Whenever drug company executives are challenged about the escallating costs of drugs with continuous price rises of existing available drugs, they point to the cost of research and development, R&D. It is claimed that it takes so long to develop drugs that the high price is necessary to recover costs. They use the same excuse for blocking access to cheaper generic drugs. For example, in 2005 AstraZeneca was fined €60 million for blocking cheaper rivals.
Drug companies claim to spend 17% or more of turnover on R&D but how much of that is wasted, repeated, pointless research that has already been done by competitors? Why do patients and governments have to pay for that wasted research?
Even allowing for the claims of the drug companies, the figures for the scale of the marketing budgets is shocking. The Los Angeles Times reported that drug companies spend more than $1 billion per year marketing to physicians and roughly $5 billion marketing directly to patients. As a consequence:
"In 2000, direct-to-consumer advertising alone boosted drug sales 12%, at an additional cost of $2.6 billion to consumers and insurers."
The Henry J Kaiser Family Foundation examined drug company marketing budgets and R&D and found that R&D went from 11% of sales in 1990 to 14% in 2000. Marketing budgets by comparison stayed pretty steady at around 36%, roughly 2.5 times as much. The profits from those Fortune 500 drug companies was at 14.3% of sales, more than three times the median for all industries.
But despite the vast profits extracted out of chronic illness management, the drug companies are facing a problem. There's a limit to how much you can bleed the market. R&D budgets have increased by 147% from 1993 to 2004 but the productivity couldn't keep pace. New drug applications are only up by 38% and the overwhelming majority were modifications to existing therapy. What this means is that there's a limit to producing more and more drugs that maintain illnesses without curing them. The cost of duplicating the expensive research into those illnesses which are more resistant means that there is less chance of making such massive profits.
This is a stark case against leaving the drug companies in charge of the direction of research. As if any more proof were needed than the present global crash, the market does not and cannot address the research needs to provide not just palliatives but cures. We need to eliminate the duplicated wasted unnecessary research, and the vast sums of money spent persuading the worried well to spend on unnecessary palliatives. We need to stop the generation of quasi-illnesses designed only to match a product.
Health is too important to be left to the mad anarchy of a market system whose only rationale is to make rich people richer at the expense of the rest of us. Drug companies cannot be trusted to represent patient interests - they have no interest in cures and every interest in perpetuating illnesses, both real and imaginary. Why on earth should we continue to put the fox in charge of the chicken-house?
