Seeking Alpha
Profile| Send Message|
( followers)  

This is my response to a SA comment posted by Ken Johnson, Senior Vice President, Communications of PhRMA, the Pharmaceutical Research and Manufacturers of America, in response to my SA article, Big Pharma Maintains Illusion of Innovation.

While I am proactive about maintaining good health, I also consider myself to be very fortunate that I do not take any medications, and have only had to in the past on rare occasion. Regardless of whether or not an American consumer takes any medication, everyone is overpaying for big pharma’s illusions and budgets that rival Hollywood’s through higher health insurance premiums, and tax revenue subsidizing Medicare and Medicaid. Secondly, medications are not discretionary for real illnesses.

Therefore, pharmaceutical companies are entrusted with a certain level of social responsibility for the privilege of applying the basic research funded by the NIH and the military. Just like the TARP, if big pharma eats at the trough of government-funded research, they have an obligation not to overcharge the American people.

Contrary to the illusion projected by Montel Williams’ magical mystery bus tour throughout the U.S. as part of your group’s Partnership for Prescription Assistance (PPA) program, helping a small and select group of consumers is no substitute for price gouging the general population. And Pfizer’s (NYSE:PFE) program to offer limited free drugs to the newly unemployed is especially egregious in taking advantage of the difficult economic times in order to improve big pharma’s image. It speaks to the fact that the U.S. must not only stop subsidizing the rest of the world at the expense of American consumers, but also full retail price paying consumers subsidizing PhRMA’s “generosity” in sponsoring the PPA.

As for your comment that the pharmaceutical industry as a whole is spending a larger percentage of its revenue on R&D than technology or other industries, you need to be more specific as to which companies you’re including. If you’re including biotechnology startups with no revenue or development phase companies with limited revenues, you’re skewing the true R&D expenditure ratios for big pharma alone.

Additionally, the actual composition of industry R&D needs greater clarification before consumers can make a judgment. Many consulting fees paid to doctors could easily cross the line between true science and clinical development vs. marketing.

SA readers might be interested in a research article (The Cost of Pushing Pills: A New Estimate of Pharmaceutical Promotion Expenditures in the United States”) published last year in PLoS, the journal of the Public Library of Science, a nonprofit organization of physicians and scientists. The authors gives a detailed explanation to arrive at their conclusion that the ratio of marketing vs. R&D spending is nearly 2:1. You have quoted IMS data in your comment, and the PLoS article explains why IMS reporting data is underestimated in order to enhance the industry’s public image.

If the pharmaceutical industry is as caring as they profess to be, why do they institute price increases every year for drugs whose development and manufacturing infrastructure costs have been fully amortized years ago?

Disclosure: none

Source: More on 'Big Pharma Maintains Illusion of Innovation' (Response to Ken Johnson)