.7 percent for soap and detergent and 12
percent for games and toys.
"Drugs are among the more promotion-intensive products," Levitt said.
"In terms of promotional intensity, drugs look most similar to toys and dolls."
The report found that drug companies spend only 14 percent of revenues on research
and development, although drug companies often argue that drugs are expensive because they
cost so much to develop.
"Profits also exceeded R and D (24 percent compared to 14 percent)," the
But Americans, and their insurance companies, are buying and will probably continue
to do so as the population ages.
"National spending for prescription drugs, reported to be $116.9 billion in
2000, has almost tripled since 1990," the report reads.
"Although prescription drugs represent only 10 percent of personal health care
spending, they are the fastest growing segment of health care spending, accounting for 20
percent of the estimated increase in such spending between 1999 and 2000," it says.
New Reports Show Impact of
Direct-to-Consumer Advertising and Trends in Prescription Drug Spending and Utilization
National spending on prescription drugs is
the fastest growing segment of health care spending, accounting for 20% of the estimated
increase in such spending between 1999 and 2000. Spending on advertising directly to
consumers increased nine-fold from $266 million in 1994 to nearly $2.5 billion in 2000,
largely due to growth in television advertising (13% of direct-to-consumer spending in
1994, rising to 64% in 2000). A new survey report finds that nearly one in three adults
has talked to a doctor and one in eight has received a prescription in response to a
seeing an ad for a prescription drug and provides information on how consumers react to
seeing various ads. A separate report outlines trends in prescription drug expenditures
and factors driving their growth and prescription drug utilization, including types of