[Ip-health] Families USA: report on R&D spending v. marketing & administration spending

[Mike Palmedo]

Press release (below):
http://www.familiesusa.org/new2001data.htm

Full report:
http://www.familiesusa.org/PPreport.pdf
-----------------------------------------
FOR IMMEDIATE RELEASE
Wednesday, July 17, 2002

CONTACT: Jennifer Laudano
Kati Anderson
(202) 628-3030 
 
NEW 2001 DATA SHOW BIG DRUG COMPANIES SPENT ALMOST TWO-AND-ONE-HALF
TIMES AS MUCH ON MARKETING, ADVERTISING, AND ADMINISTRATION AS THEY
SPENT ON RESEARCH AND DEVELOPMENT

Drug Company Profits Exceeded R&D Spending by 60 Percent; Executive
Compensation and Deferred Stock Options Were Huge

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 THERE'S A CHART THAT WON'T PASTE INTO AN EMAIL VERY WELL] 

"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:

EXECUTIVE NAME
 TITLE
 COMPANY
 COMPENSATION
 
1. C.A. Heimbold, Jr.
 Former Chairman & CEO
 Bristol-Myers Squibb
 $74.9 million
 
2. John R. Stafford
 Chairman               
 Wyeth    
 $40.5 million
 
3. William C. Steere
 Former Chairman  Pfizer      
 $28.3 million
 
4. Henry A. McKinnell      
 Chairman and CEO
 Pfizer      
 $23.8 million
 
5. 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:

EXECUTIVE NAME TITLE COMPANY VALUE OF STOCK OPTIONS
 
1. Raymond V. Gilmartin
 Chairman, President, and CEO
 Merck
 $93.3 million
 
2. C.A. Heimbold, Jr.
 Former Chairman and CEO
 Bristol-Myers Squibb
 $76.1 million
 
3. William C. Steere
 Former Chairman 
 Pfizer
 $60.2 million
 
4. Henry A. McKinnell 
 Chairman and CEO
 Pfizer
 $56.5 million
 
5. 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.
 




-- 
Mike Palmedo
Consumer Project on Technology
Tel: 202-387-8030
Fax: 202-234-5176
P.O. Box 19367
Washington, DC 20036
mpalmedo@cptech.org