Pharma companies in the US spend about twice as much on advertising as they do on R&D [1]. Recent data compiled by the House Oversight Committee shows the biggest pharma companies spent $56 billion more on stock buybacks and dividends than they did on R&D over the past five years [2]. Very little of the ridiculous prices that US citizens pay for medicine (directly or via insurance) actually goes towards R&D.
Terrible take. Your first source vaguely tries to estimate promotional spending (not advertising as you deceitfully claim). Promotional spend has a positive ROI (or you wouldn’t do it). So spending $1B in promotion gets your $1B+ in sales (it’s self funding).
Plus stock buybacks and dividends are being criticized? Returning money to investors is “bad”? Who do you think provides capital for drug development? The Grenadier Guards?
> Promotional spend has a positive ROI (or you wouldn’t do it).
That's incorrect; promotional spend on prescription drugs is the globally suboptimal result of a prisoner's dilemma where the prosecutors are going around saying "hey, that guy over there snitched, so should you". There is absolutely no guarantee that ROI is positive.
> Who do you think provides capital for drug development? The Grenadier Guards?
Most of basic drug development happens in labs e.g. at universities that are funded mainly by public sources.
Per the latest PhRMA member survey, drug companies spent about $13 billion per year on preclinical R&D, which was about 15% of their total R&D spend. Meanwhile the NIH alone provides about $40 billion per year for preclinical research. So funding for actually finding new drugs and therapies is dominated by other funding sources than drug companies.
If you look at e.g. Pfizer and J&J, more than 85% of their revenue comes from drugs that were invented elsewhere. Just to clarify, I'm not saying clinical trials isn't a necessary and expensive thing. But in large part it's not developing drugs, it's checking that there are no big side effects and that efficacy remains what you saw at small sample sizes.
For instance mRNA vaccines were invented in publically funded laboratories. Monoclonal antibodies that work against inflammation is another example. And of course CRISPR, which is very promising.
Very little drug development happens in academia. You are missing all the time, money spent in public and private markets in the biotech ecosystem that Pharma largely is the back end buyer for through off-balance sheet acquisitions/deals. VCs collectively spend tens a billions a year on biotech (~40B this year), and much more in public markets (IPOs and secondary public finances).
In the example you bring up. Moderna raised and spent billions over a decade since it was founded on the 'academic invention', and didn't have a product until their vaccine. The same is true for BioNTech. There was a large chance these companies could have folded, and before the pandemic, most were deeply skeptical.
A positive ROI in isolation for one company doesn't necessarily mean anything useful is gained across the whole industry. Consider what would happen if promotional spend was just taking market share from other pharma companies - it'd be wasted money, but everyone would have to do it to preserve market share.
Price very much depends on cost, the goal is profit maximization not maximizing revenue.
Suppose you can sell 1 million sandwiches at 5$ or 1/2 a million at 6$ which you price depends on your cost of production. If it’s costing you less than 4$ you pick the first option if it’s more than 4$ and less than 6$ you pick the second. Though in the real world costs aren’t independent of sales so it’s even more complicated.
It’s only when you get extreme markups from a guaranteed monopoly that you can approximate things as revenue maximization. Also, drug R&D numbers are extremely inflated as among other things it’s got tax advantages.
My whole post is the exception you mention in your third paragraph. Your first paragraph is what happens when you have generics, and they start treating the drug more like a sandwich that a treatment. (No bioequivalence tests, safety concerns, etc)
But does it really increase sales? We’re talking drugs that are prescribed by a doctor. Or do people not buy and take their statins unless they see a tv ad?
That should scare everyone and I’m not sure why it doesn’t. They wouldn’t be advertising them if it didn’t increase sales, which probably means oncologists aren’t always prescribing what’s best.
As far as other medications, most people don’t go to the doctor regularly. Even if they did, they would probably need to inquire about their condition to have the doctor think of updating anything.
As someone who has worked with doctors for much of my career I can assure you the quality of doctors varies just as much as other professions.
