Healthy Skepticism Library item: 7574
Warning: This library includes all items relevant to health product marketing that we are aware of regardless of quality. Often we do not agree with all or part of the contents.
Publication type: news
Derfel A.
Drug firms gouging system, study suggests
The Gazette (Montreal) 2007 Jan 19
http://www.canada.com/montrealgazette/news/story.html?id=e031a361-4694-4617-99ee-b1b19bc83473&k=2444
Full text:
Brand-name pharmaceutical companies have been reaping astronomical profits over the last 10 years while driving up the cost of prescription drugs, concludes a new study by a Montreal economist.
The escalating cost of medications is by far the single fastest-rising expense in Canada’s health-care system – and big pharma is squarely to blame, says Leo-Paul Lauzon, of the Universite de Quebec a Montreal.
Lauzon and co-researcher Marc Hasbani examined the audited financial statements of 10 pharmaceutical companies from 1996 to 2005, and discovered that the average return on investment after taxes was a staggering 29 per cent.
(Lauzon and Hasbani were unable to extract exclusively Canadian data, since the companies release consolidated financial statements for their global operations. However, Lauzon said the Canadian subsidiaries are highly profitable as well.)
“The price of medications has exploded in the last 25 years,” Lauzon said, noting drug prices today represent 16 per cent of health-care costs in Canada – up from 8.8 per cent in 1975.
“There has been a lot of talk of imposing user fees to control health-care costs, etc.,” Lauzon said.
“We have to identify the cause of the problem of increasing health costs in Canada and the cause is the rising cost of medications.”
The 10 pharmaceutical companies invested $739 billion U.S. in marketing and administration over the 10-year period, according to the study. By comparison, the industry spent $288 billion in research and development of new drugs.
These figures, Lauzon contends, fly in the face of claims by the pharmaceutical industry that drug costs have gone up, in part, to finance R and D.
An official with Canada’s Research-Based Pharmaceutical Companies took issue with the study’s methodology.
“The report deals with 10 entities and not the industry as a whole. It appears that Mr. Lauzon did not consider the specific Canadian environment where price controls are in force and where patented medicine prices are on average eight per cent below the international median,” said Jacques Lefebvre.
He cited figures from the 2005 annual report of Canada’s Patented Medicine Prices Review Board, which does impose price controls on prescription drugs.
Lefebvre added that Canadian pharmaceutical companies are forbidden by law from advertising directly to the public.
Therefore, the amount of money spent on advertising in Canada is considerably less than in the U.S.
In Canada, brand-name drug companies invested $1 billion in research and development last year. In Quebec alone, the amount was $450 million, Lefebvre said.
Lauzon countered that prescription drug costs in France, Spain and Germany are still lower than those in Canada. He urged the federal and provincial governments to pressure big pharma to lower prices.
As for his study’s methodology, Lauzon said he would welcome the Canadian subsidiaries opening their books for his perusal.
The companies examined included Pfizer, Johnson and Johnson, GlaxoSmithKline, Merck, Novartis, Roche Group, Abbott Laboratories, Bristol-Myers Squibb, Wyeth and Eli Lilly. In total, these companies earned $413 billion in profits over the 10-year period, according to the study. The companies returned $317 billion to their shareholders, or 77 per cent.
