Everyone should be able to get the medications they need at a price they can afford. But drug prices are still out of control, driven by high launch prices and price hikes that Big Pharma alone control. And a new analysis from AHIP shows that in most cases, more of the dollars spent by drug manufacturers go toward selling and marketing costs than toward research and development (R&D) for new treatments, cures, or expanded indications and uses of existing drugs.
The AHIP analysis examined the 10 largest pharmaceutical companies by revenue in 2020. Using pharmaceutical companies’ own annual reports and other financial filings, AHIP compared spending on research and development with a combination of selling, general, and administrative costs. In the analysis, selling and marketing costs constituted the bulk of spending for selling, general, and administrative costs.
Of the 10 drug manufacturers examined, 7 of them spent more on selling and marketing expenses than they did on research and development. For this group of 10 companies alone, selling and marketing expenses exceeded R&D spending by $36 billion, or 37%. Moreover, this use of dollars occurred during a year dedicated to the development of new treatments and vaccines to overcome the COVID-19 crisis.
Of particular note:
- Abbvie, which manufactures branded drugs like Humira®, spent $11 billion on sales and marketing in 2020, compared with $8 billion on R&D.
- Bayer, which manufactures branded drugs like Xarelto® (codeveloped with Johnson & Johnson) and Eylea®, spent $18 billion on sales and marketing, compared to $8 billion on R&D.
- Johnson & Johnson, which manufactures branded drugs like Xarelto® (codeveloped with Bayer) and Stelara®, spent $22 billion on sales and marketing, compared to $12 billion on research and development.
Drug manufacturers offer many important medicines that people need and deserve, but patients and our health care system should not be priced gouged for them. Big Pharma’s practices clearly show that their growth strategy is based on selling a greater volume of drugs to patients – not on creating groundbreaking new therapies and delivering more value to patients. We do not have to choose between innovation and the affordability of prescription drugs. With thoughtful solutions that encourage private-market competition and end pharma’s gaming of the system, we can have both.