I remember having to personally call a doctor and ask them to stop prescribing a drug because it was pretty much malpractice to not use the newer approved drug from another company.
Probably because the people will name-drop that particular brand. It's up to the doctor to responsibly prescribe it, whom probably heard of the drug because of other forms of marketing or flat out kickbacks
Those free samples very much make treatment less affordable. They don’t need to hand out samples when their treatment is the only option, they need to advertise to out compete generics.
It’s shockingly effective, look at say prescriptions for patented opioids vs the vast numbers of equally effective generics. Doctors are extremely susceptible to advertising just like most people, the difference is it’s not their money being spent.
“Clinical studies comparing the response and side effects of various opioids have not been able to show robust differences between drugs.”
So, it’s not a question of which is prescribed more, it’s a question of why branded opioids are ever prescribed. We aren’t talking about a ~100 Billion dollars of accidental waste, it took a lot of work to extract that from the general public.
I mean the biggest opioid sales were OxyContin and the argument there was the time release which wasn’t available in a generic.
As a part of my job I’ve talked to insurance companies and they aren’t willing to pay for branded pain relief drugs unless there is some differentiating value.
1987 “May: MS Contin, (morphine sulfate) approved; first formulation of an opioid pain medicine that allowed dosing every 12 hours instead of every 4 to 6 hours.”
1990 “August: Duragesic (fentanyl transdermal system) approved; first formulation of an opioid pain medicine in a patch (sometimes referred to as a “skin patch”) that is changed every 3 days.”
1995 “December: OxyContin (oxycodone controlled-release) approved; first formulation of oxycodone that allowed dosing every 12 hours instead of every 4 to 6 hours.”
In the case of doctors it's more high-touch than plain old ads anyway. The representative stops by and chats them up, maybe they get some sponsored continuing education (which is of course designed to push expensive products), etc.
BS, doctors give the samples to friends and family, and some to patients. Doctors can't know a patient is poor. In private practice, the doctor assumes the patient isn't poor.
That's not how it works. The doctor prescribes the drug and gives the patient the free sample. What, did you think they were in a "take one" candy jar?
As an alternative, you could have a single payer, public health care option that would be significantly cheaper than the current shit show that the US system has (modulo the small percentage of Americans who have had a genuinely positive experience with the syst as opposed to the Kafkaesque nightmares that are the more common take.)
Your first link is from 2008, and analyzes data from 2004. I don't see how this proves anything, or even suggests much, about the industry today.
Your second link shows that the pharma companies spend almost as much on R&D as on stock dividends and buybacks. Is there any other industry that spends as much on R&D? Apple, for instance, seems to be spending ~6x as much on stock buybacks and dividends as on R&D (approximately, based on the first Google hits).
Even your own links contradict your claim that very little goes to R&D.
This is not a dick measuring contest. The comment was challenging the notion that pharmaceuticals companies spending the majority of their cash on advertising and stock buybacks is a desired outcome. The specific numbers, especially across industries, are meaningless.
R&D is actually usually done outside of the major drug companies and is funded by the government. So I doubt it really will effect it. And most price hikes lately have been in pre-existing drugs.
It's interesting to note that the Pfizer, AstroZeneca and J&J vaccines were all invented by 3rd parties.
Early stage R&D is the part that typically happens outside of big pharma, though all the big companies have their own proprietary early stage efforts/portfolios.
Even then govt funded stuff is mostly preclinical. Start ups mostly cover anything from animal studies to phase 1 / 2.
Late stage R&D, manufacturing, and marketing is extremely capital intensive and complex and is mostly done by large pharma companies, who either license the asset or enter some sort of partnership with the IP holder. And I am including regulatory approval, demonstrating value to payers, etc under marketing (e.g. it is not just advertising).
I frequently hear/read complaints of "that's outrageous [that this medicine costs $X]!"
Well, maybe it is; maybe it isn't, but if you make sure it costs $X/100, I can be pretty sure you'll get less drug R&D.